As e-sports’ popularity explodes, betting needs to be regulated

E-sports betting has boomed in the last five years, attracting investments from celebrities, investors and entrepreneurs like Mark Cuban and Ashton Kutcher even the former NBA Commissioner, David Stern, has talked about it on many forums.

Gambling in e-sports has charmed stakeholders, but it may have created a monster in the gaming industry. As with every growing industry, it’s vital to create checks and balances to avoid corruption.

Already, critics are lining up with questions about the credibility of the betting system and its influence on the integrity of e-sports. We have already witnessed some match-fixing cases in the past, which involved betting, and many e-sports organizations — including the game developers — have taken strict actions against such incidents to discourage players from getting involved in this mess.

Valve taking the initiative

Knowing that the large part of betting involves skins (the in-game items that provide visual upgrades for default looks), Valve took an initiative of increasing the waiting period to execute the transaction for skins after each trade.

This not only prevented the manipulation of the marketplace, but also had a trickle-down effect on betting, causing delays in each transaction or trade of an in-game item.

The final blow from Valve came when they announced an in-game item-trading update, clarifying that it had no involvement with any of the betting sites and that these sites exploited the use of the “Steam” trading system by integrating the OpenID API.

Valve has also started sending notices to these sites requesting they cease operations through Steam, and said that it will further pursue the matter as necessary.

Closure of CSGOLounge and Dota2Lounge item betting operations

With restrictions implemented by Valve, both CSGOLounge and Dota2Lounge started to cut back on their item betting operations. The community had already started to anticipate the closure of betting services by a couple of the biggest item betting sites.

And on August 17, 2016, CSGOLounge and Dota2Lounge released official statements and Dota2Lounge announced the closure of virtual-item betting operations for both of the sites.

Since then, many websites have shut down their virtual-item betting services that were associated with Steam. However, money-based betting sites are still up and running.

U.K. Gambling Commission interference

Earlier this month, the U.K. Gambling commission presented a discussion paper on virtual currencies, e-sports and social gambling, mentioning the possible risks and emergence of further issues for the betting regulation system and player protection.

The paper defines the scope of virtual currencies, gambling and betting providers along with imposed regulations. It clearly shows the stance of the U.K. Gambling Commission regarding gambling/betting in e-sports.

“In the Commission’s view, the regulation of betting on eSports is no different from any other event upon which bets can be placed.”

According to the commission’s discussion paper, betting on e-sports involves risks that need to be managed just like betting in any other sports, including the risk of cheating and match-fixing — along with the threat that people will start gambling excessively.

The discussion paper also warns the unlicensed gambling services of possible legal action if they operate without a proper license. And the commission said it had written to more than 100 unlicensed online gambling websites informing them that they should cease offering to British customers facilities for gambling.

Some of them ceased offering gambling services when they received the letter. However, a few were the subject of payment-blocking by payment providers and the remainder are still the subject of ongoing enforcement activity.

This paper reinforces the mission of the U.K. Gambling Commission to uphold the licensing of gambling services and betting providers. For this purpose, the commission can pursue a range of options, from delivering guidance to prompting criminal proceedings if a gambling service or betting provider continues to operate without a license.


Are gambling sites the cause of match-fixing?

It’s obvious that the existence of e-sports gambling and betting sites have played a role in match-fixing. These betting providers also allow the players, sponsors and other stakeholders of a particular match-up or e-sports event to bet against themselves, which obviously creates conflicts of interest.

The best example is the iBuyPower CS:GO match-fixing incident, where the team deliberately lost the match to alter the draws of the next-stage matches. Many players have been suspended by Valve, including a list of SEA gamers disqualified from Shanghai Majors.

Not all of the blame for corruption in e-sports should fall on the betting sites. Despite the increasingly large earnings players can receive, most league gamers aren’t paid enough for their continued efforts.

However, in the case of CSGOLounge and Dota2Lounge, the sheer size of these sites and the total volume of bets on competitive matches at all levels simply made it impossible to effectively monitor the operations and activity. The absence of proper monitoring mechanisms allowed people to take advantage of this fact.

“As I’ve said many times, I am for e-sports betting that is in line with the laws of the respective lands it takes place and is regulated. As much as CSGOLounge helped CSGO viewership grow it never really achieved that status and it came with its own set of problems,” commented Richard Lewis, e-sports game analyst.

The emphasis here is on the regulation of the betting providers and their monitoring.

Some companies offer this, like SportRadar, which provides anti match-fixing services such as its Fraud Detection System, education workshops and intelligence reports to ESL and the ESports Integrity Coalition, as well as e-sports betting products and services to regulated bookmakers worldwide.

“Our general position is that skins betting as it exists was and is a dangerous proposition because it is unregulated, with poor KYC and child protection protocols. We believe the betting on eSports is inevitable and growing, and therefore should be provided in a regulated, reliable environment,” said Alex Inglot, a spokesman for SportRadar.

“Of course match-fixers use betting operators to generate profits but in our experience, proper monitoring can significantly deter those fixers, while educational workshops for players and participants also have a critical role in preventing match manipulation.”

What to expect for the future of e-sports betting

Since the growth of betting and gambling in e-sports in inevitable and it will remain a big factor, the industry needs to make sure it’s done correctly.

“Looking to the future, I know many regulated and legal betting companies want to offer their services to the e-sports community. That will ensure that no underage gambling takes place, that the bets are monitored for irregular betting patterns and that people are betting in a responsible fashion,” said Lewis. “There’s a long way to go but I think we will be in a much better place when we leave skins betting behind and see what these companies provide.”