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Esports gambling industry primed for quick development

December 09, 2020

The esports gaming industry is expected to continue to grow over the next few years and consequently, as seen with the sports industry and gambling, so is the demand for esports betting services.

This enthusiasm for esports betting services is occurring at a transformative time for US sports gambling in general. In 2018, the Supreme Court of the United States struck down the Professional and Amateur Sports Protection Act (PASPA), which prohibited state-authorized sports gambling, with some exceptions. These exceptions included a broad carve-out for Nevada and allowed a handful of other states to permit limited forms of “parlay” style sports gambling. The Supreme Court’s decision to strike down PASPA in 2018 has allowed individual states to legalize and regulate sports gambling as they see fit. As of November 2020, numerous states have legalized forms of sports gambling, including single event sports betting, and many other states have introduced bills that have yet to be passed by state legislature.

However, even though many states have begun permitting the sale of sports betting services, only a few states currently permit betting on esports events. On July 30, 2020, the New Jersey Assembly passed a bill that would permit gambling on certain esports events in the State of New Jersey, provided that the esport event meets certain criteria. Such criteria relate to, among other things, protecting minors from gambling. The bill is currently awaiting approval by the New Jersey Senate. Furthermore, some states have slowly begun permitting esports gambling on a case-by-case, or event-by-event, basis. In Nevada, for example, while no esport matches, tournaments, or leagues were approved for betting in 2019, 13 requests for wagers received approval between March and May of this year. This regulatory momentum in the sports betting industry generally, and the esports betting industry specifically, may help industry stakeholders advocate for further development in other state jurisdictions and across the United States at large.

This regulatory momentum is not limited to the United States. Indeed, recent developments in the Canadian sports betting landscape have in some ways mirrored the regulatory push seen in the United States. Parliament has again been presented with the issue of legalization of single game sports betting in Canada. Bill C-218, the Safe and Regulated Sports Betting Act, which was initially introduced as a private member's bill, was tabled by the federal government on November 26th. As it stands, the Criminal Code prohibits all forms of gambling, with some limited exceptions. Currently, betting on sports in Canada is restricted to “parlay” bets. If passed, the new legislation will, among other things, repeal section 207(4)(b) of the Criminal Code, thereby paving the way for single event betting on any sporting event, with the exception of horse racing (which is regulated by the Canadian Pari-Mutuel Agency). As is the case in the United States, the legalization of single sport events betting in Canada does not necessarily mean that single esport events betting will be given the green light — it will be up to the provinces and territories to regulate and conduct single event betting in this space.

Opportunity for esports industry stakeholders

The recent regulatory developments and booming demand for esports betting services has created commercial opportunities for players in the esports industry. Indeed, the esports betting industry appears to be primed for quick growth. However, the extent of this growth will depend on, among other things, how consumers, legislators, and industry stakeholders work together to ensure that the various stakeholders’ concerns and perspectives are adequately represented. We will continue to monitor how the esports betting industry continues to adapt and grow.

The authors would like to thank Arron Chahal and Ashley Beaulieu, Articling Students, for their assistance in preparing this legal update.