How esports could become the third biggest betting market in America soon

How esports could become the third biggest betting market in America soon
How esports could become the third biggest betting market in America soon

Esports is now a billion-dollar global market. The idea behind playing games as a profession has gradually normalized over the past decade, with several countries turning it into an entertainment spectacle and reaping profits. So why exactly has America, who often jump on the bandwagon of any highly-profitable vertical, yet to legalize esports betting on a federal level?

Currently, only 12 American states are regulating esports betting in some form. So, less than a fourth of the world's biggest economy has the opportunity to wager in a market that is expected to grow to roughly $20.73 billion by 2027. That signifies a massive increase in value from 2020, when it was just $12.67 billion.

But more and more states are beginning to understand that this market needs to be far more regulated, or else other nations stand to benefit and leave little for America to exploit.

With that in mind, let us first take a look at the the countries that have already legalized esports betting on a large scale.

Esports betting already a familiar norm in Britian and Europe

The UK did not wait around when debate surrounding the inclusion of gaming in the category of sports betting came up. UKGC is one of the best gaming regulators in the world and quickly included esports betting under the same regulatory umbrella as regular sports betting. As a result, the majority of the top UK sportsbooks, including Bet365, William Hill and 888sport all have esports betting markets included in their regular sportsbooks.

Some European nations have also recognized and regulated sports betting, namely Malta, Spain, Denmark and Italy. So customers from these countries can use licensed sites to legally bet on sports.

Canada has yet to include esports betting in its legalized betting infrastructure, but it does not prohibit its citizens from wagering on overseas sites, provided they are regulated. The same goes for India.

While there are no figures on the kind of market they have built, the response has been terrific and they are far more liberal on the topic of allowing their citizens to wager in the esports market.

Let us now explore how America has gone about it.

America has taken its own time to get into this billion-dollar market

The NFL and NBA are two of the richest sporting leagues in the world, as is Major League Baseball, and all three markets have legalized sports betting a long time ago. Over 30 states are currently regulating betting in these competitions.

But esports betting was only legalized in 2017, and even then, only Nevada took advantage of it first by including gaming in the category of sports betting. In March 2020, every significant bookmaker was offering esports, and a number of different offerings at that. Meanwhile, Nevada regulators also approved betting on 13 separate e-leagues and tournaments in the same year.

One person in the enforcement division of the Nevada Gaming Control Board said that by mid-March 2020, casino operators were filing esports wagering applications at a rate of “almost one a day.” The hope at the time was that with a large number of states struggling financially, esports betting would be legalized and categorized as a taxable source of income.

Although not everybody took notice of this, Colorado and Tennessee regulated sports betting in some form in 2020 but both put the legal betting age at 21, as compared to the global norm of 18 or sometimes even lower in some cases.

But following that, Arizona, Connecticut, Louisiana, Maryland, Nebraska, Virginia, Washington and Wyoming also began regulating esports wagering in 2021.

New Jersey also passed legislation for the same in July 2021, and this could prove to be a turning point in the American sports betting market.

New Jersey allowing Esports Entertainment group to regulate esports betting was a turning point

Esports Entertainment Group (EEG) received an order approving a transactional waiver from the New Jersey Division of Gaming Enforcement a couple of weeks ago. The transactional waiver allows the EEG to legally accept bets in the Garden State.

EEG is now planning on launching its esports betting platform in New Jersey. The launch of kicked off with a five-day "soft play" period, which ensured limitations were applied to the online wagering experience to ensure proper regulatory operations. New Jersey bettors were able to wager on a variety of prominent esports, including Counter-Strike: Global Offensive, League of Legends, and Dota 2.

While football and basketball wagers still rely on living athletes (usually), humans have become optional in generating action. Some global sports books now also offer betting on completely automated soccer matches within the FIFA game made by Electronic Arts (computer versus computer). DraftKings and FanDuel (which offer legal fantasy contests in just over 40 states) have each offered new free contests based on automated games of Madden NFL, another Electronic Arts title.

FanDuel and DraftKings, which went public in April 2020, also offer paid fantasy contests for real money based on traditional top esports, including League of Legends by Riot Games, and Counter-Strike: Global Offensive by Valve Corporation.

Nevada and New Jersey are two of the biggest gambling states in the country. They understand how to regulate gambling and churn out profits from people looking to make calculated bets, and those that impulsively wager money in order to turn a quick profit. Las Vegas and Atlantic City, in particular, are also tourist hotspots, and despite COVID-19, millions of people flock from various parts of the globe to enjoy the hip and happening lifestyle in these liberal cities.

Traditional means of betting were always appreciated in these cities, but to place money on competitive gaming could just give tourists a new adrenaline rush. New Jersey now needs to take similar steps as Nevada to grow its own market and boom profits.

For example, in April 2020, Nevada regulators approved Activision Blizzard’s Call of Duty League and Overwatch League for betting. Three weeks later, the leagues announced an “integrity services” deal with Swiss company Sportradar, modeled on similar deals that Sportradar has with traditional sports organizations such as the NFL and esports pioneer Riot Games, creator of League of Legends, one of the most popular e-sports.

The partnership with Sportradar now allows people to access real-time data and place calculated bets, while the Swiss company also monitors betting for suspicious patterns, investigates possible corruption, educates players and officials on proper behavior, and establishes anti-corruption procedures. All of this has resulted in the Nevada Gaming Control Board facilitating huge profits solely from esports betting.

With New Jersey now entering the fray, the size of the market could double in a few years, given the state's expertise in regulating gambling, coupled with the incredible growth of the esports market.

To put things into perspective, as per Insider Intelligence estimates, there will be 29.6 million monthly esports viewers in 2022, up 11.5% from 2021. Additionally, certain esports organizations, like FaZe Clan, are also moving aggressively into areas such as merchandise, lending their brands more notoriety than if they had stuck to esports alone.

Commercial deals, endorsements, sponsorship contracts and broadcasting deals from video streaming platforms such as Twitch and YouTube are also leading to a massive rise in esports throughout the country and globally. Plus, bookmakers are also starting to understand the size of the market, thereby increasing their stakeholdership in this vertical.

But once Nevada and New Jersey become flagbearers in the esports betting market, the rest of America is sure to follow suit. A federal law could also come into effect, especially if the finances start to surpass traditional sports-betting verticals.

In fact, New York is also one of the players in the esports market but most of their business takes place online as there are no sportsbooks located in the Empire State. It is important to note that the Big Apple surpassed New Jersey to become the biggest sports betting market last month, as it took over $1.6 billion worth of sport bets, according to figures released by the New York State Gaming Commission. That's $300 million better than the best month that New Jersey ever had. However, most of its business came from bets on fantasy sports, which has been regulated in America for a while now.

Regardless, once they completely dip their feet in the esports betting market, it will add incremental value to the vertical and perhaps turn it into a multi-billion dollar space. There is still so much to be exploited in the American esports betting market, but now that New Jersey is also in the midst of regulating it on a large scale, it has all the chances in the world of becoming the third biggest sports betting market in America soon, behind the NFL and the NBA.

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Edited by Sandeep Banerjee
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