James McHugh, former judge for the Massachusetts state court and active Massachusetts Gaming Commissioner, warned his fellow regulators on Thursday, October 29th that eSports is “lurking in the shadows.”
The remark was spoken at a meeting of the Massachusetts Gaming Commission during which most of his colleagues discussed how to handle daily fantasy sports sites. The largest daily fantasy operator in the country, DraftKings, is headquartered in their own jurisdiction in Boston – and coincidentally offers a fantasy eSports product.
Reports from earlier in 2015 state that McHugh was expected to have retired at the end of September. Although his retirement has at least been postponed, he may be choosing to speak out about the rapidly growing eSports market now so that his colleagues become aware of its existence before he leaves the Commission.
eSports will soon be mainstream
McHugh discussed several major corporations that have recently worked towards getting into eSports, including Amazon which purchased video game streaming giant Twitch and Turner Broadcasting which will begin holding and covering tournaments next year.
In a memo addressed to the rest of the commissioners, McHugh stated that while he is unable to guess the specific direction that the eSports industry moves in the future, it is clear that the size of the audience for events is increasing rapidly. It is therefore likely that wagering on these events also increases in the future, and that it’s an area which regulators should closely monitor as it develops.
While acknowledging that eSports events do not yet have a mainstream audience, McHugh believes that may change in 2016.
What will eSports regulation look like?
In many cases, eSports regulation is likely to follow the lead of traditional sports betting. The act of betting on a single match or on the result of a tournament is generally no different from betting on a single game or tournament in a physical sport.
There is typically no distinction with respect to regulation of sports betting based on the variance of the sport: a low-variance sport like tennis follows the same rules as a high-variance one like baseball. Similarly, the full spectrum of different eSports can be handled the same way even though there are tons of different games being played.
In the case of fantasy sports and fantasy eSports, the similarities are so strong again that separate regulation is unlikely to be needed – eSports can simply be regulated in the same manner as traditional sports.
There is, however, one interesting form of betting on eSports which is quite unlike anything that exists in the realm of traditional sports betting – wagering virtual items.
Regulating betting of virtual items
One common way for eSports fans to wager on events is by betting virtual goods. The most prominent example of this is the CSGO Lounge where users can bet items in Counter-Strike: Global Offensive on the outcomes of competitive matches.
Why might this be an issue for regulators? Because the items can be bought and sold for real money, and thus the argument that these virtual goods hold real world value is easy to make.
The difference between wagering $50 on the outcome of a Counter-Strike match and wagering a virtual item which can be bought/sold for roughly $50 may not be significant in the eyes of a state or federal regulator.
If the betting took place using items that could never be redeemed for actual cash, it would be ignored entirely because that would only be happening within the world of a video game. Once real money enters the picture, it becomes unlikely that regulators will turn a blind eye to the situation.
Currently, virtual good wagering flies under the radar of regulators. However, if the eSports betting market escalates in popularity at the rate that most analysts expect it to, the real-world value of the virtual items being wagered may get high enough to spark some interest.
Online gaming operator TonyBet, run by outspoken poker pro and philanthropist Antanas “Tony G” Guoga, has begun accepting bets on eSports events. TonyBet is a UK-licensed online casino which offers poker, sports betting, and casino games in several languages. The site primarily caters to Eastern European markets.
Live betting began on October 30th, just one day before the League of Legends World Championship grand finals in Berlin, which was the first event the operator accepted eSports wagers on.
Initial betting lines focus on biggest events
TonyBet plans on expanding their eSports offering to cover a wide variety of games, and the company mentions Counter-Strike, League of Legends, Starcraft II, and Dota 2 as games they plan on covering extensively.
In the short term, the focus is primarily on offering betting lines for the biggest tournaments in eSports. This week TonyBet offered bets on the CEVO/MLG Pro League LAN Finals, and it has announced it will take wagers on the MLG Smite Pro League Championship in December – both of which are Major League Gaming events.
TonyBet has already announced that it will be taking action on several of the most anticipated eSports tournaments which won’t take place again until 2016, and it is safe to assume that if significant interest and action is generated that the company will begin taking bets on less prominent events as well.
A representative from TonyBet stated in the company’s press release that they’re ready for expansion and to stay competitive as demand increases:
“In a market that’s so heavily saturated we aim to provide our users with an exceptional experience. TonyBet was always about being innovative and progressive, and in the rise of eSports, we aspire to respond immediately to the demand that it creates.”
eSports market in Europe poised for growth
The TonyBet representative also expressed great enthusiasm about the potential this new venture has:
“We believe that this market has a lot of potential. It’s clear that the gaming culture is gaining popularity, becoming more mainstream and people are willing and interested to participate in or watch the tournaments, so naturally we want our customers to be able to actively take part and support their favorites.”
Statistics on market size included in TonyBet’s press release and attributed to market research firm SuperData state that the European eSports market is worth roughly $72 million today compared to an estimated $143 million in the United States and $374 million in Asia.
With millions of viewers tuning in for the biggest eSports events and more fans emerging each year, industry experts believe that wagering on events is set to grow substantially in each of those markets over the next several years.