The dark side of esports’ rise in popularity

Casinos, poker, and sports betting are some of the most forms of online gambling. However, many are unaware of esports betting and loot boxes. 

These are illegal in some countries and almost always beyond the jurisdiction of any regulatory authority. Loot boxes have been accused of contributing to child gambling and video game developers are rarely open with players regarding the odds they face when it comes to getting a good item. 

Despite this, loot boxes have generated billions of dollars for video game publishers. Here is everything you need to know about loot boxes, and how they fit into esports.

Esports and loot boxes

What is esports?

Esports, which is short for electronic sports, is a form of competitive video gaming. Esports is typically associated with players making money, but this isn’t always the case. There are casual gamers that enter online tournaments for fun. 

However, the professional video gaming scene is every bit as serious as football or basketball. Some of the biggest contests see players locking horns for millions of dollars in prize money or raking in seven-figure salaries. 

The excitement isn’t exclusive to the competitors, but is an attraction to millions watching on online streaming services such as YouTube and Twitch.tv. The popularity of these events is so great that big TV networks like ESPN and ABC broadcast esports contests on their channels.

There are many video games that have large esports scenes, with these being some of the most popular:

• Super Smash Bros.
• Call of Duty
• FIFA
• Counter-Strike: Global Offensive
• League of Legends
• Fortnite
• Dota 2

What is esports betting?

Where there are fans watching live events, there is bound to be betting. Just as fans bet on football and tennis matches, there are betting markets for esports. 

Similarly, punters wishing to engage in esports betting should have a basic understanding of the video games being played, knowledge of the structure of the contests and familiarity with the players’ skills. 

There are several different mechanisms available to bet on esports. 

• Real money betting: This form of esports betting is closest to traditional sports betting. Bookmakers offer odds for outcomes, which you can bet on. If your selection turns out to be correct, you get paid at the agreed rates. 
• Skin betting: Punters do not use proper currencies for the bets, instead using in-game items from the game they are watching. This is helpful where esports betting is illegal, but is very rare as of 2021.
• Social betting: This is an informal mechanism of betting among friends instead of going through a professional bookmaker that offers odds.
• Fantasy betting: This works exactly the same way as in fantasy sports associated with traditional sports like football and cricket.
• Challenge betting: Also referred to as “money matches,” this is when the competitors put money down with someone they’re facing head-to-head. 

What Are loot boxes?

Loot boxes work similar to a pack of trading cards, offering the player a chance to obtain one or more items at random from a larger collection. Depending on the game, these upgrades can range from cosmetics to customize a character’s appearance to game-changing weapons or items. Players can either buy the boxes directly or obtain them during play and later buy “keys” to open them.

Online casino players will find that loot boxes are based on the same mechanism that slots use. For example, you can pay an extra amount in some slot games that increases the probability of triggering the bonus feature, thus increasing the return to player. Many loot boxes have “escalating odds” that give a greater chance of getting a good item for each loot box a player opens.

The pitfalls of esports betting

To appreciate the dangers of esports betting, you have to first realise how big it is. Without getting into too much detail, here are a few key facts. 

How big Is esports betting?

Let us look at two of the biggest video games in this field. Fortnite has around 78 million monthly players and professional tournaments draw huge crowds both in real life and online. League of Legends World Championship attracted over 100 million viewers in 2019 with a peak of 44 million. Compare this with the Wimbledon Men’s Final 2019 that peaked at around 9 million viewers.

Major online bookmakers such as PaddyPower, Bet365, and Betway offer bets on esports tournaments. Monthly esports betting revenues for UK operators rose 30-fold between March 2019 and March 2020.

Esports betting is attracting youth

Younger bettors are more likely to succumb to the pressures of addictive gambling, and esports betting is attracting those just above the age of majority. The average tennis spectator is 61, whereas the average age of esports spectators is only 26. 

The UK Gambling Commission reported that in 2019, 17% of esports gamblers were aged between 18 and 24. According to the UK Children’s Commissioner, 93% of UK children play video games, averaging three hours a day and a growing number also follow professional esports teams. Betting on esports is just one step away from this and the number of minor problem gamblers has quadrupled to more than 50,000 in the last two years. 

Match fixing in esports

Integrity issues are being rigorously monitored in traditional sports by a number of regulatory authorities. However, esports is a nascent industry and possibilities of match fixing lurk at every corner. 

Ian Smith, a UK-based lawyer and the integrity commissioner at the Esports Integrity Coalition, says that match fixing is rampant. Individual players see an opportunity to rig a particular outcome and bet big against themselves. Even more dangerous are organised activities, in which gambling syndicates bribe players. There are also more minor incidences of this, like in battle royales that are meant to be a free-for-all, but see players collude with one another beforehand.

In South Korea in 2016, Lee Seung-Hyun, touted as one of the greatest players ever on StarCraft II, was convicted for throwing two matches. He was sentenced to 18 months in prison, fined 70 million in local currency and banned for life from esports. In 2019, Bloomberg reported police in Australia arrested six pro Counter-Strike: Global Offensive pro players for deliberately losing at least five tournament matches after illegally betting on their own defeats.

The need for regulation

Despite its obvious dark side, esports is here to say. The next step is to more effectively and consistently regulate it. 

Some steps have already been taken. The Esports Integrity Coalition and some tournament organizers are doing work in terms of combatting match fixing. The Advertising Standards Authority is trying to curb esports adverts targeted at younger audiences. 

Bettors ought to look for action with licensed and reputable bookmakers. There are many fly-by-night operators offering better odds, but these should be avoided at all costs.