Abstract
When the going gets weird, the weird turn pro.
I
No. It's not even a track meet. The teams shake hands and repair to rows of tables set up on stage, to compete with each other playing online video games such as League of Legends, Starcraft, Halo, and Counter Strike. A computer console and keyboard are provided to each player, along with a big comfy swivel chair in which to sit. Video of the gameplay is piped to the giant screens above, as well as streamed on the Internet, and the fans watch raptly, cheering on their favorites. Welcome to eSports. 1
Inception and Growth
Videogame tournaments are nothing new, having been around for about 20 years. But in 2011, the video streaming site known as Justin.tv became the online streaming platform known as Twitch. By this time, the option of playing in interconnected teams had become at least as popular as solitaire play. In fact, there arose video games which did not merely feature the possibility of playing in teams, but which focused on it. Games such as Defense of the Ancients were designed and composed expressly for team competition. Twitch concentrated on the live streaming of tournament play of such games, and quickly built a worldwide audience. From then on, the growth of competitive video gaming was explosive, even by Internet standards. As of 2014, there were 205 million people watching or playing eSports on Twitch and its competitors such as Yelp. 2 The majority of these fans are located in Asia, particularly South Korea, the most wired society in the world. But North America and Europe account for 28 million fans, with 21% annual growth predicted for the near future. 3
Game? Sport?
With little if any physical exertion involved, critics say, how can this be called a “sport” or its participants “athletes”? According to the Merriam-Webster Dictionary, a sport is “a contest or game in which people do certain physical activities according to a specific set of rules and compete against each other,” or “a physical activity (such as hunting, fishing, running, swimming, etc.) that is done for enjoyment.” 4 To be sure, the definition can be somewhat elastic. Golf is considered by many to be a sport, even though, unlike American football, it requires much less physical exertion and cardiovascular activity, and so can be played by elderly, overweight, or handicapped people. Others consider it a game: an “activity engaged in for diversion or amusement,” or “a physical or mental competition conducted according to rules with the participants in direct opposition to each other.” 5 An NFL or National Collegiate Athletic Association (NCAA) cheerleading squad is not considered to be involved in a sport, even though they, too, engage in strenuous physical activity in teams. Bullfighting is not a sport but a spectacle, even though the exertion is intense to the point of fatality; horseracing, far gentler but still vigorous, is “the sport of kings.” The International Olympic Commission is constantly receiving suggestions for other activities to be formally classified as “sports,” including surfing, skateboarding, karate, and even ballroom dancing. 6
But apart from physicality, there is another prominent point of comparison between eSports and pro/college sports as we traditionally have understood them: eSports is big money, too. As of 2016, the eSports market is predicted to grow to $463 million, reaching $1 billion by 2019. 7 While Asia provides most of the fans and participants, North America is the most lucrative market segment. 8 Major corporations sponsor the teams and events, 9 which now fill up large stadiums not only in Asia, where the phenomenon began, but in Europe and the USA as well. 10 Generous recompense is available for successful players, reaching into the millions per head. 11 There have even been cheating and doping scandals, 12 and occupational injuries that sideline promising players. 13 But most importantly, for the purposes of this discussion, these contests resemble pro and college sports because people bet on them.
Esports and Gambling
A rose by any other name, the Bard of Avon assures us, would smell as sweet. That might be because Shakespeare never studied U.S. gambling law. There, it matters intensely whether a given activity is called a “game” or a “sport.” Games which qualify as gambling can be licensed by U.S. state authorities. If we consider these contests to be games, that also opens up a second set of possibilities. There are gambling games, which tend to be illegal if not licensed by the authorities, and games of skill, which may need no license at all, even if contestants can win prizes. But if so-called eSports are actually sports, legally equivalent to basketball or hockey, then gambling and wagering on them is largely forbidden by federal law. Let's see how the different labels would play out.
State level: Playing versus betting
If eSports video gaming is legally defined as a game, then it would initially fall under the jurisdiction of the various states wherein the players reside. In order for state authorities to require that operators and parties offering participation be licensed, the gaming would have to be legally classified as gambling. That is, the elements of consideration, chance, and prize would all have to operate simultaneously. If so, that would make eSports the legal equivalent of online table games or slots. In a number of states, such online gambling would be a misdemeanor; in one, Washington State, participation alone would be a felony. 14
Most such eSport games, however, are not offered for direct play in a gambling context. Some use the “freemium” arrangement, whereby anyone may log on to the game server, establish an account, and play for free. A certain amount of the in-game currency, whether it is called “points,” “chips,” or “gold coins,” is periodically awarded to players, also for free. But if the player should run out of the free issue, or desire more points or gaming aids for game advancement, he or she may purchase extra points or game aids, usually via credit card, PayPal, or similar instruments. This eliminates the element of consideration. It may also be possible to eliminate the element of prize. Some games allow rewards to be issued, not with cash, cash equivalents, or other valuable prizes (such as cars or vacations), but with essentially nominal items, such as digital icons depicting “a bouquet of flowers,” “an ice cream soda,” or other purely virtual tokens of esteem.
It is far more common for professional bookmakers to offer odds for wagering on various teams and events in eSports. The business is already well established outside the USA; such well-known establishments as William Hill, Bet 365, and Pinnacle regularly take action on eSports matches from jurisdictions where they are licensed. 15 An interesting variation has emerged, however: so-called “skin betting,” whereby gaming aids—such as “weapons” for Counterstrike–Global Offensive—can be wagered as a form of currency in online exchanges. These are, for the present, unsupervised. 16
Federal level: No new participants allowed
This leads us to the other alternative: if eSports are considered true professional sports, then the participants are pro athletes. Which means that in most of the United States it is illegal to bet on them and probably will be for years yet. Ever since 1992, when the Professional and Amateur Sports Protection Act (PASPA) became law, state governments and Indian tribes have been forbidden to license sports betting, in particular, wagering on “competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.” 17
A total of four U.S. states were grandfathered under PASPA, as they already licensed sports-related gaming: Delaware, Montana, Oregon, and (naturally) Nevada. The programs in Delaware and Oregon, essentially based on the state lottery, folded for lack of interest. Montana continues to allow establishments holding liquor licenses to sponsor betting pools on sporting events, and also in-house racing of pigs, hamsters, and gerbils, in towns with populations under 100. 18
Of course it is unfair and arbitrary to deny 46 other states the chance to profit by licensing sports betting, to say nothing of several hundred Indian tribes. But PASPA is also established law, in place for over two decades now, and thus repealing, or even modifying, it has proven to be a tedious, expensive, and uphill battle. New Jersey's effort to have PASPA overturned in court has not prospered despite repeated attempts. 19 Attempts to repeal or revise it by congressional action seem to hold out even less hope. Gambling has long been a stock bogeyman of American political theater, so supporting its expansion could well be politically hazardous (and in an increasingly politically correct public discourse, it is one of the few things still safe to criticize or oppose). Add to that the fact that Congress has many more important matters to attend to in any given session, and it becomes apparent that the chances for meaningful reform of PASPA are dim indeed, and will probably remain so for the foreseeable future.
Popular perception
Another important, if seldom mentioned, factor in weighing the legal status of competitive team video gaming (or, for that matter, any other sort of gaming) is how the public in general perceives that game. The whole rationale behind outlawing certain games or activities as gambling, or requiring them to be licensed and closely supervised, is that these games can pose a genuine social threat. Unsupervised, says this rationale, weak or unwary members of society may be lured into self-destructive behavior, resulting in an array of financial and social problems. It is therefore government's job to protect the public. This in turn is good publicity for prosecutors and attorneys general with political ambitions.
But while it is widely understood that people can ruin themselves through problem gambling, it's important to note that this perception does not extend to all games. Craps, slots, casino-style gaming, and cards are recognized as potentially hazardous—“house” games, where Daddy can lose the house. But mah-jongg and backgammon, which both contain elements of chance and which are the basis for heavy gambling in their home countries, are not considered “wicked gambling” in the USA, because they were introduced here as amusement games. Grandmothers play mah-jongg. Backgammon is for rainy afternoons when there's nothing on TV. There are no political points to be scored by prosecuting them, and quite often the decision to prosecute or not prosecute such gambling is a political one.
What is the popular perception of video games and gaming? Even though it has grown and changed into a respectable slice of the entertainment industry, in the USA at least, it retains an image of nerdiness. Video games are kid's games, amusing but not the best use of one's time; anyone who is too seriously involved with them was, until quite recently, something of a misfit. While the characterization no longer applies, it still has an effect in the arena of public opinion. Busting up illegal slots or crap games is understood to be crime fighting. But what about wagering on video games? It's a lot harder to portray games involving dragons and knights or space monsters as menaces to the public good, even if there is wagering on them. And so official action against them, absent more concrete offenses, is much less politically attractive. No one will be elected governor for leading vice raids on Middle Earth.
Summary
At the present time, online gambling on fantasy eSports is limited to traditional sports betting sites that also allow wagering on the fantasy video game tournaments. Since such sites must be licensed, actual cash betting on fantasy eSports is not widely available in the USA. The size of the gambling market on this particular niche is hard to estimate, because the fantasy video game action is mixed in with the receipts from traditional sports betting and fantasy sports betting that is also done online.
It may be that this new genre will take advantage of freemium and similar formats to avoid the expense and delay inherent in state-based licensing, but still establish a profitable market. It may be that licensing such games turns out to be easier than traditional gambling games, as the new formats lack the dodgy reputation and social stigma of old-fashioned gambling. There is little doubt, however, that the size and profitability of this market segment will continue to grow.
In the meantime, the Nevada Gaming Policy Commission is investigating the ins and outs of this new wrinkle in gambling, and in Vegas, the Downtown Grand already offers an eSports lounge. The cash market in eSports bets may be hard to pin down, but the traffic in “skin betting” is projected to reach $6 billion by the end of this year. 20
Nevertheless, even in a dynamic and flexible environment, the average observer is still brought up short by the concept of playing video games in competitive teams as a “sport.”