Game on: A brief look at gambling on eSports

Like daily fantasy sports, betting on eSports (i.e., professional video gaming) has increased in popularity over the last few years and has given rise to allegations of unregulated and underage gambling. The eSports market is large. According to a 2016 report by Superdata, professional eSports is growing exponentially and is worth an estimated $612 (US) million a year. Furthermore, Eilers and Krejcik Gaming estimate that real money betting on eSports betting will reach $10 billion (US) by 2020. The professionalization and sportification of this entertainment form has brought sports-world elements to it: stadium-like facilities, cheering stands, sponsors, big rewards, and competition. Instant replays, jumbotrons (i.e., super-huge television screens), and referees add to the sport dramatisation. In some notorious cases, prizes have gone beyond the $10 million [US] threshold in a packed arena housing 73,000 fans. According to by John McMullan and Delthia Miller in a 2008 issue of the Journal of Gambling Issues, sportification is the process of incorporating the logics of sport to non-sporting contexts (e.g., poker, eSports. This can materialise in many ways but most commonly occurs when (i) other industries capitalise on the positive attributes of sport (e.g., popularity, engagement, or sanity and health inferences); and (ii) non-sport fields try to increase the entertainment and playability of their products and their association with joy and excitement.

Twitch, an online platform that streams live video gaming, informs its’ advertisers that it has 100 million monthly viewers, who watch for an average of 106 minutes a day. Betting on eSports presents new challenges. As a news report in Bloomberg news observed in relation to betting on the game Counterstrike: Global Offensive (CSGO):

“Gambling – licensed, regulated, and by adults – is generally accepted in eSports. There is growing concern, though, that teenagers are being attracted to different forms of betting facilitated by third-party providers. One such platform is CSGO Lounge (an independent site not affiliated with Valve Software, which develops the game itself). The site allows spectators to bet in-game add-ons known as skins – weapons, tools and the like – on the results of matches. Not all skins are created equal, and the rarity of some means they can cost hundreds of real dollars on marketplace sites like SkinXchange.com. The temptation is too much for some”.

Put simply, skin gambling is the use of virtual goods and items (typically cosmetic elements that have no direct influence on gameplay) as virtual currency to bet on the outcome of professional matches. The Bloomberg article also claims on the basis of interviews with industry insiders that underage skin gambling is a “huge problem”. Justin Carlson (lead developer of SkinXchange) claims there are “countless” parents whose children have used their credit cards without their knowledge to buy skins and bet on gaming on other sites. Although anecdotal, Carlson claims that some minors have “racked up hundreds or thousands of dollars in skins on ‘SkinXchange’ just to lose them all on some betting or jackpot site”. It’s clear that people trading skins in eSports has grown over the last few years and various regulators around the world – such as the UK Gambling Commission (UKGC) – are considering regulation and says it is an “emerging product” and an “area for continuing future focus”. More specifically, the UKGC’s 2016 Annual Report notes:

 “The growing market in esports and computer gaming has scope to present issues for regulation and player protection – issues which are being examined by gambling regulators in other international markets…These issues range from the emergence of real money esports betting markets, to trading in-game items which blur the lines between gambling and social gaming. Our focus will be to understand developments, including engaging with key stakeholders, and we will work wherever we can to ensure the risks associated with these, particularly to children and young people, are minimised”.

One of the complicating factors for eSports gambling is that while cash is the currency for many gamblers, there is a growing trend towards the use of virtual currencies, or ‘in-game items’ which, according to the UKGC, can be “won, traded, sold or used as virtual currency to gamble with and converted into money or money’s worth”. These, according to the UKGC, “include digital commodities (such as ‘skins’) which can be won or purchased within the confines of computer games and can then be used as a form of virtual currency on a growing number of gambling websites”. No academic research has examined underage skin gambling but this is an issue that is unlikely to diminish over the coming years.

It is also worth noting that this massive interest in eSports followed by a massive audience has led most major betting operators to include eSports in their daily gambling offer. However, the singularities of eSports market pose new challenges that conventional online betting sites struggle to address. Suraj Gosai, co-founder of Blinkpool, an eSports dedicated betting platform, laid out two main problems: in-play betting limitations and odds algorithmic programming. For in-play betting to be viable, companies need to get access to reliable, instantaneous, and unambiguous data that can settle bets and separate winners from losers. Data companies like Perform do that in sport, and betting operators rely on their data to offer in-play action to gamblers. The problem in eSports is that actions are not as quantified and standardised as in real-life sports. To counteract that, Blinkpool created a computer vision technology that extracts data from real-time action and promotes hyper-contextual opportunities, that is, 10- to 45-second in-play betting mini-markets concerning very specific developments in the narrative of the games.

Odds programming in sports betting is fundamentally based on historical data from hundreds of thousands of games, from which each factor (home advantage, table position, head-to-head, etc.) is weighted in to determine the probability of an event occurring. In the fixed-odds betting market, the bookmaker makes available to bettors that probability plus a benefit margin. When placing a bet, an individual bets against the probability that the house has predicted. This is not yet feasible in eSports because the historical data are scarce and the modelling is complex. Companies are circumventing this problem by offering exchange betting rather than fixed-odds. This method comprises peer betting, that is, bettors do not bet against the house but between one another. This way, the house gets a commission from winning bets and operates a much less risky business.

Dr. Mark Griffiths, Professor of Behavioural Addictions, International Gaming Research Unit, Nottingham Trent University, Nottingham, UK

Further reading

Bracken, G. (2016). We hope to be the home of eSports betting. Gambling Insider. Available from: https://www.gamblinginsider.com/in-depth/1909/we-hope-to-be-the-home-of-esports-betting

Gambling Commission (2015). Explaining our approach to social gaming. Located at: http://www.gamblingcommission.gov.uk/Gambling-data-analysis/Social-media/Explaining-our-approach-to-social-gaming.aspx

Gambling Commission (2016). Annual Report 2015/16. Birmingham: Gambling Commission.

McMullan, J. L., & Miller, D. (2008). All in! The commercial advertising of offshore gambling on television. Journal of Gambling Issues, 22, 230-251.

Melbourne, K. & Campbell, M. (2015). Professional gaming may have an underage gambling problem. Bloomberg, September 7. Available at: http://www.bloomberg.com/news/articles/2015-09-07/professional-video-gaming-has-an-underage-gambling-problem

Superdata (2016). eSports Market Report. Available at: https://www.superdataresearch.com/market-data/esports-market-brief/

Wingfield, N. (2014) In e-Sports, video gamers draw real crowds and big money. New York Times, August 30. Available from: http://www.nytimes.com/2014/08/31/technology/esports-explosion-brings-opportunity-riches-for-video-gamers.html?_r=0

Wood, J. (2016). UK Gambling Commission: We’ll work to minimize risks from emerging esports betting markets. Esports Betting Report, July 19. Available at: http://www.esportsbettingreport.com/uk-regulators-address-esports-betting/