During the height of the COVID-19 pandemic in 2020, the sports wagering world was essentially short-circuited as professional and college sports leagues canceled games. With the notable exceptions of Belarusian soccer and Russian table tennis, actual markets for sporting events were few and far between.
Esports filled a portion of that void, with NASCAR drivers competing in a virtual racing league and popular multiplayer games such as League of Legends and Counter Strike: Global Offensive (CS:GO) being introduced to the sports betting community. More than two years later, however, the potential esports showed as an additional vertical to the sports wagering space has yet to be realized.
There have been a handful of one-off events that have been approved by a handful of state regulatory agencies, but there has not been any league sanctioned for wagering. The Esports Integrity Commission has been around since 2015 to try and help combat issues including match-fixing and ensure level playing fields in terms of technology, and the sport had its first global summit in April.
But the last steps — creating a regulatory framework for sports wagering and then having sportsbook operators offer those markets — continue to be elusive. The Nevada Gaming Control Board is moving forward on the former issue, with hopes what it crafts in rules and regulations will help address the latter.
Growth of esports has been global, but not local
Speaking as part of a panel at the Global Gaming Expo in Las Vegas, moderator Seth Schorr, CEO of Fifth Street Gaming and chairman of the Downtown Grand Hotel and Casino, joked that the title of the session, “Esports Wagering: Passing Trend or New Vertical,” sounded “so 2019.” Fellow panelist Dr. Brett Abarbanel chimed in light-heartedly that she wondered if she had been on that panel — before she explained the current marketplace.
“We’ve been talking about how big and how great esports is for a very long time and how big and how great this parallel space of esports wagering is for equally as long,” she said, pointing out Schorr’s sportsbook was the first in Nevada to accept a wager on an esports event. “I remember talking in 2015 how sports wagering is about five to 10 times the esports market, and it does continue to be that size. But in order to take that measurement, you really have to look at it on a global scale, and when we do that, we can see some incredible advances.
“We see betting integrated into esports itself. But where we seem to have faltered is in the United States,” Aberbanel continued. “We’ve been slow to the uptake. Nevada was the first to permit wagering on esports, Seth was the first esportsbook operator in the U.S. to take a wager on an esports event. But we haven’t really gotten too much further past that.”
Both Aberbanel and Schorr sit on the Esports Technical Advisory Committee, which was created following the passage of SB 165 in the Nevada state legislature last year. NGCB board member Dr. Brittnie Watkins, who rounded out the G2E panel, serves as chair of the committee. Watkins has extensive research experience in esports as part of her overall gaming litigation background.
“There’s an increased focus on regulating wagering,” Watkins said in an interview with US Bets about what has changed since she resumed an active interest in esports in 2019. “[At the end of] my research in 2017, William Hill had just taken its first esports bet. I think there’s an increased legitimacy in the U.S. with esports teams in college and high school. You start to see it trickle into education and that’s a sign of its legitimacy.
“I think [the esports committee] will be very helpful for us, getting advice from people in the industry who understand esports about how best to protect integrity when esports wagering is involved.”
What is the biggest challenge to growth in the vertical?
Aberbanel felt regulators face the biggest challenge in bringing esports to the full-time sports wagering landscape because “there is an element of ignorance that comes naturally with a new subject no matter who you are. … [Esports] is a new case, there are all sorts of new quirks about esports that are unique compared to other games that have been regulated in the past.”
To that end, Watkins and the Esports Technical Advisory Committee have been working on a draft for a whitelist of leagues and gaming developers. The problem is no one has submitted an application to be on that whitelist, and some of that may come from the expected rigorous due diligence the NGCB will perform after receiving an application.
“I think any company coming into the Nevada market strongly considers a strict regulatory environment,” Watkins said. “There was a lot in terms of the general agreement that a whitelist would be helpful. What we want to do is best practices, whatever is going to be best at balancing the integrity in wagering and growing the industry. If a whitelist is what works, then that’s what works.”
Schorr countered with the belief that sportsbooks have it toughest. Not with esports as a sport — he said the industry has moved past that argument — but the issue is whether the “gambling industry knows how to leverage the sport.” Schorr pointed out operators have plenty on their plates with a full sports schedule in addition to operating in multiple jurisdictions, and they have yet to align themselves in position to act.
Engagement may be biggest hurdle for sportsbooks
Aberbanel, who has been in the esports space for more than a decade and is the director of research at UNLV’s International Gaming Institute, suggested sportsbooks with an online presence are more receptive to esports wagering — something that could prove frustrating in the Nevada marketplace since brick-and-mortar betting still accounts for such a large portion of the handle.
But engagement with the general public that doesn’t play esports but who might want to wager on events could prove to be the most elusive piece as a chicken-and-egg arguments of sorts. Aberbanel pointed out esports does not need traditional media to be successful in the overall picture, but when those tournaments are aired, the terminology may not be readily understandable to that new audience. She recalled when ESPN2 aired a “Heroes of the Dorm” tournament in 2015, there was a sense of people “being interested in it, but not a lot of interest in it being on ESPN.”
Additionally, esports fans consume media at a much faster rate thanks to platforms like Twitch, where many tournaments are aired. Aberbanel noted the high levels of community engagement there via chat boxes, which includes people “doing Twitch predictions, some are betting amongst themselves — which I’m sure the Gaming Control Board might be interested in — and cashing out via Discord.”
And without that traditional interest, there may be less incentive for operators to seek out esports as an additional vertical. Watkins pointed out that 2020 remains the high-water mark for applications regarding esports events for wagering, and that the NGCB did not receive any last year.
“The short answer is that there’s not a lot of interest among operators,” Watkins said. “I hear talk among operators, but in terms of applications to accept sports wagers, there have not been many. While that may surprise people because esports is a big deal everywhere else, here in Nevada we have not received an application and have not received an application for our whitelist.”