Gambling in eSports

March 25, 2021

Gambling in eSports has gotten out of control and could get even worse without proper regulations. There are two forms of eSports betting: cash betting on professional eSports games and skin betting. The first gambling companies to enter into eSports already had a foothold in the traditional sports industry. After noticing the exponential rise in eSports viewership and lack of eSports specific regulation, these companies pivoted into eSports in an attempt to capitalize off the emerging industry (Greer, Rockloff, Browne, Hing & King, 2019). In the years following the success of these firms, new betting platforms were created that offered their services exclusively to the eSports market (Greer et. al., 2019). Skin betting refers to the practice of using in-game cosmetics to bet on eSports games or as collateral for online games of chance (Greer et. al., 2019). For several years the eSports betting industry operated completely unchecked, posing a slew of ethical issues, particularly around competitive integrity and underage gambling (Dos Reis, 2017). While there have been crackdowns by marketplace operators and legislative bodies, many of the problems still exist today and new ones are emerging as eSports continues to mirror the gambling complex of the wider sports industry. 

Skin gambling has routinely exploited the younger demographic of eSports viewers and has operated with far fewer constraints than traditional betting. Skins are typically acquired by in-game achievements, randomly through “loot-boxes”, or directly via purchases on the Steam marketplace (Greer et. al., 2019). These skins are typically tiered by the rarity with the most expensive skins going for tens of thousands of dollars and serving as an indicator of prestige (Greer et. al., 2019). Creating a Steam account where skins can be stored and sold is extremely easy and lacks any regulation. Potential users only need to be 13 years old, have a valid email address and if they want to make purchases on the account, any valid debit, credit, or gift card is required (Greer et. al., 2019).  

Additionally, some sites allow consumers to trade their skins for tokens that can be used to play games of chance such as roulette, crash, and even poker. The winnings on these sites are higher valued skins but they can be withdrawn and sold on third-party sites for real currency. The excitement that is generated from users winning on these websites makes for extremely popular reaction-based digital content. As such, some social influencers have built their brands around this form of skin gambling which can cause more youths to develop an interest in betting. There have also been several high-profile scandals where social influencers mislead consumers about their financial connections to these gambling sites. For example, in 2016, Youtube stars Trevor “TmarTn” Martin and Tom “Syndicate” Cassel published videos where they gambled with skins on the website “CSGOLotto” (Frank, 2016). In their videos, Martin and Cassel claimed that they were simply using the sites for fun, when in fact they surreptitiously owned the site and were using a backend function to increase their odds of winning to create more thrilling content (Frank, 2016). However, their reactions to winning on the site were so fake that anonymous watchdogs investigated and caught wind of their fraudulent behavior (Frank, 2016). Scandals such as this caused some changes to regulation, primarily by the owner of Steam, Valve Corporation. Valve was able to take down many skin betting sites that required users to sign-in with their steam accounts in order to bet with skins (Greer, et. al., 2019). But without any government legislation to back up their rules, new sites have emerged and lackadaisical behavior by Valve has allowed them to operate unchecked (Greer, et. al., 2019). Without proper enforcement, the threat to the easily exploitable youth demographic of eSports will remain in perpetuity.

(TmarTn apologizing for the role he played in the CSGOLotto scandal, Dexerto.com)
(TmarTn apologizing for the role he played in the CSGOLotto scandal, Dexerto.com)

Despite crackdowns from Valve and game developers, skin gambling remains one of the biggest ethical issues that exist within eSports. Children are indoctrinated into skin gambling through in-game loot boxes. Technically, loot boxes can be opened for free if a player receives enough value from natural skin drops in the game to trade their items for a loot box key. But, the loot boxes are essentially slot machines that possess addictive qualities that can make any human make poor decisions, regardless of age. Adding onto that is the element of prestige that comes with having high valued skins, which further incentivizes individuals to bet. Most children do not have access to large bank accounts that they can pull money from to fuel their skin gambling addiction so those that have not formed a shell of integrity may attempt to use their parent’s credit card (Hardenstein, 2017). There are no additional authentication checks needed to use a credit card to buy skins on the Steam marketplace. Furthermore, credit card information could already have been linked to the children’s Steam account when their parent’s purchased games for them (Hardenstein, 2017). This means that children would not have to steal their parent’s credit card information to have access to an enormous amount of money to gamble with. It was several high-profile cases where disgruntled parents sued Valve for their lack of restrictions on skins and personal finances that led to the crackdowns that currently exist (Hardenstein, 2017). However, every time a skin sells on the Steam marketplace, Valve takes a 10% cut and the associated game developer to the skin being sold takes a 5% cut (Hardenstein, 2017). This made it in Valve’s best interest to keep the current system in-tact albeit with slower trading times. 

At its peak in 2016 the skin gambling market for a single eSports title, Counter-Strike: Global Offensive (CS:GO), was worth $4.6 billion USD. Skin gambling in CS:GO was seven times more than total eSports cash betting at the time ($649 million USD) and more than four times the revenue that the entire competitive eSports industry is projected to make in 2021 (Hardenstein, 2017). These extraordinary numbers represent a fraction of the money that people are willing to spend within the eSports space and why many betting companies are sponsoring eSports teams and tournaments. With such a significant amount of unregulated money floating around in eSports, people will look to capitalize off the system in any way that they can. Perhaps the worst case of exploiting the skin market is when competitive eSports teams purposely lose a game in order to secure a large number of valuable skins. The visibility of the top level of eSports competitions makes it difficult to “throw” games without getting caught. However, because betting options still exist for semi-pro games that could average less than 100 viewers, there are high reward and low-risk opportunities for gamers who care more about money than competitive integrity (Hardenstein, 2017). Match-fixing is an unfortunate consequence of industry success that exists in traditional sports too. Cases like the Black Sox scandal in 1919 and supposed match-fixing by NBA referee Tim Donaghy are clear examples of how badly sports can be impacted when the motivations of players and officials are in the wrong place. The threat of these events happening in eSports is much greater, though, as very few regulatory bodies exist specifically for eSports' competitive integrity. Moreover, the methods by which matches are fixed benefit companies like Valve as well as game developers. While it is unlikely that matches will be fixed at the top of eSports, several infamous incidents have rocked the industry and created a corrosive environment where fans are quick to distrust the results of games that don’t go in their favor. 

The lack of regulation and surveillance of lower-level eSports tournaments puts players in compromising ethical situations. It is understandably very difficult for amateur and semi-professional eSports players to break into the top of the scene. For the players that want to benefit financially from eSports but do not believe that they will become professionals, match-fixing is an easy way to make money (Hardenstein, 2017). Furthermore, without a robust regulatory body to prevent teams from match-fixing, players can repeat this process over and over again until they get caught or lose enough so that their games are not listed on the common betting sites (Hardenstein, 2017). Valve attempted to put an end to match-fixing back in 2015 when they banned four players from the CS:GO team iBUYPOWER, who at the time were in contention for the best team in North America (Hardenstein, 2017). The punishments that were levied by Valve banned the four players, along with several accomplices who helped facilitate and bet the skins, for life from Valve-sponsored events (Hardenstein, 2017). This meant that these players could no longer compete at the Majors and it essentially ended their CS:GO careers. As time has passed, fans and players have clamored for the iBUYPOWER players to be unbanned, but Valve has never even entertained the subject in the past 5 years. Valve believed that such a strong message would prevent anybody from match-fixing in the future, but this created a careless attitude that has allowed match-fixing to happen again across CS:GO and other eSports titles (Hardenstein, 2017). Without proper regulation, what was once a significant part of the eSports economy has been harmed by match-fixing and the distrust that fans now feel. People are being robbed by random eSports athletes who have decided that their success in the eSports industry will not be defined by the games they win but by the money they make when they lose. Sites that allow people to bet on these lower-tier matches and tournaments need to be hit with sanctions and legislation should be passed that specifically focuses on controlling the eSports betting market. Unfortunately, there will always be a small group of players who try to throw their games, but with the right leadership the size of this group can be reduced and the negative impact of their actions can be diminished as well.

(iBUYPOWER at FACEIT League Season 2 LAN Finals in 2014, HLTV.org)
(iBUYPOWER at FACEIT League Season 2 LAN Finals in 2014, HLTV.org)

 eSports organizations that partner with betting sites help to fuel the system of unethical behavior that has plagued eSports over the past decade. It seems as though every party involved in eSports is willing to turn a blind eye to the ethical issues that betting presents because there is so much money that is created by gambling. eSports teams are heavily reliant on sponsorships to fund their teams and operations with an average of 58% of eSports revenue being derived from sponsorship sources (Newzoo, 2019). While it is important that eSports organizations are developing large sponsorship contracts, and even more so with companies that don’t traditionally do business in eSports, partnering with betting companies could be sending the wrong message to fans. Almost 20% of eSports fans are under the age of 18 and exposing them to activities that should be illegal at their age presents a slew of ethical and moral issues (Newzoo, 2019). Younger individuals will forge positive associations with betting companies as they trust that their favorite team has their best interest in mind. Until eSports betting receives proper regulation, organizations that partner with these betting sites are accomplices in the unethical behavior of exploiting younger eSports viewers. Organizations need to either take a stand against these betting companies or change their marketing strategy so that it does not paint gambling in such a favorable light.

Sources:

  1. Dos Reis, V. (2017). Q&A: The Rise of Esports Betting and the Challenges the Industry Faces. Gaming Law Review, 21(8), 630-636. doi:https://doi.org/10.1089/glr2.2017.2189
  2. Frank, A. (2016, July 04). Counter-Strike YouTubers revealed as owners of gambling site they promoted (update). Retrieved October 20, 2020, from https://www.polygon.com/2016/7/4/12093546/csgo-lotto-tmartn-syndicate-youtube-disclosure
  3. Greer, N., Rockloff, M., Browne, M., Hing, N., & King, D. L. (2019). Esports Betting and Skin Gambling: A Brief History. Journal of Gambling Issues, 43. doi:10.4309/jgi.2019.43.8
  4. Hardenstein, T. (2017). Skins in the game: Counter-strike, esports, and the shady world of online gambling. UNLV Gaming Law Journal, 7(2), 117-138.
  5. Hums, M. A., Barr, C. A., & Gullion, L. (1999). The Ethical Issues Confronting Managers in the Sport Industry. Journal of Business Ethics, 20(1), 51-66. doi:10.1023/a:1005951720456
  6. Newzoo Global Esports Market Report 2020. (2019, November). Retrieved October 20, 2020, from https://newzoo.com/insights/trend-reports/newzoo-global-esports-market-report-2020-light-version/