Should Esports Stakeholders Stake Their Betting Future On Staking?

While state gambling regulators have been slow to move, an alternative has emerged

An air of frustration hung over an esports betting panel at the SBC Summit North America in New Jersey back in May. Esports wagering through sportsbooks was supposed to have exploded by now, or so everyone thought. Instead, only a handful of states had either legalized esports betting or specifically approved wagering on the events, which involve video games.

“The U.S. has had a difficult enough time getting its act together on sports betting,” said Roger Quiles, a leading esports attorney. “When you compound that with the misunderstanding a lot of legislators have with what esports is, there’s this misunderstood notion that esports is for kids, and certainly that’s not the case.”

But while plenty of adults are keen on esports, it’s very much a young person’s game (or games). Hence, it might be wise for boosters of esports betting to take a moment to exhale and realize their moment will come, just a bit later than originally assumed.

“I go to esports conferences and you hear the complaining,” said SIS Content Services Vice President Michele Fischer, who was on the SBC panel. “We are still in the very early stage of sports betting in America. We’re not finished legalizing sports. North Carolina, Kentucky, and Vermont are just putting up their regs, and if you’re a sportsbook operator, you’re just looking at getting one of those finite number of licenses.”

Fischer feels that once sports betting is operational in 40 states, sportsbooks’ attention will “turn to content” — and, in turn, to esports offerings.

“A lot of these operators are in multiple states and they’re gonna integrate something they can have in the most states,” she explained. “With esports, a lot of times it’s not that it’s illegal — it just hasn’t been approved and on the catalog. Every sport goes through the same issue as esports are.”

Throw in licensing processes and technological integration challenges, and Fischer suggests “it’ll be several years” before esports betting takes off en masse.

‘Entertainment wheel that doesn’t stop’

To ensure maximum integrity, all of SIS’s esports gamers are employees of the company and compete in a studio in the U.K. While SIS’s competitions, which occur around the clock, are available for wagering at more than a dozen sportsbooks worldwide, bets on them are taken in the U.S. only by bet365 in Colorado and New Jersey.

SIS offers some wagering on first-person shooter games and has plans to expand such markets in the future, but its focus thus far has been on “sims,” or sports simulation games like NBA2K, FIFA, and Madden (NFL).

“We were trying to appeal to the sports betting audience to start with,” said Fischer. “The big challenge you have in esports is a lot of the tournament formats are made for gamers, but they’re not made for betting. Will esports bettors bet on sports sims? I don’t know. But sports bettors will.”

Anthony Geranio, the CEO and co-founder of 1v1Me, would be happy to offer his product through partnerships with sportsbooks when the time is right. But he’s not content to wait around, as he’s taken 1v1Me live as a stake-betting site. Here, bettors back either of two gamers in a given competition, with their money moving the line like a parimutuel pool in a horse race before the price locks in as the showdown commences.

Like SIS’s gamers, 1v1Me’s compete head-to-head, primarily in sports sims. But unlike SIS’s gamers, they can play remotely from wherever they want, and their competitions are streamed to the site via Twitch.

When asked how his company goes about ensuring the integrity of its competitions, Geranio replied, “All the players that participate go through an identity verification process, sign a contract with us. We have referees for each match. They’re very experienced. Before the matches start, we do a variety of checks — what’s on their console, what’s on their PC, what they can and can’t do. There have been instances where people have been caught cheating, so we have a year of lessons from that.”

Geranio thinks that U.S. sportsbooks will finally get serious about the esports space once the teens of today turn 21. Until that point, he said, “It’s up to companies like 1v1Me to prove that the market exists. I think the regulators will get it once we prove that people want to do this thing on scale.”

He then added, “I think we’re better positioned to attack this market than a traditional operator. It’s extremely difficult to create odds, especially when they might not have the experts. Some of the books are just starting to create those teams. The differentiating factor is we can crush them on volume. I think of it as an entertainment wheel that doesn’t stop.”

Is stake betting legal?

Of course, there’s some risk involved in creating an alternative gambling ecosystem that most states haven’t gotten around to regulating. 

According to a 1v1Me spokesperson, “Staking is legal in every state where the player is not living in a banned state for head to head.” The states that have banned H2H wagering are Arizona, Arkansas, Louisiana, Montana, and South Dakota, with 1v1Me taking the position that inactivity does not equal illegality in other jurisdictions.

“We have to rely on our counsel to tell us the best practices on this,” said Geranio, pointing out that stake betting has occurred in the poker world for decades. “But, ultimately, the skill-based gaming market really isn’t regulated in every state.”

After reviewing 1v1Me’s interface, Florida State University professor Ryan Rodenberg, one of the nation’s foremost experts on sports betting law, offered the following analysis: “When all of the 35-plus states legalized sports betting after the Supreme Court case, only a tiny fraction of those carved out for esports betting. These esports betting companies fall into two buckets. On Unikrn, you and I would play a video game against each other and stake some money on the outcome. The other bucket of companies is where you can place bets on other people playing video games, and that’s much more nebulous on where that falls on the skill vs. chance spectrum. 

“This harkens back to DFS in 2015 and 2016. Whenever you’re betting on an outcome that you yourself can’t control, then you always fall into more chance than skill and that’s where companies that have that business model run into trouble if there’s regulatory scrutiny. But I haven’t heard of any state prosecutor or [one] at the federal level going after these esports websites since Washington state.”

(In the Washington case, the state’s gambling commission sent Valve a cease-and-desist order in 2016, telling the company that it could no longer allow observers to wager fake guns — or “skins” — on first-person shooter games.)

Without singling out 1v1Me, another sports law expert, John Holden of Oklahoma State University, said via email, “There have been a number of efforts from creative entrepreneurs around the country, or globe, that seek to offer an innovative product by arguing that it is not in violation of relevant laws for one reason or another. Ultimately, the determination of whether an activity is legal in the U.S. comes down to state law. Every state defines gambling based on the degree of chance (or if you want to look at the alternative, skill) involved, when present with consideration (a payment) and a prize.

“While a fair number of states allow for limited types of social wagering, it would seem unlikely, in my opinion, that many would consider a business facilitating social wagering to be within the scope of permissible activity, as many of these social exceptions are [for bets] under $100.”

Photo: Gonzalo Arroyo/FIFA via Getty Images


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