The Various Ways in Which Gambling Could Benefit the Field of Electronic Sports 

Kyle Oberholzer
Stalk me

Esports are heavily preparing for the introduction of betting. You’ve undoubtedly been following the news lately, particularly regarding Vulcun, Alpha-Draft, and Unikrn. Some see this as the first step toward the end of all things. That is not the case. The legalization of gambling will be a huge boon to the esports industry.¬†

The global market for sports betting could be worth $3 trillion. That is more than India’s, Russia’s, or Canada’s Gross Domestic Product. The fact that the sector is largely unregulated is perhaps the most concerning aspect of its scope. Only 15% of the total sports betting market is legal and accessible to regulators worldwide. In the United States, that figure is significantly lower, at only 3%. According to a recent article on ESPN’s website about the subject, sports betting is a “mammoth market” that is being capitalized on by organized crime and used as a vehicle to launder vast sums of money.¬†

Because the situation is so dire, this should be a worrying time for both esports and traditional sports. Gambling creates incentives for match-fixing and other forms of cheating that jeopardize competition integrity. Traditional sports have a history of being tainted by scandals like these, with examples ranging from the 1919 Black Sox fixing the World Series to more recent issues that have rocked soccer leagues across Europe. 

Unfortunately, esports fans already have their own controversies to contend with as a result of previous incidents of a similar nature. Last year, The Daily Dot discovered a match-fixing ring in Counter-Strike: Global Offensive (CSGO) CEVO Professional Season 5. It was eventually determined that they threw the game, with some players profiting from bets placed against iBUYPOWER via the betting site CSGO Lounge. One of the top North American teams (iBUYPOWER) was dominated in the event’s first round, which many predicted they would win. Given the current state of affairs, it is easy to conclude that betting on esports should be avoided. That ought not to be the case.¬†

Gambling has the potential to grow and improve esports. The esports industry must have the guts to approach this challenge with a fresh perspective. Betting must be woven into the fabric of the community, wagering operations must be regulated, competition integrity must be protected, and collaborative efforts must be made to address any potential consequences. 

Before we continue, I’d like to express some of my preconceived notions and opinions. I used to be a professional poker player before starting law school. In addition, I am currently employed by Unikrn, a startup dedicated to the growth and legitimacy of esports wagering. I enjoy gambling, but I am well aware of the numerous negative consequences it can have, especially in terms of addiction. Even with the risks involved, betting on esports has the potential to be a net benefit to the industry. As a result, I decided to start my own business. In fact, when I started working for Unikrn, I had already started writing this post. The facts, data, and analyses that will be presented are what ultimately led to my decision to work for the organization, not the other way around. To put it another way, I came to the conclusion that gambling could benefit the business that I am very passionate about for the following reasons:¬†

Why are regulations so important? 

Whether you like the idea or not, esports gambling will undoubtedly become more popular. This simple fact should serve as a guiding principle for the entire debate over the role of gambling in the esports industry. 

People gamble for a variety of reasons, and the activity thrives even in jurisdictions where it is illegal to do so. Gambling is an important part of the economies and social fabric of many societies. Although sports betting is currently illegal in the United States, it is possible to place wagers on sporting events in many other countries around the world via a smartphone app or at self-service kiosks located inside stadiums. There is also some irony in the fact that many Americans continue to regard sports betting as a societal problem, despite the fact that 43 states have lotteries, 48 states allow some form of commercial gambling, and 40 states have racetrack betting. Despite the fact that the legal framework governing gambling in the United States varies due to lobbying and other factors, gambling is widely practiced throughout the country. The worst thing we can do to protect competition integrity is to ignore the rise of esports betting and allow an unregulated market to thrive. This is the absolute worst thing we could do. 

Enter Adam Silver, the NBA’s current commissioner. Silver has stated publicly that sports betting should be legalized in the United States and that leagues should collaborate with wagering companies rather than compete with them to ensure competition integrity. Silver’s public stance was motivated by his belief that leagues should collaborate with, rather than compete with, wagering companies to ensure competition integrity.¬†

Silver recently told ESPN that one of his main concerns is that he will be perceived as being in favor of sports betting. “However, I see myself as a supporter of openness. And someone who is well-known in the industry for their realism. That betting action should be directed toward authorized betting establishments, where it can be monitored and regulated by the league, as this is the most effective way for the league to ensure our integrity. That is the prudent course of action.”¬†

Silver reached this conclusion after the FBI conducted an investigation in 2007, which discovered that NBA referee Tim Donaghy had influenced the outcomes of games played over the course of three seasons. “Had the FBI not come knocking on our door and informed us about Donaghy’s betting,” Silver recalls, “none of the systems that we had in place at the time would have captured any betting by Tim Donaghy.”¬†

What types of structures must be established as norms? An important first step is to establish an open line of communication between the organizations accepting bets and the competition organizers. It is also critical to promote well-established wagering platforms, which are businesses with a larger stake, a large number of resources dedicated to spotting outlier actions, and experience in doing so. 

To return briefly to the case of match-fixing in Counter-Strike: Global Offensive: As previously stated, the majority of the betting was done by a single person (on behalf of the players that threw the match). Duc “cud” Pham wagered the maximum amount allowed ten times on the underdog using multiple Steam accounts. This type of behavior is simply not possible on a gambling website with strict account verification and wager monitoring.¬†

Other advantages 

Recent studies have revealed a link between the number of people who bet on sports and the total number of people who watch sporting events. Gambling increases your proclivity to watch and be invested in the outcome of a game, as anyone who has ever placed a wager on a sporting event has long known. However, this study only confirms what was previously known. 

In response to the NBA’s recent shift in public stance on sports betting, Mark Cuban, a long-time owner of the NBA team and a sports icon, provided a succinct summary of the value of sports betting. “We’ve always known that betting, fantasy leagues, and daily [fantasy] sports have driven interest and viewership,” he said. At the same time that we openly condemned gambling, we did everything we could to promote it. I’m relieved that Adam Silver is bringing all of this to light and calling us out on our hypocrisy.¬†

This viewpoint is shared by executives across the sports industry, and the rise of fantasy sports has done nothing but strengthen this belief among industry professionals. Gambling is an excellent form of entertainment. 

Esports betting is not any different. In fact, wagering offers a one-of-a-kind opportunity to attract even more mainstream spectators to events. This type of participation is beneficial to everyone involved. It leads to an increase in sponsorship funds, which should lead to higher player salaries and prize pools for competitions. This money may not be enough to solve all of esports’ problems, but it’s a good place to start.¬†

Increased earnings and prize pools will only benefit the professional class of esports athletes, helping to further strengthen and grow this class. Even if certain games, such as League of Legends and Counter-Strike, have already reached this point, increasing the size of the sponsorship and audience pie may be critical for less popular and younger esports that are attempting to fund full-time employment for players, owners, and support staff. Increases in compensation would enable more players to receive the type of individual representation that is desperately needed to help balance the industry’s power inequities. This would be another advantage of higher pay.¬†

Minimizing the negative consequences 

Gambling addiction is a serious problem that affects real people. Acceptance of esports betting has a human cost, at least to some extent. The audience for esports, on the other hand, is much younger, more easily influenced, and in many cases not even legally permitted to gamble. These concerns definitely weigh on my mind, as they should for anyone who works in this industry. 

However, the evidence on the prevalence of addiction does not support the concern that esports betting would lead to widespread addiction. According to a recent National Council on Problem Gambling survey, fewer than 1% of callers to the Nevada Council on Problem Gambling Helpline identified sports betting as their most problematic type of gambling. In other words, sports betting-related gambling addiction is extremely rare. This is not to minimize the impact of addiction on a person’s life. Simply put, it is a point of view that must be considered in the context of the ongoing debate over the role of gambling in esports.¬†

The most important benefit of incorporating gambling into the fabric of the economy is the actual opportunity to prevent potential negative outcomes. According to a study conducted by the National Council on Problem Gambling, only one percent of problem gamblers attend an annual treatment program for compulsive gamblers. This is especially disheartening given that the same line of research shows that these treatments are actually very effective. Our primary focus should be on strengthening existing initiatives, such as actively promoting responsible gambling, streamlining opportunities for those suffering from addiction to identify themselves, and connecting problem gamblers to newly available treatments. Furthermore, we must implement strict standards to prevent people who are too young to gamble from using the system. 

This is the strategy Adam Silver intends to pursue. According to Silver in a recent opinion piece published in the New York Times, a comprehensive wagering platform backed by a league should have the following features: “mandatory monitoring and reporting of unusual betting-line movements.

Silver has nailed it with this one. The esports industry should embrace his forward-thinking stance, and every component of the overall system he envisions should be implemented. Gambling addiction will always be a challenge. However, such issues are more likely to arise in an unregulated industry; wagering companies and competition organizers should work together to identify problem gamblers and ensure that they receive treatment as soon as possible. Minors’ gambling will continue unabated. However, the most effective approach would be to legalize and strictly regulate gambling while also requiring players to provide proof of legal age.¬†

I’m not trying to entice anyone else to gamble here. I just want to get people thinking about how an ecology of esports gambling might not be as sinister as many people believe. I’d even go so far as to say that if esports wagering is properly integrated and regulated, it will be a huge boon to the industry that I’m so passionate about.¬†

If the esports industry takes a forward-thinking approach like the one described above, it may be able to capitalize on the opportunities presented by wagering. At the same time, it has the potential to reduce the risks to competition integrity as well as any other potential issues caused by the lack of regulation in traditional sports betting markets.