Esports Betting: Balancing Growth and Consumer Protection

Introduction

Esports is a dynamic and rapidly growing industry, being fueled by advancements in gaming technology, rising viewership, multi-million-dollar tournaments, professional leagues, sponsorship deals, and advertising revenues. According to Statista, it is projected to achieve an estimated market value of $5.9 billion by 2029. However, this growth is accompanied by significant controversies, primarily due to the industry’s under-regulation. One of the most contentious aspects of esports is its betting market, which accounts for nearly half of the industry’s revenue at an estimated market value of $2.5 billion in 2024. Due to varying laws around betting in different countries, it occupies a regulatory grey area, raising ethical and legal concerns about its impact on the broader esports ecosystem.

The Growth of Esports Betting

The rise of smartphones and increasing accessibility of streaming platforms like Twitch have fueled a global shift toward online esports tournaments, generating significant growth in esports betting. Like traditional sports, esports betting allows fans to wager on teams, players, or outcomes in solo matches, tournament matches, and pro leagues. However, it is inherently more complex due to the ever-evolving nature of the industry, including frequently updated game titles, changing teams, and shifting metas (most effective strategies), which complicate the accurate valuation of betting odds.

Esports betting involves real money, in-game items like skins (digital avatars), and increasingly, cryptocurrency. Major contributors to this market include the USA, India, Sweden, the UK, Germany, and South Korea. Together, these regions are expected to propel esports betting to a projected market volume of up to $3.5 billion by 2029. While these countries have introduced regulations for esports betting, the inherently online nature of the industry continues to create regulatory grey areas, raising challenges for enforcement and oversight.

Challenges of Online Esports Betting

a. Varied Regulations: While some countries have dedicated regulations for esports betting and licensed bookmaking ( eg., certain states in the USA, South
Korea, etc), most do not. The cross-border nature of such laws creates legal grey areas for betting service providers to access unregulated markets, increasing the risk of fraud and exploitation of bettors in those regions.
b. Game of Skill vs Game of Chance Definitions: Most gambling legislation across the world regulates sports betting on the basis of the distinction between games of skill and games of chance, viz., the games of chance where informed calculations cannot be used are typically illegal to bet upon. However, the definitions of ‘skill’ and ‘chance’ may vary by jurisdiction, which creates regulatory loopholes.
c. Underage Gambling: Online gaming is popular among younger demographics, which makes them more likely to participate in online betting. This opens up the need for strict measures to protect minors from engaging in wagering activities with real money or in-game tokens that can be exchanged for real money on third-party platforms.
d. Addiction Risks: Casual and professional players, often minors, are exposed to the gambling ecosystem early on with easy accessibility to gamified betting. This poses the risk of the development of addictive behaviours. Betting losses for younger, inexperienced bettors can have adverse health consequences.
e. Fraud and Match-Fixing: Due to a lack of standardized oversight in esports and its betting market, unregulated and unlicensed bookkeeping platforms may commit fraudulent activities such as setting unfair odds, refusing to pay winnings or match-fixing. This undermines trust in the esports industry as a whole.
f. Data Privacy and Cybersecurity Threats: Since esports includes large betting pools, it is an attractive target for cybercrime. The sharing of personal and
financial information on betting sites, especially unlicensed ones, poses a risk to the privacy and safety of bettors.

Way Forward

To balance the growth of the esports market and its regulation to increase the trust, safety, and privacy of its stakeholders, the following dimensions will have to be explored:
a. Standardized Regulation: Licensed online bookkeeping services can enhance consumer confidence and attract investments. Countries such as India will need to create a regulatory authority along the lines of the UK’s Gambling Commission and update their gambling laws to protect consumers since a significant amount of betting occurs here and is only expected to grow. This will also facilitate the creation of jobs and funding opportunities within esports.
b. Protection of Minors: Only licensed platforms conduct age verification to prevent underage betting. There is a need to bring unlicensed operators under the regulatory umbrella and mandate them to implement self-exclusion tools and spending caps to keep a check on gambling addiction.
c. Global Collaboration: There is a need for unified international standards to ensure effective oversight and enforcement across borders. Transparent
practices are essential to combat match-fixing, a growing concern in esports. Robust monitoring systems, mandatory reporting of suspicious activities, and
collaboration between regulators and esports organizations can help uphold the industry’s integrity.

Conclusion
The esports industry, with its increasing global popularity, presents a significant opportunity for economic expansion and innovation. However, with this comes challenges of consumer protection and associated ethical concerns. Efforts to address these must focus on closing legal loopholes to safeguard minors and other consumers from potential harm and utilizing technological solutions to improve data privacy and security in betting operations. The online nature of esports betting calls for a collaborative approach among cross-border stakeholders to ensure the industry’s balanced and sustainable growth. Thus, balanced regulation is essential if the industry is to earn credibility among stakeholders and observers.

Sources
● https://www.statista.com/outlook/amo/esports/esports-betting/worldwide
● https://www.skrill.com/en/skrill-news/gaming/how-does-esports-betting-work/
● https://www.si.com/esports/betting/biggest-challenges-esports-betting
● https://www.topesportsbettingsites.com/country/india/
● https://www.gamopo.com/countries/#