States Need To Move To Approve Esports Betting — And Quickly

Posted By Derek Helling on March 13, 2020

As the traditional sports world shuts down indefinitely because of coronavirus pandemic concerns, the esports world isn’t on an island. Many of the world’s prominent esports leagues have altered their formats and canceled events.

Like with traditional sports, this situation remains fluid. Esports seem uniquely situated to take advantage of the lapse in traditional sports, however, because of their ability to hold competitions remotely and deliver the content to spectators online.

That represents an opportunity for legal sportsbooks to pivot and try to recoup some of the handle they’re losing by creating markets on these events. In order to do that, however, regulators in their jurisdictions must facilitate that.

As with stopping the spread of the virus, time is of the essence. There is one state that has, unfortunately, put its legal sportsbooks at a distinct competitive disadvantage.

Indiana’s short-sighted ban on wagering on esports competitions

When Indiana enacted its gambling expansion law last year, the statute had a lot of great qualities. For example, the state’s avoidance of limitations on betting on college sports and not requiring bettors to register for online accounts in person were great decisions.

The biggest flaw in the legislation could prove costly for its legal sportsbooks now, however. Indiana law expressly forbids sportsbooks posting lines on esports competitions.

While the motivation behind that decision is unclear, it’s likely that state officials were unfamiliar with the governing bodies in esports and felt allowing such wagering might create too much risk. To date, Indiana is the only state to enact a sports betting law with such a provision.

All other states which have legalized wagering on sporting events have been mum on the subject with the exceptions of Colorado and Tennessee. Colorado’s statute explicitly allows esports betting as long as the contests are sanctioned by a governing body and the participants are at least 18 years of age.

The law in TN states that sportsbooks may take wagers on esports as long as the markets depend on skill and not chance. Similar to CO, TN requires contests to have a governing body for eligibility.

The rest of the states and Washington, D.C. are mum on the subject. In those jurisdictions, it is up to the regulatory bodies to decide on whether to allow esports betting and if so, to what extent.

The time to make that move has come. The esports industry, while significantly affected, is plowing forward for the most part.

Official changes to the world’s major esports calendar so far

Although these situations are in flux and could change at any moment, most of the world’s prominent esports competitions are moving on in altered fashions. For most of them, that means canceling large spectator events and moving competitions that were scheduled to take place at those events online instead. A few examples:

  • The Overwatch League has canceled all homestand events through the end of April. The matches will still be held but played online and broadcast on various platforms like Twitch and YouTube Gaming.
  • League of Legends Championship Series and European Championships have opted to continue playing live but without audiences in the venues. China’s LOL Pro League has moved all competitions online and mandated a 14-day quarantine for all players prior to resuming play.
  • The NBA 2K League has postponed the beginning of Season 3 indefinitely. Teams will remain in their home cities and compete in exhibitions against each other online.

For those doubting the viability of esports to fill in the gaps for both bettors and fans alike, consider the fact that the NBA’s Phoenix Suns have essentially moved their competitions online. The franchise will continue to “play” its scheduled games using NBA 2K as long as the league remains suspended.

Like the Suns, legal sportsbooks would be wise to take their action into the virtual world. Their competitors aren’t going to punt on that action.

Why sportsbooks and state regulators need to move on this situation quickly

If state regulators continue to waffle on this issue, their legal sportsbooks will pay the price. On the other hand, some of this opportunity depends on sportsbooks’ initiatives.

For example, New Jersey allowed licensees to take action on LOL contests last year. That happened because operators sought permission from the state to do so.

Time is of the essence because operators on the “black market” aren’t going to wait until legal sportsbooks get approval from state regulators to flood their customers with lines on esports competitions. Whether it’s illegal bookies or offshore websites, these illicit channels already have a huge lead on legal operators in this category.

If legal sportsbooks punt this opportunity either out of ignorance of the opportunity or because they can’t get approval from regulatory bodies, that advantage will only grow during the lapse in traditional sports. Bettors will find action on these contests and if the unregulated operators are the only ones offering it, then they become the only choice.

On the other hand, this is an opportunity for regulated markets to cut a bigger slice of that pie. Bettors who are unfamiliar with legal markets for such contests could become educated about that if regulators clear the way and sportsbooks put in the work.

At the same time, this could be a boost for legal wagering on esports long-term. Some of the bettors who normally bet on traditional sports may gain a taste for wagering on esports and add it to their regular menu.

Businesses that are able to adapt to undesirable circumstances are the most successful. Sportsbooks have an opportunity to do so right now with esports but state regulators have to enable it. If both parties move quickly on this opportunity, it could signal a new day for the esports betting industry in the United States of America.

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Derek Helling

Derek Helling is a freelance journalist who resides in Chicago. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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