Online Gambling Without the Casino

The industry of eSports is a rapidly growing one in terms of legitimate and regulated eSports markets and one that has recently suffered a severe decline on its darker side. We will be investigating both sides of eSports today, as we take an in-depth look at how it functions both inside and outside of regulated online casinos sites. Before we can do that, however, we must first answer a simple question:

What Are eSports, and Who Are the, ‘Athletes?’

Much like the term, ‘Sports,’ eSports can comprise a wide range of things. At its core, however, it just refers to playing video games either professionally or for some sort of stake non-professionally.

There is a wide range of video games that can be played at the competitive level, but the vast majority of them are some sort of first-person shooters or sports games. Fighting games may also be played at a very high level. While not as huge as some events, here is an example of a Smash Bros. Wii U Tournament Final.

The first thing to notice is that it very much resembles an amateur or low-professional sports event complete with commentary from other players and split screens. On the bottom of the feed, there is also sponsor advertising running for some companies that sponsored the tournament and/or players.

Some tournaments are much bigger in both size and scope, with players winning in the tens of thousands of dollars for coming in first. For example, the largest Madden tournaments of the year often have a top prize in the tens of thousands.

Another comparison that can be made to professional sports is that many of the players are professional players. In addition to having paid sponsorships, some of the players are actually signed to contracts (individually or as part of a team) and are guaranteed to make a minimum salary. When it comes to sponsorships, often hardware companies will sponsor the players, so that could be manufacturers of controllers, mouses, headphones, gaming chairs...etc

Players may also market themselves provided they are independent, or it is permitted in their individual contracts. Some players have direct streams in which other people may watch them play for entertainment, or alternatively, watch them play as a tutorial. These direct streams occasionally rely on subscribers to the hosting site receiving a percentage of subscriber fees and the streamer receiving the rest.

Many player will also choose to offer their gameplay videos and/or tutorials free for the public consumption on sites such as YouTube hoping for the advertisement revenue to be sufficient. These players represent only a percentage of professional, ‘Youtubers,’ and there are many others in different genres. Some players do both, have a paid subscriber feed on a site such as Twitch, but also YouTube some of their videos.

Between all of these different revenue streams, some percentage of these players make a good living with totals in the low six figures or high five figures. Many players make some amount less than that annually as well as amateurs who make some amount of money on the side with eSports.

Make no mistake that those who participate in eSports professionally, or even at a very high amateur level, have some serious skills. While the barriers to entry may not be as high as playing something such as ice hockey at a very high level, some serious dexterity and hand-eye coordination is required to be a top-level player. In addition to that, these players spend many hours practicing and honing their skills in MMO (Massive Multiplayer Online) tournaments that we do not see.

For example of the kinds of skills some players hone, check out this video from an annual charity event, Awesome Games Done Quick.

In that video, a player known as, ‘Zallard1,’ plays Super Punch Out blindfolded and beats the entire game. Throughout the course of that video, Zallard1 only loses to one opponent and beats that opponent in the very first rematch. Perhaps most impressive is Zallard1 taking care of the second-to-last and final boss in 16.64 seconds and 24.45 seconds, respectively.

In case you wondered, Zallard1 doesn’t even get touched in either of those last two fights.

Just like being one of the best at anything else, it’s not easy and requires intense training.

eSports for Fun:

Much like I can pick up a basketball and head down to the local court, just about anyone with an Internet connection can pick up a controller and play eSports for fun. Such players may even bet on it, but surprisingly enough, it has been estimated that just over 5% of all eSports betting consists of people betting on themselves.

Well over 90% of eSports betting consists of people betting for fun on either tournaments or matches consisting of very high-level players. ESports even has a very small, ‘Fantasy,’ sports market in which bettors can put together, ‘Teams,’ of players and have series against one another.

The professional eSports market is still in its infancy, so it is possible that some individuals who play for fun can still break into the game and become professionals. For those who choose to bet, though, there are several ways to do it:

Regulated eSports Betting:

The two most popular games for eSports betting are League of Legends and Counter-Strike: Global Offensive and there are regulated sportsbook sites that cover both of those games. One example of such is BetOnline who have their League of Legends odds posted here.

For lack of a better term, sites such as BetOnline represent the, ‘White,’ of eSports betting. This consists of traditional online Sportsbooks who choose to offer some odds on eSports while adjusting the lines to the bets of the players in a fashion that cuts itself out a vig. For example, the 3:00p.m. Saturday game between Phoenix and Cloud9 has lines of -110 for each side. In that case, as long as the action is balanced, the sportsbook is guaranteed to make money.

The regulated eSports sites essentially do the same thing that traditional sports betting does. They take high profile matches and hope that their handicappers are smarter than the, ‘Public,’ when it comes to setting odds that are fundamentally designed to leave a wide vigorish in the first place. In other words, the only players that could ever hope to consistently beat the books would have to be extremely knowledgeable.

Most bettors on eSports or, ‘Regular,’ sports are decidedly not extremely knowledgeable. It has been found that only slightly more than 25% of players even bother to research stats or game histories when deciding who they want to bet on. If eSports betting functions anything like regular sports betting, most people probably just have favorite teams or players that they like to put their money behind.

However, eSports gambling is hardly a small industry and the cash game is expected to grow substantially over the next several years. ESports gambling is a very serious industry as eSports enthusiasts are twice as like to gamble online as the average Internet user, 60% of eSports fan use either fantasy or betting sites and 35% of enthusiasts bet on real-time events more than a few times per week.

Some individuals might write off watching individuals or teams play one another at video games as, ‘A waste of time.’ In my opinion, it is no more or less a waste of time than watching professional athletes run into one another and toss/kick a ball around on the football, American football, rugby or any other sporting event. It is simply a means by which people can entertain themselves, and for many, having a proverbial, ‘Dog in the race,’ makes it all the more compelling. That is why the eSports betting industry exists in the first place.

Of course, even when the bettors are going through regulated providers of wagering, such as BetOnline, there are still a number of inherent risks. For one thing, there might be some question of bribery in the sense that eSports players may be different from athletes making millions of dollars per year and might be easier to, ‘Get to.’ Furthermore, if an eSports combatant were to, ‘Throw a game,’ in addition to being difficult to prove, there is also likely no sanctioning body in place to do anything about it. In other words, the players are largely just on their honor that they are performing to the best of their abilities.

Fortunately, the more shady avenues of eSports betting are being closed off, (at least major outlets) so greater proportions of gambling on these things are expected to come from regulated sources. In fact, Pinnacle Sports expects its eSports market to grow by 300% just over the next few years on an annualized basis.

The game is also going to become more popular as the years go by with popularity begetting even more popularity. At one time, eSports was largely a completely self-contained phenomena with the only sponsors being video game companies and the only gambling outlets being sites built strictly to cater to that spectrum of gaming. Very shortly after more traditional bookmakers got into the fray, traditional advertisers and companies began sponsoring some of these events. For anyone following the development of eSports, even just a little bit, it has been quite a phenomenon in terms of short-term exponential growth.

While bettors can feel mostly secure (as long as they believe the games themselves aren’t rigged by the players) dappling in betting on regulated sites, unfortunately, is a shady underbelly to eSports:

Skin in the Game?

As everyone knows, if you want to wager online at sites such as Pinnacle and BetOnline, then there are certain identity verification requirements that go into that. While it is theoretically possible for a few minors to get on there and make bets, it would only be by directly stealing their parent’s information and circumventing the security measures that many of these sites put into place. Even then, good luck getting paid as the funds would be going into your parent’s account!

Unfortunately, in the world of eSports, there exists a black market that is designed, mainly, to cater to those not old enough to gamble elsewhere.

Of course, these sites cannot deal directly with money because that would be so obvious as to be undeniable. As a result, they have to come up with an alternative form of currency with which to do business. That is where the concept of, ‘Skins betting,’ enters into play.

Skins are unique items, upgrades or designs that can be bought, sold or traded on a given Internet-based video game. The company, Valve, has an entire market through Steam for the purpose of dealing in these skins.

Valve, who hosts the games as well as the market, takes out 15% of all player-to-player sales that take place utilizing the market. While trading skins can happen without the use of the market, the only way to convert the skins to actual cash is to sell them on the marketplace. In that sense, when a player wants to get out of the skins game, the only choice is to go through the market.

With exception to the fees, this in and of itself isn’t necessarily a bad thing. Many of these items are unlockable (in game) and can be acquired for no additional cost aside from owning/playing the game. Furthermore, in its purest form, the skins market is just a place for players to buy/sell/trade items. This is hardly any different than the old World of Warcraft games in which one player could pay another to, ‘Drop,’ an item that the first player could then pick up.

Unfortunately, the skins are not always used for in-game purposes but are very often a front for gambling.

It should be mentioned that Valve does not and has not provided any support or means for the skins owners to gamble. The gambling is conducted via third-party websites who are not directly authorized by Valve and who Valve has, in recent months, taken measures to shut down. Several of these websites have been smaller time operators, and Valve mainly seems focused on shutting down the major ones. Therefore, several of the smaller ones still persist.

These sites have engaged in any number of unfair tactics against those who have used them for gambling. For one thing, several of these sites have shut down entirely without returning any of the skins or credits in a bettor’s, ‘Account,’ back to the player. In addition, match fixing has taken place on these sites in which some gamers would intentionally lose a match they should have won to cost the bettors their skins. The players, in these cases, have often been sponsored directly by the site that told them when they would lose.

Additionally, there have been cases in which eSports players have owned these third-party gambling sites and have promoted them accordingly without revealing their interests. There have been allegations of match fixing and match throwing associated with those sites, as well. The players (upon having other bet on them) could then throw the matches and profit directly because it was their own site that the bettors were placing bets on them to win!

Again, Valve has made efforts, via cease and desist Letters, to shut down the most major of these third-party gambling sites. While some of the sites complied immediately, others did not. Some of the sites continue to accept other forms of deposit from players, but do not allow skins gambling.

What is the Problem with Playing for Skins?

There are several problems with allowing players to play for skins, other than those that were highlighted in the previous section. For one thing, there is absolutely no mechanism in place on these third-party websites to ensure that the skins game is fair.

It is important to remember that not even 50% of the total skins betting has anything to do with eSports matches, whether or not the player participates directly. Much like the guy at the gas station rattling off series’ of PowerBall numbers to the clerk, many skins players (estimated at more than 25%) like to go for the big score and play lottery-style games hoping for jackpots.

Roughly 30% of all other skins bettors play other gambling games such as Roulette, Blackjack, Coin Flip, Raffle Ticket or Pick-a-Box games. It is important to note, once again, that there is absolutely no enforcement mechanism behind these games and sites to ensure that the software is fair and the player is getting the advertised odds. Of course, players could complain about being swindled if that indeed does happen, but then it’s just a matter of the operator killing the site and putting up a new one with the same rigged games.

Another problem is that a player does not necessarily win even if the player does win! There is a game within a game that goes on by which players are counting on the value of the skins that they own (or perhaps win) to either hold or increase. To wit, a player could successfully gamble using the skins, but if the value of the skin drops enough, the players could still find themselves in the hole.

For example, the skins are worth the most when they are both at their newest and most rare. When items are released in-game, or players playing the game complete certain tasks that give them the items, then the items decrease in value. It is essentially a simple game of supply and demand. Many of these items can lose serious value in the long-term and some of them even do in the short-term. Much like playing the stock market, the marketplace keeps a record of historical sale prices and units sold as we linked before.

Let’s pick out a particular item.

At the time of this writing, the sniper rifle in question was listed at around $24.00. However, if you look at the historical pricing of the rifle, seventeen units were sold at over $130 each when it first hit the market. Short-term fluctuations that occur naturally can also result in drastic changes to the price of an item as two units of that rifle were sold for $37.80 a month ago. It is difficult to tell if that was because of how few units were purchased, or whether it was some attempted, ‘Price-pumping,’ by a few people working in a concerted way that have a ton of units to unload.

Either way, if those two units were bought at $37.80 organically, it is pretty clear from the price history chart that they are unlikely to unload them at that price (or better) again. In fact, the current, “Buy,’ price request for two units is, at best, about $22.

In addition to the potential for serious valuation plunges of these skins, it is also important not to forget that 15% fee on any sales. The long and short of it is that the skins game sees players often playing games that are rigged, (in one way or another) betting items of an uncertain value to win items of an uncertain value that they then have to pay fees to sell.

I like to think I’m a pretty good gambler, but if there’s a way to win there, I can’t find it!

When it comes to the Skins game, though, it gets even worse in a hurry.

While skins can be acquired in-game, they essentially can only be directly purchased via a marketplace, so what that means is that the charges appear to be innocuous on credit card statements. In other words, it appears (from the statement) that the purchase just has something to do with a video game.

For adults playing the skins game, that wouldn’t matter, but it is mostly not adults playing it. Other than countries that block online casinos completely, most adults who want to participate in eSports betting are not going to do it with skins. Most adults are going to deposit cash into a legitimate and licensed online gambling provider and bet on the eSports matches they enjoy there.

For adults who want to play at online casinos, again, they are not going to convert money to skins and do it at unregulated third-party sites with suspect games. Those of legal age to play are going to come to sites such as ours and search for regulated online casinos with sterling reputations, fair software and excellent bonuses.

For children, on the other hand, playing at a properly regulated website is almost impossible.

While many players may participate in the skins market in a non-gambling capacity, several of them use it as a front for gambling. The vast majority of those people are children.

It is important to remember that skins are not necessarily a bad thing and are not necessarily used for gambling. Some of them have practical in-game effects that can be beneficial to players, while others can be used to customize your items and make you look bad ass. When players earn these skins through gameplay and sell them, whatever can be earned ($$$) from the sale represents actual profit. However, when people purchase the skins, they are not always for in-game use or straight resale.

The credit card statements coming as a result of these purchases are going to make it look as though some sort of video game or video game related item was purchased, but it is after the purchase that is the subject matter. The unregulated third-party sites that offer the eSports betting or casino games for skins are essentially directly targeting children and have only the barest (if any) age checks. In these cases, children as young as thirteen years old are getting involved in the games and gambling on these unregulated sites.

Many of these children also make unauthorized purchases on their parents’ credit cards in order to acquire the skins. In several cases, the kids outright steal their parents' credit card numbers.

Simply put, the children ARE the target market.

Can It Be Stopped?

Valve has taken some actions against the biggest operators of these third-party websites and has banned certain players for match-fixing and making skin transactions that violate the terms and conditions. In a way, Valve should be credited for this action because it devalued the skins themselves (in a serious hurry) which caused Valve to lose some money on the 15% fee on sales. Obviously, 15% of something like $30 is less than 15% of $130.

Aside from Valve cracking down on the smaller third-party sites, or becoming more restrictive on the way that skins can be transmitted from player-to-player, it is going to be really difficult for them to do anymore to stop it. There’s no way to ask Valve to stop the skins marketplace completely because, not only is it central to their business model, but it’s also a big part of what makes the games fun. Remember, at their most innocent, the skins are nothing more than in-game items designed to be useful or to show off your skills by getting them.

The first line of protection for minors getting involved (and hooked) on skins betting is the parents. The parents need to be proactive in knowing what their credit cards are being used for and to strictly monitor what purchases are taking place. Unfortunately, many of the skins can be acquired without making any purchases (aside from the game itself) and those skins can then be gambled without a parent’s credit card even being used. It is tough for a parent to protect the children from these operators unless the parent is extremely well-versed in technology.

It may also be prudent for law enforcement to attempt to get involved, but unfortunately, allowing minors to gamble in this way is a very difficult crime to detect. Also, since the juveniles are not actually gambling with money, (on direct) there are those out there that would attempt to advance a legal argument that the act should not be illegal.

Conclusion:

The worlds of both eSports and video game skins are both multi-layered and very complicated. Rather than place negative connotations on both of those things, it is important to fully understand what those things consist of and how they work.

ESports is an alternative to traditional sports that many individuals enjoy watching, find entertaining and gamble upon legally and in a regulated way. Individuals should be permitted to do all of those things. Very skilled players who put in long hours of hard work to excel at the games can eventually rise to the level of professionals and, for them, it is just a way to make a living. Casual players of legal age should be able to choose to gamble or not gamble on their own games, much like I could go down to the park and wouldn’t hesitate for a second to bet a guy at H-O-R-S-E (basketball) if I felt like I could beat him.

When eSports are gambled on in an above board way, that gambling is going to take place using direct cash and often on a regulated sportsbook provider, such as Pinnacle.

Gaming skins are in-game items used for a wide variety of reasons. They may even serve as in-game currency unto themselves or sold outside of the game via a marketplace. At their most innocuous, the only purpose they serve is to make the playing of a game more enjoyable. At their darkest, they function in the same manner as casino chips for children.

My final word on this is for you adults out there to continue to have fun if betting on eSports is something you enjoy, always use a reputable provider and make sure to look out for your kids.