A few survive, but the unregulated free-for-all environment saw many operators go to the wall after weak security, weak morals, and outright fraud brought about their collapse.
Even though regulators have begun to take notice of esports betting, and the main game providers are now taking game integrity seriously, the industry still looks like it will have to fight off the reputational risks it is facing in order to succeed.
January 2016 marked the 20th anniversary of online sports betting. The first company to take an online sports bet was Intertops, an operator which is still in business and still going strong.
Intertops is well known as an honest, customer-focused company, but many of its peers failed to adopt these essential traits of success.
At Ultimate Bet, a scandal involving a software feature that allowed so-called “super-users” to see other players’ hole cards destroyed the company’s reputation. When poker’s Black Friday came along, the operator went bust and players lost their money.
The list of sites going bust and leaving players high and dry is very, very long, and even now court cases continue against operators like Everleaf Gaming, and Europoker—both of which were fully regulated in Malta and France, respectively.
It is not just bad management, negligence, or fraud that can kill a company or its reputation. Bad customer service will ensure that a company fails to survive in a competitive market place.
The long-established online sports betting operators who have now added esports betting as a business vertical, have the luxury of experience and the constraint of existing regulatory obligations.
Bet365, SkyBet, Betway and Pinnacle know how to deliver esports betting with integrity. Some new companies, such as Unikrn, have also put the lessons of the past 20 years into practice in establishing their own approach to esports betting.
Unfortunately, there are other new players who have failed to take the long term view, and appear to be falling into the same trap as the early cowboy operators of the internet age.
Several threads on Reddit currently contain complaints about the introductory bonuses offered by GG.Bet.
GG.Bet is an official sponsor for Team NP, Ad Finem and Empire, well respected esports teams with huge followings.
The Reddit posts allege that the terms and conditions of its introductory bonuses make it unreasonably difficult to earn the bonus, and restrict cash outs until any bonus period is expired.
This is not the place to go into the details of the allegations and whether they are true or not.
What is more important is the issue of reputational risk and how operators that lose sight of the importance of reputation can damage their own business.
GG.Bet is taking a public relations hit because social media sites like Reddit have changed the information balance of power.
Consumers can now share and publicize their criticisms of a company in a targeted way.
Their complaints are no longer relatively private and restricted to a small audience, they can now be shared with a wide audience of other customers using a specific service or product.
They have much more power than the early customers of online betting operators 20 years ago.
The esports skin betting scandals which erupted earlier in 2016 gained traction with customers extremely quickly because they were accelerated by social media. This resulted in immediate action by the game developers and unusually rapid intervention by regulators.
A similar collapse in esports cash betting is extremely unlikely.
The big name operators continue to dominate the majority of online bets, and so the impact of negative behavior by smaller operators is likely to be less significant.
Nonetheless, even minor scandals or abusive marketing practices will have an effect beyond their immediate origin.
Social media has expanded the audience for such “errors” and the media headlines won’t be “Operator X abuses customers,” they will be generic: “Esports betting is a dangerous risk.”
Scandal and predatory marketing won’t kill the whole industry, but they could easily reduce its potential rate of growth , and induce regulators into more heavy-handed regulation than the risks require.
History is repeating itself, but now that the major esports betting operators have learned history’s lessons, the negative risks should be mitigated.