Less discussed has been the slice of the esports economy based around wagering. It’s a large, diverse market than spans multiple products, formats, levels of sophistication – and it may end up being one of the primary engines driving broader growth for esports.
This page explores the contours of the market for gambling on and around esports, and offers answers to some of the most commonly asked questions regarding the intersection of esports and wagering.
There are two major verticals and a handful of secondary verticals that together form the market for esports betting:
An in-depth treatment of these verticals follows a few sections below.
In terms of handle (i.e., total amount bet or wagered), the market for esports betting is measured in terms of billions of dollars.
That may seem like a substantial amount – and by some measures, it is – but in relative terms, it makes esports betting a material, but minor, part of the global market for betting. Consider:
The answer varies by vertical.
The following chart shows our estimated distribution for esportsbook handle. As is the case with skin betting, a handful of titles drive almost all of the action. CS:GO is not nearly as dominant in this vertical as in the skin betting vertical, but nonetheless remains a significant force:
You can get a closer look at the relative offerings for titles on any given day via our esports odds tracker.
In addition to the games above, you do see some betting action on a handful of additional titles, including:
Skin betting is more of a class of betting products that all share a common characteristic: skin betting sites generally don’t involve any cash component.
Instead, players load their accounts with skins and then also have the ability to win skins via games (or via an internal currency acquired while playing those games).
Skin betting is far and away the largest vertical in the esports betting market. While visibility into the vertical is somewhat limited, and confirming data is far more difficult than in the traditional online gambling market, I am confident (based on direct observation and channel checks) in estimating that total skin betting handle across all products will exceed $6bn in 2016.
You can find a skin betting equivalent for almost every traditional online betting product. Some of the most popular products in the skin betting vertical, ordered loosely by contribution to overall volume, include:
The next vertical by size is what I generally refer to as esportsbook betting, although I’m sure someone will come up with a better name at some point. Whatever you call it, what I’m talking about here is the traditional sports betting model – cash betting on competitive outcomes – applied to esports.
The vertical is made up of a mix of established sportsbooks that are adding esports to their product mix along with new operators that are focusing exclusively on esports.
Visibility is again an issue with these sorts of estimates, but based on my conversations with major operators in the space, I feel comfortable with a range of $550-$600mm for total handle for esportsbook betting in 2016.
That estimate only includes online betting at sites regulated in established jurisdictions, and does not account for esports betting handle generated from dark grey / black markets.
Broadly speaking, esports betting is similar to traditional sports betting in terms of the types of bets offered:
In practice, esports betting is underdeveloped relative to the traditional sports betting product, a topic that we’ll get into further in the following section.
While it’s true that esportsbooks and traditional sportsbooks share a fair amount of DNA at the core, the products as they currently stand converge more on some points than others.
A few of the fundamental similarities between esportsbook betting and traditional sports betting include:
Some of the core points of divergence include:
Fantasy esports is broadly similar to the fantasy sports product for traditional sports.
The dominant product within the vertical is daily fantasy esports.
Fantasy esports sites have been drawn into the larger legal and legislative dustup surrounding daily fantasy sports. As a result, the revenue potential of the product has been dampened; I estimate that there will be under $10mm in total handle for fantasy esports in 2016.
This class of product shares a lot of similarities with “skill betting” products that allow players to enter competitive contests for money around games like online pool, chess, and so on.
The vertical is relatively new and highly fragmented. My working assumption is that the vertical collectively generates less than $25mm in handle annually. This estimate does not include the broader skill-betting vertical and only speaks to challenge sites focused primarily on major esports titles like League of Legends, Hearthstone, and so on.
With any new wagering product comes some degree of uncertainty regarding how regulators will respond. I believe that the broad similarities between esports betting and traditional sports wagering will likely lead regulators to approach the two products in similar ways.
But the all-digital context of esports and cultural pressure could each give regulators cause to consider developing a separate framework for esports betting. That process could suppress operator interest or produce an esports betting product with limited consumer appeal.
There is also the interesting question of whether gaming regulators will demand “under the hood” access to esports titles, in essence deciding that the product should be scrutinized as a slot machine or RNG-driven virtual sport would be.
If regulators make such a demand, the predictable response from game developers (a polite “no thank you”) could chill wagering supply. That approach may seem illogical (no similar inspection is required of the NFL). But the fact is that an RNG does dictate some of what occurs within many esports. That “some” may be minor in the bigger picture, but nonetheless provides a potential rationale for regulatory intrusion.
The issue has yet, to the best of my knowledge, to be raised in any European licensing jurisdictions.