United States: An Introduction To E-sports – The Next Potential Betting Market To Enter The Scene

Last Updated: October 28 2016
Article by Ashley Brinn

What Are E-sports?

E-sports, short for electronic sports, is the competitive playing of video or computer games for cash and prizes. Already popular in China, South Korea, Europe and North America, e-sports have gained increasing popularity in the United States in recent years.

E-sports have a unique appeal to the millennial demographic. Both organized global leagues that involve professional teams as well as numerous online amateur leagues exist. For example, the E-sports Entertainment Association League (ESEA), a competitive video gaming community well-known for its anti-cheat software, allows players of all levels to compete against others. The European Gaming League, also well-known, has created an online arena where gamers can compete, watch matches or live stream new e-sports shows.

The professional e-sports industry involves numerous participants, ranging from teams, coaches and commentators to game developers and publishers, event organizers, channels, platforms, sponsors and leagues. This industry has multibillion-dollar potential. In 2015, e-Sports viewing figure records soared, investment in teams hit an all-time high, and tournament prize pools increased steeply. Last August, the International 5 (a popular e-sports tournament) became the tournament with the biggest e-sports prize pool in history with approximately $18 million to divvy up amongst the professional teams and players. In 2015, all of the top professional e-sports teams had earnings ranging in the millions of dollars.

What Are E-sports Events?

E-sports events are competitive video game tournaments among professional gamers. Thousands of fans flock to these events, which are held all over the world. Fans can also purchase "virtual tickets" that enable them to watch the tournaments on the internet. In addition, e-sports events can generally be live streamed (by channels or platforms such as Twitch, which is owned by Amazon or YouTube) and/or viewed at a later time online. Notably, ESPN is also investing heavily in e-sports coverage. Some examples of major e-sports events include theBattle.net World Championship Series, BlizzCon, Capcom Cup, Dreamhack, Electronic Sports League, Electronic Sports World Cup, Evolution Championship Series, Garena Premier League, Intel Extreme Masters, Global Starcraft II League, Major League Gaming, Halo Championship Series, World Cyber Arena, SMITE World Championship, World Cyber Games, The International and Wargaming.net League.

Popular E-Sports Genres and Games

The most common types of e-sports games are real-time strategy, fighting, first-person shooter and multiplayer online battle arena games. Popular games include, but are not limited to: League of Legends, Dota 2, Starcraft, Smite, Call of Duty, Heroes of the Storm, Hearthstone, Overwatch, Street Fighter, Super Smash Bros., Mortal Kombat and Halo. The popularity of a game is contingent on a variety of factors, including game and character design, ability for customization, price point and graphics quality.

The Legality of E-sports Event Hosting at Casinos Under New Jersey Law

On June 28, 2016, Director David Rebuck of the New Jersey Division of Gaming Enforcement issued a letter to all casino counsel wherein he urged Atlantic City casinos to begin hosting e-sports tournaments. In his letter, Rebuck stated that "New Jersey casino licensees could run the tournaments directly, offering prizes to the participants" or a casino could "allow outside entities that organize and run such events to hold the tournaments, provided such entities obtained the proper level of casino service industry entity credential." Rebuck emphasized that e-sports events create great opportunities for publicity for the hosting casino, as well as for Atlantic City, because the events are live streamed on the internet all over the world. Moreover, thousands of spectators would flock to Atlantic City in order to view the tournaments in person.

The applicable New Jersey regulation that authorizes New Jersey casino licensees to host e-sports tournaments provides in pertinent part: "A casino licensee may conduct a gaming tournament for any game approved by the Division pursuant to N.J.A.C 5:12-5." N.J.A.C. 13:69F-8.6(a). Further, "gaming tournaments involving games where the outcome depends on the skill of the participant are authorized provided that some element of chance is also part of the game." N.J.A.C. 13:69F-8.6(d). As such, current New Jersey regulations permit Atlantic City casinos to host e-sports tournaments and the casinos are encouraged by the Division to offer their facilities as a host location.

Host casinos must notify the Division that they wish to offer a tournament at least five days in advance of the tournament and provide a detailed list of the equipment that will be utilized, the number of participants that are expected and a description of the security and surveillance measures that will be used to monitor the events. N.J.A.C. 13:69F-8.6(b). No casino has yet notified the Division of its intent to offer an e-sports tournament.

The Future of E-sports in Atlantic City and Las Vegas

In Atlantic City, reports recently surfaced indicating that Glen Straub's casino (formerly known as Revel) resuscitation project might offer an e-sports lounge. If true, this would be revolutionary in that it would be the first of its kind at a New Jersey casino. An e-sports lounge could host tournaments and potentially offer head-to-head player wagering, E-sports slot machines and audience-based sportsbook-style wagering. In Las Vegas, Seth Schorr's Downtown Grand, a property that aims to be an e-sports destination, opened the first dedicated e-sports lounge in February 2016. The Downtown Grand has formally applied to the Nevada Gaming Control Board to offer wagering at its lounge.

What's Next – Can E-sports Spectators Legally Wager Under Current New Jersey Law?

In his aforementioned letter Rebuck notes that New Jersey regulations do not currently permit spectators to wager on the outcome of e-sports tournaments. This issue has yet to be explored by the Division. The manner in which the term "e-sports" is defined significantly impacts the resolution of this issue. Pursuant to federal law, sports betting is illegal in the majority of states. Specifically, the Professional and Amateur Sports Protection Act of 1992 (PASPA) is a federal act that banned sports betting in all but four states (Nevada, Delaware, Montana and Oregon). However, if e-sports betting is not truly sports betting because e-sports are not truly sports, PASPA does not apply. Proponents of e-sports betting argue that e-sports are not "true sports" because they do not involve physical exertion and outdoor playing areas as required by most traditional sports. Further, proponents contend that e-sports are a competition, rather than a sport. Consequently, proponents argue that states are not prohibited from authorizing e-sports betting like sports betting. However, those opposed to e-sports betting contend that e-sports is a mental sport, which has sufficient elements of traditional sports such that it is prohibited by federal law to the same extent as sports betting.

Further, it is suggested that the risk of match fixing is even greater in the e-sports betting context than in the sports betting context because cheating is harder to detect. Whether it is legal or not, e-sports betting is already occurring (specifically on in-game items). Accordingly, express legalization, as well as regulations, would likely make it safer. Just like illegal sports betting is linked to criminal activity and threatens the integrity of sporting events, unregulated e-sports betting has similar ramifications. Therefore, if e-sports wagering is found to be legally permissible under the New Jersey Casino Control Act, the creation of robust governance and regulatory frameworks would be the next step.

E-sports Betting Online

E-sports betting is also the most recent betting market to potentially enter the online gambling arena. Overseas bookmakers online are expanding the range of sports betting they offer by adding e-sports betting to the available betting options. Numerous off-shore sportsbook sites (like Pinnacle, Bet365 and Bet-at-Home) are currently offering e-sports betting. In 2015, Seattle's Unikrn began allowing people to bet on the outcome of e-sports tournaments. However, only Australians and Europeans are currently permitted to use this site due to the aforementioned federal ban on sports betting in the United States. The legality of e-sports betting online under the Unlawful Internet Gambling Enforcement Act of 2006 is another question that warrants exploration.

Conclusion

In conclusion, while e-sports tournaments can legally be held in New Jersey casinos, the follow-up questions of whether spectators might lawfully wager on the results of such tournaments, at New Jersey casinos and online, present interesting legal issues that do not yet have clear answers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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