eSports is expected to reach 1.2 billion people this year and will be a $23 billion global betting market by 2020, according to research from New Zoo.
Sportsbooks are tapping into it in a big way and it has already overtaken sports like hockey and golf in popularity at top rated sportsbooks like Pinnacle.
It is potentially a huge market, but as video gaming rubs shoulders with gambling it has caused the authorities to pay attention, and a pair of YouTube stars felt their wrath this week.
Craig Douglas and Dylan Rigby, who run a YouTube channel with 1.4 million subscribers, have been fined a total of £265,000 ($327,000) for breaching gambling laws by encouraging children to bet on Premier League soccer matches.
Therein lies the problem for sportsbooks and other sites trying to tap into the popularity of eSports: it has a huge appeal to under-18s.
For a generation brought up with computers and handheld devices, eSports – essentially watching people compete at video games such as Counter-Strike, League of Legends, Call of Duty and Fifa 17 – is far more compelling than traditional sports such as football, hockey, and basketball.
It is an online world, leading it to rub shoulders with digital currencies, and you can bet on it any time of day, 365 days a year.
Douglas, known to his subscribers as Nepenthez, posts videos about Fifa 17 that typically gain around 200,000 hits. These YouTube stars are worshiped by subscribers, and Douglas and his business partner Rigby, decided to make some money out of Nepenthez’s captive audience.
They set up a website called FUT Galaxy that let their subscribers transfer virtual currency, Fifa Coins, out of the Fifa 17 video game and use it to bet on real life soccer games in England, Italy, Germany, and France.
In a video shown in court, Douglas tells subscribers: “You don’t have to be 18 for this because this is a virtual currency.”
But where Douglas and Rigby came unstuck is that the Fifa virtual currency can be sold back onto the online market, allowing players to convert them into traditional currencies like sterling, euros or dollars.
In the year to February 2016, the site made a profit of £196,000 ($242,000) and one 14-year-old boy lost £586 ($724).
The UK Gambling Commission started the prosecution of Douglas and Rigby in September 2016, under the UK Gambling Act, for the charge of “promoting a lottery and advertising unlawful gambling” via the Nepenthez YouTube channel.
Douglas and Rigby initially pleaded not guilty but dropped their pleas and pleaded guilty this week. They appeared at Birmingham Magistrates Court and were spared jail but ordered to pay fines and costs, totally £174,000 ($215,000) for Rigby and £91,000 ($112,000) for Douglas.
It represents the first-ever successful prosecution for running an unlicensed gambling website connected to a video game.
As eSports continues to soar in popularity at Pinnacle and other sportsbooks, and cryptocurrencies continue to develop, this is only set to become a more urgent priority for the authorities across the world as they seek to stamp out illegal gambling.
The UK Gambling Commission, an influential body in the worldwide gambling industry, said skin betting that eSports ‘skin betting’ – which sees gamers wager with virtual goods acquired within eSports games – is very much on its radar because these skins “are traded or are tradable and can, therefore, act as a de facto virtual currency and facilities for gambling with those items are offered”.
The Commission is also concerned that sites are being irresponsible in promoting gambling to a YouTube audience made up predominantly of youngsters. "Taking action against those offering facilities for gambling without a license has always been a priority,” it said. “Taking action against anyone offering facilities for gambling to children and young people is a particularly high priority.”