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Esports is attracting major attention from the sports-gambling world, but there are big hurdles to taking bets on pro video game matches

14th April, 18:52

Other online betting and analytics platforms are working to expand their offerings for esports as well.

While many traditional sports have been derailed by the coronavirus pandemic, competitive video gaming -- commonly known as esports -- has quickly adapted to online broadcasts. And the sports-betting industry, which is scrambling to find new gambling opportunities, is paying attention.

Esports was expected to surpass $1 billion in revenue during 2020 with organizations like the Overwatch League embarking on international tours. But as the pandemic took hold, esports leagues responded by giving up their live arena events while keeping their seasons alive online.

The leagues want to keep fans engaged and get new ones. That's where gambling could come in.

The US Supreme Court's 2018 decision to overturn a federal ban on sports betting was in the middle of bringing a boom to the industry when the pandemic began. Consulting firm Activate previously projected that Americans could wager as much as $31 billion on sporting events in 2020 as more states adopted sports betting.

But the pandemic and subsequent cancellation of all major sporting events has left the industry with few options for wagers, which has prompted some operators to explore esports.

Esports has a complicated relationship with gambling, though. Many of the popular esports leagues depend on young, international audiences, increasing the number of regulatory hurdles betting operators face. Esports competitors are also young and relatively unknown compared to traditional athletes. And a high turnover rate for talent leads to unpredictable team rosters, making it difficult to identify the frontrunners.

FanDuel became the first online betting platform to legally allow bets on esports in the US in November 2019. Fans in New Jersey, Pennsylvania, West Virginia, and Indiana were able to place wagers on just one match: the finals of the "League of Legends" World Championship.

But few sources have the data needed to maintain a sportsbook and set the odds for esports.

In lieu of traditional bets, esports fans can enter fantasy contests online.

FanDuel and other sportsbooks offer daily competitions for "League of Legends" and other esports, allowing fans to build their own lineup of professional gamers and compete based on real match results. DraftKings has been offering fantasy contests based on professional "League of Legends" matches since 2015, and in March the platform expanded to include daily fantasy contests for "Counter-Strike Global Offensive."

Fantasy contests offer a fixed prize pool and users pay a set fee to build a team in their game of choice. A single contest can pay out thousands of users -- rewards can start as low as $15 and go up to as much as $100,000 for first place in a single contest. Users can enter multiple teams in the same contest, giving operators plenty of opportunities to accept money from the each new member.

DraftKings told Business Insider the number of customers playing daily esports contests increased by 20 times the usual total in March, and the platform is seeing 50 times the usual number of fantasy esports entries. "League of Legends" will be included in the DraftKings Championship Series for the first time this year, giving users a chance to win $400,000 in prize money.

DraftKings said it's awarded more than $500,000 in prize money in fantasy competitions tied to the eNASCAR iRacing Pro Invitational Series after three races, and a series of simulated "Madden NFL 20" games has garnered more than 2 million fantasy entries since April 5.

FanDuel and DraftKings both have a history of sponsoring esports events, partnering with teams and specific events for advertising rights. Another competing fantasy sports platform, Monkey Knife Fight, announced a new marketing campaign that will use esports influencers to direct people to its daily esports contests with gaming videos on YouTube and Twitch.

But offering betting on esports matches is very different from offering a fantasy contest. Specifically, to run a sportsbook, you need data to set odds.

European sportsbooks like Betway and Betsson offer a selection of esports wagers but aren't equipped to handle customers from the United States. For esports betting to continue growing in the US, sportsbooks must be able to account for a growing list of international leagues and an ever-changing roster of players.

Charles Ormsby, the CEO of SpreadKnowledge.com, has spent the last month working to update his sports gambling analytics platform with data from esports matches dating back to 2015, and he told Business Insider that tracking down data for different games has proven to be a challenge.

Sports media is a massive industry, but esports relies on a host of community-organized sites to track news, results, and business dealings. Esports fans can even use community sites to gamble using in-game currency and items.

"You can go to a site like ESPN and get basketball, hockey, and all that stuff, but in the context of esports, it's spread across many different sites," Ormsby said. "I think that is a challenge for the new user who's adopting."

SpreadKnowledge doesn't take wagers itself. The company uses in-game data to offer live recommendations to bettors. Esports had only been a small fraction of the SpreadKnowledge's business before the pandemic, but the cancellation of traditional sports has resulted in a surge of interest, Ormsby said.

Before March, SpreadKnowledge had about 4,000 matches worth of data, but through a number of paid and free sources, Ormsby has boosted that catalogue to more than 100,000 in a few weeks. By parsing the data for specific money line situations, Ormsby believes he can create accurate predictions in spite of the factors that make esports betting volatile.

Traditional sportsbooks will need to make the same call by judging whether their data is robust enough to set odds on esports matches.

But with esports one of the only games in town, they have an incentive to figure it out. That will be especially true if the NFL season is delayed, which sports-betting insiders previously told Business Insider would be the worst-case scenario for the industry.

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