How Nevada plans to become the eSports capital of the world

In mid-November, some of the most powerful people in the Nevada gambling industry came together for a meeting titled: “How Nevada can become the eSports capitol of the world”.

The conference saw the Nevada Gaming Control Board (NGCB) and state legislature meet with gaming licensees and eSports industry experts to discuss how to make that goal a reality.

Whatever was said in that Wednesday meeting proved mighty effective, as two days later, the chairman of the NGCB, A.G Burnett, approved a request from William Hill asking to take bets on an eSports tournament in California.

The order was signed that Friday morning and Hills had betting options on eSports tournaments across its 108 race and sportsbooks and its app the very same day.

“It was important for us to be first to market,” says Dan Shapiro, the VP of strategy and business development at William Hill US.  “We pride ourselves on having the largest menu of bets in Nevada and this is one more thing to add to that.

“We’ve been following eSports for quite some time and we had identified this event as one where there would be some interest in wagering, so we had a lot of the pieces in place to go live as soon as we got approval.”

Hills of course has an inbuilt advantage because its UK parent company already offers eSports betting online and it can borrow odds feeds from there, whereas rivals will likely have to find a third-party odds provider or build a new eSports trading team from scratch.

But by being first to market, Hills gained a major PR boost, with the news of its launch being covered on ESPN and a plethora of news sites including the gambling and video gaming press.

Although, while Hills has scored the first-mover advantage, Shapiro expects rivals to be hot on their heels. “I do expect others to follow us,” he says. “It benefits the whole industry and others will request the approval for other events.”

Golden opportunity

So why are Nevada operators clamouring to enter the eSports fray? The first reason is simply the potential extra revenues from adding a new sport – one which will see about $650m in global cash wagers in 2016, according to Narus Advisors. The consultancy firm also predicts the market will grow to $11.5bn by 2020, as more and more sportsbooks start opening up markets on an ever-growing number of eSports events.

Likewise, at offshore bookmaker Pinnacle, eSports wagering volume has been doubling every year since it started taking bets in 2010. Indeed Pinnacle’s head of trading Marco Blume recently claimed that eSports betting could be as popular as soccer within the decade.

The other key factor is the type of demographic that eSports can bring into a casino. Betting helps attract the millennials who casino executives are so desperate to have in their properties.

Vegas is increasingly playing home to eSports events at major venues like the T-Mobile arena with its 15,000 person capacity, and if a casino can get these fans through its doors by offering eSports betting, it’s a win-win.

“I think that’s fair to say that eSports betting is going to be about increasing footfall in the casino rather than turning a profit for the product itself in the short term,” Shapiro says.

“It’s still going to be a while until betting on eSports is a major revenue generator for us. But it hopefully brings in a different demographic.

He says the first tournament Hills took bets on – the 2016 Intel Extreme in Oakland – was more of a symbolic event rather than a real money-spinner, but it still generated enough interest to inspire optimism going forward.

“We only had a day to promote it before the quarter finals, but there was enough volume to make us want to do it again,” says Shapiro.

Slow and steady

But while the first domino has fallen in the Nevada/eSports love affair, both operators and regulators are taking a cautious approach. For Hills, it’s a risk mitigation thing more than anything else, with the operator seeking to pick its events carefully and keep limits quite low. “We recognize we know a hell of a lot less about this than some people out there, so we’re being careful at first,” Shapiro says.

The NGCB is also taking it slow. Existing regulations require operators to request the ability to take bets on specific ‘Other’ events. These are things which aren’t traditional sporting contests, like who will win the Heisman Trophy or the National League Cy Young. This designation extends to eSports tournaments, and means each operator looking to take bets will have to apply for approval for each and every tournament they want to take bets on.

“We could ultimately change that regulation to make it simpler, but for now we are going to take it event by event,” says A.G Burnett, the chair of the NGCB.

“There’s so many types of competition it would be unwise at this point to say anybody can take any bets on any event. We still need that comfort level in terms of the integrity and objectivity of the outcome in particular.”

Burnett says he has been working with the eSports Integrity Coalition (ESIC) to establish a greater level of comfort with the integrity of the games, and says as long as that comfort is there, the availability of eSports betting will only expand.

“The operators, be they casino resorts or sportsbooks like William Hill, they’re all going to start paying attention to this, because at a minimum it can be additive to their overall handle and additive to their patron base,” Burnett concludes.

Seizing the opportunity

So if opinion is fairly unanimous that eSports is a massive opportunity, how do firms position themselves to take advantage of it? A perfect case study comes from the Downtown Grand Hotel and Casino in Las Vegas, which has spent the past couple of years transforming itself into the “Mecca of eSports in Las Vegas” under its forward-thinking chairman Seth Schorr.

In 2016, the casino converted its high-limit table games room into a full-time eSports lounge, replete with frequent competitions, where contestants pay an entry fee and compete for cash prizes. It means the contests are more tournament-style skill games than traditional betting and are therefore not subject to the same regulatory oversight.

“Our model so far has been very well received and we continue to refine and develop that program,” says Schorr. One tweak for example saw the casino switch to serving “food on a stick” so gamers could keep their hands clean and free for playing.

“Eventually our model will move to pure betting, now we’ve seen the first approval in Nevada,” explains Schorr. “That will include betting on each other and betting on the outcome of events.

“We don’t have enough analytics to specifically quantify the conversion rate, but there’s no question that when we have a lot of people at our eSports contests we see more people in the pit”.

He says eSports is being discussed in the boardroom of every operator in Nevada, adding that those that can host tournaments will have a major advantage in driving a high volume of bets.

Simplify

Moritz Maurer, the head of eSports at technology and data provider BetGenius, says firms would do well to seek out some kind of data visualisation feed to help explain the action to the less educated (or older) fan, in the style of the in-play visualisation tool on many betting sites.

“There are tools that can tell you the impact of any single decision in a game – this player chose this weapon and lost 2% of win expectancy,” says Maurer. “It just makes it more accessible and interesting for the casual observer and simply a better spectator sport.”

He also warns that casinos looking to offer contests between players for cash had better find a way of matching players up equally. “The potential disparity in skills can be staggering,” says Maurer. “Operators had better be careful of the shark/fish ecology we see in DFS and poker, because that could kill participation fast.”

There are pitfalls in the head-to-head cash contests, but they also offer intriguing opportunities for casinos beyond Nevada, with these theoretically legal in dozens of states. Indeed these contests already account for more than $30m worth of wagering in 2016 and are set to grow at the same exponential rate as the rest of the industry.

The legal question

For any gaming operators outside of Nevada, that would appear to be the best route to pursue, with widespread eSports betting almost certainly considered to be illegal under PASPA.

As sports law attorney Daniel Wallach puts it: “My view is that PASPA is intended to have broad application and the argument for PASPA applying to eSports is stronger than the argument against.”

That has not yet been tested in a court, but Wallach points out that it is unlikely to ever be so.

“After all, who’s going to bother suing?” he asks. “Certainly not eSports leagues so they can allow their events to be the subject of wagering.”

But what’s bad news for the rest of the country is yet more good news for gaming operators in Nevada, which will be able to monopolize the growing eSports wagering market much like it has done with traditional sports.

Given that unique edge, the support of politicians, regulators, operators and even the bettors themselves, it appears Nevada has put itself in prime position to deliver on its promise and become the eSports capital of the world.