Esports Growth and the Betting Integrity Landscape

On May 30th, 2021, at 13.50 GMT, the attention of 5.4 million people was locked on the sporting action coming from the Marina Bay Sands Hotel, Singapore. They were tuned in via YouTube, Booyah, Facebook, TikTok, Twitch and VK for the culmination of the Free Fire World Series 2021, a battle royale video game being contested by Thailand’s Phoenix Force and LOUD from Brazil.

That 5.4 million figure made the match the most viewed esports event of all time, with a global audience figure 2.5 times greater than peak viewership just two years earlier in 2019. This is the glamourous side of esports; Phoenix Force were awarded US$500k in prize money for their victory, with the players on their roster earning US$83k for their efforts.

The growth in global popularity of esports has been matched by demand for betting opoortunities. Offerings now include a wider range of competitions and markets and esports-focused and esports-only betting operators, such as unikrn.com, are now commonplace. An estimated US$96 million in total bets were placed on the concluded League of Legends mid-season invitational, a 17-day event played in May 2021 demonstrating how important a source of turnover esports is becoming for betting operators.

Esports betting is estimated to have accounted for 2.1 percent of Global Gambling Revenue (GGR) of online sports betting during 2020. This is projected to reach 2.4 percent by 2026, according to H2 Gambling Capital. This should be considered in the context of a market dominated by football wagers making esports betting revenue comparable to established sports such as rugby and cricket. With sizeable growth projected for the overall sports betting market, the expectation is for esports global gambling revenue to double by 2026, representing an annual value of almost US$1 billion.

This increase in popularity has meant that playing esports professionally can be a viable career. However, while the players participating in the final of the Free Fire World Series received adequate reward, for others lucrative sponsorships or prize money can be out of reach. The often low-paid grind of life as a professional or semi-professional can lead players to seek alternative sources of income, either in a player-led, opportunistic manner, or through inducements to manipulate matches following an approach by organised match-fixers.

While a recent study by Ghent University indicated that only 10 percent of those approached to manipulate a match were being asked to do so solely for betting purposes, the rise in popularity in esports still presents a new challenge to the sports integrity infrastructure that is in place to tackle betting-related fraud. Indeed, the challenge in esports is considerable, not helped by the lack of a central governing body and a multiplicity of privately organised events and game publishers adding complexity to reporting and investigative mechanisms.

The response to this challenge has largely come from the Esports Integrity Commission (ESIC), established in 2015 to deal with the threats of match manipulation and betting fraud. ESIC has built relationships with betting industry stakeholders, including the International Betting Integrity Association (IBIA), with its membership of regulated betting operators that report and share information on irregular betting activity. This data is the starting point for an investigation into any potential match-fixing. From the start of 2019 to mid-2021, IBIA identified 52 cases of suspicious betting activity in esports with matches in Esoccer and Dota2 accounting for 63 percent of these suspicious betting alerts.

ESIC’s links with event organisers and publishers allows it to enforce bans and fines. Such measures are generally reserved for the more opportunistic, player-led manipulation of matches while ESIC works with relevant law enforcement to open criminal investigations into match-fixing orchestrated on a larger scale by organized criminal networks. This is exemplified in the United States where, as more states are legislating to legalize sports betting, the FBI has set up a sports betting investigative unit and has been working with ESIC to combat organized crime related to esports betting. Developments such as this show that, while the expansion in esports popularity and betting markets has been significant in the recent past with continued growth likely, the challenges of combating integrity-related problems are being met as stakeholders collaborate and resources improve.

One key tool in combating match-fixing in esports is player education. Knowledge of integrity issues and how to report approaches, which can be done anonymously to ESIC, are vital. This is particularly pertinent when we consider that, while the ability to monitor customer account-level betting activity is appreciable in the relatively mature, regulated betting markets of Europe and Australia, the same cannot be said of the large unregulated markets in Asia, and the infant cryptocurrency sports betting market, where visibility of betting activity is minimal.

As technological developments have been the catalyst for esports to become mainstream, increasing in popularity in terms of the number of people able to play and watch, so too have technological developments enabled the growth of a parallel online betting industry dealing in cryptocurrency. These betting operators require little or no customer identification, sitting outside the infrastructure created to combat match-fixing, and often based in jurisdictions such as Curacao with few regulatory requirements and little ability or incentive to report any suspicious betting behaviour. Indeed, while a small number of regulators, such as the Malta Gaming Authority (MGA) and the UK Gambling Commission (GC) are currently exploring ways in which cryptocurrency gambling operators can be licensed in the regulated sector, demand for the product is often driven by the anonymity that betting in cryptocurrency provides. This tension between regulators’ ‘know your customer’ requirements is seemingly incompatible with the business model of a crypto-sportsbook.

While any growth in cryptocurrency sports betting outside regulated markets increases the risk of betting-related fraud due to the ability to bet anonymously, the problem may be particularly acute for esports where a large proportion of players, viewers, and bettors alike are in the young, male demographic which dominates cryptocurrency usership. So, while the regulated market has reporting and investigative mechanisms in place to combat betting-related fraud through identifying customer account-level activity, the possibility of such fraud migrating onto unregulated markets is dramatically increased. The problem is compounded by the fact that, even if ESIC has been informed of suspected intentional underperformance, its ability to acquire actionable information and data is greatly reduced.
The answer to controlling online betting in either the unregulated market, notably in Asia, or the crypto-sportsbooks may lie with the supply of data facilitating those markets. Indeed, tougher checks on the probity of operators seeking that data and their impact on the integrity of the event may prove beneficial.

Overall, while the popularity of esports is on the rise and that in turn can stimulate the demand for betting and the number of matches that can be bet on, the well-regulated betting markets have introduced an infrastructure to combat the threat of betting-related fraud and to act as a deterrent to it. However, the proliferation of betting options outside the regulated market poses significant challenges which are particularly relevant to esports. In the often-opaque unregulated space with little accountability or deterrent for those intent on betting fraud, it is important that the risk is reduced through the education of players, the channelling of customers into the regulated market, and ensuring a standard is established and met regarding the supply of data.