Simultaneous Efforts to Regulate Esports Gambling in Nevada and New Jersey

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Last month, eight members of Nevada’s eSports Technical Advisory Committee unanimously approved its draft regulations for eSports wagering.

The recommended regulations will now go before the Nevada Gaming Control Board (NGCB) and the Nevada Gaming Commission (NGC) for their approval.

If both regulatory bodies likewise vote in favor of the proposal, it would amend the existing Regulation 22. That is the portion of the Nevada regulatory code covering racebooks and sports betting. The new regulations would expand this to allow wagering on video game competitions taking place either online or in person at venues in the state.

Existing Nevada sportsbooks would be able to offer lines on such events. However, the amendment allows the NGCB to nix any esports events whose integrity is in question. The relevant portion of the draft regulations gives the board the right to:

… issue an interlocutory order prohibiting books from accepting wagers on events conducted by an event operator… Whether or not a book has notified the chair of the book accepting wagers on events conducted by an event operator, the chair may place an event operator on the list of [to be developed/determined] sanctioning organizations.

Sports betting in Nevada can take place at retail casinos or online. However, the online options are more limited than in other states and require in-person registration.

A Parallel Effort in New Jersey

Meanwhile, in September, New Jersey legislators began considering a bill that would classify esports as an “authorized gambling game.”

Betting on esports is already legal in the state. A 2021 amendment to the New Jersey sports betting law allowed the Division of Gaming Enforcement (DGE) to selectively approve esports competitions as “sporting events.” That, in turn, allows the state’s sportsbooks to offer lines on them.

However, the proposed legislation (A4397/S2986) would establish esports as a distinct gambling category.

The state’s existing gambling laws define “authorized gambling games” quite broadly:

… [any] game which is determined by the division to be compatible with the public interest and suitable for casino use after such appropriate test or experimental period… includes gaming tournaments in which players compete against one another in one or more of games authorized herein, or by the division… shall also include any game that the division may determine by regulation to be suitable for use for wagering through the Internet.

Under the proposed legislation, anything classified by the DGE as “an esports game” would also automatically qualify as a gambling game.

That would allow sportsbooks to offer bets, similarly to the current “sporting event” model. However, it also seems to imply that participants can wager on the game directly. That could theoretically expand New Jersey online gambling to include a variety of real-money multiplayer games, not unlike online poker, which is already legal.

Nevada and New Jersey enjoy a reputation as the two states at the forefront of the US gambling expansion. As such, it behooves them not only to keep up with current trends but to get ahead of future ones.

At the moment, esports betting is a niche product. However, its place in the industry may evolve. Nevada and New Jersey may become the real-world testing grounds for whatever new products emerge.

New Jersey May be Fixing Something That Isn’t Broken

If it wants to offer esports betting, Nevada has no choice but to expand its regulations.

However, despite the differences between eSports and both casino games and traditional sports, it’s not clear that an entirely new classification is warranted in New Jersey.

After all, the DGE has already exercised its right to allow betting on esports events on a case-by-case basis. It has likewise authorized trials of retail skill-based gambling games and has the power to enable player-versus-player competitions as it wishes. The legislation would simply tie these things together.

That would streamline the rollout of such games. However, it also takes away from the DGE the latitude to consider whether a game might be appropriate for wagering by participants but not for esports betting or vice versa.

That said, the larger point of the bill seems to be to make it so that esports-only betting companies don’t count as sportsbooks for purposes of brand limits. Under current New Jersey regulations, each land-based casino or racetrack can only partner with up to three sports betting brands. Treating esports brands separately reduces the opportunity cost of striking such a partnership.

At the moment, that seems unnecessary, as there are still partnership slots available and few pure esports betting companies in the world. However, it could become important if this novel form of betting takes off.

The Future is Taking Its Time Getting Here

In the here and now, we should not exaggerate the significance of these proposals.

Over the years, there have been numerous predictions that esports is a sleeping giant in the betting game. In practice, however, there’s been little evidence of such pent-up demand.

The esports market is big, worth $1.22 billion in 2021, according to Statista. However, estimates of esports betting handle are in the single-digit billions worldwide, while conventional sports betting sometimes produces over $1 billion in handle in a single month in New Jersey alone. Furthermore, much of the interest in esports betting comes from foreign markets and unregulated cryptocurrency gambling.

Early experiments with regulated esports betting in the US haven’t been promising. On Oct 25, just a day after the Advisory Committee vote in Nevada, New Jersey-based Vie.gg announced its imminent shutdown. As of Nov 1, it has now ceased operations. It had been the only NJ sportsbook with a focus on esports.

Vie may well have been the canary in the coal mine for the prospects of US esports gambling. The high-profile failure of the first and only such company in the US coming alongside these proposals is not merely ironic. It may be demoralizing for others considering entering the market and an indication that esports as a gambling phenomenon has been overhyped.

Even if the promised demand is coming, more difficulties may lie ahead. Operators and authorities will face new, perhaps unforeseeable, game integrity challenges. That’s particularly true of any player-versus-player games allowing both direct and third-party wagering. Regulators and operators would have to watch out not only for cheating but also match-fixing.

Between lack of interest and those regulatory challenges, it’s hard to say whether Nevada and New Jersey are ahead of the curve or simply taking themselves on a wild goose chase.

About the Author

Emile Avanessian

Emile is a one-time banker turned freelance writer. He previously worked in equity research and as a member of the Financial Sponsors Group with Goldman Sachs, where he worked on numerous casino- and gaming-related projects. His written work has focused largely on sports (NBA basketball and European soccer) and sports betting. Emile currently also writes for Squawka and Urban Pitch. His work has also been published in The Los Angeles Times, The Blizzard, Yahoo Sports, SI.com, and ESPN.

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