Pre-Covid, the Evo Tournament packed the Mandalay Bay Events Center every year. This year’s event went virtual.

Covid-19 put a crimp in the live Evo Championships this year at Mandalay Bay in Las Vegas. Evo held a virtual competition, but there’s something about live action that can’t be matched by the online version. Hopefully next summer, if the joystick gods are kind, the live games will resume, bringing back esports stars and their scores of devoted fans.

In the past, the Evo series often sold out at the Mandalay Bay Events Center and attracted thousands more to the property, according to Josh Swissman, founding partner with The Strategy Group in Las Vegas.

“This shows that an esports tournament can be a big enough draw on its own to get people to Las Vegas to watch it in person,” he says. “Now imagine that same event with other add-on experiences to complement the tournament itself. Meet-and-greets with famous esports athletes, for example. These would represent additional ways for the hosting property to monetize this crowd, and better introduce the next generation of game players and gamblers to these resorts.”

The future doesn’t necessarily belong to esports. But these games will have a seat at the table.

A Whole New Audience

For the Downtown Grand Hotel & Casino in Las Vegas, that seat was in an esports lounge that first opened in 2015. For several years—until Covid-19—the casino ran hundreds of cash tournaments in the lounge, and a William Hill sportsbook on property at the time accepted bets, the first time in esports history in the U.S., says Seth Schorr, CEO of Fifth Street Gaming and chairman of the Downtown Grand.

Covid had an impact, he adds, but not all of it was negative.

“It was very positive that during the lockdown, when traditional sports ceased, esports became a popular sport to take action on,” Schorr says. The interlude also exposed esports to whole a new audience.

A year later, operators are focused on traditional sports, driving to acquire new markets and new customers as legal betting expands. As a result, esports have taken a back seat, Schorr says.

“However, as we transition from the customer acquisition phase to the retention phase, I believe esports will be used by many sportsbooks to tap into a new audience and offer a differentiating product.”

Most adults understand something about video games, which they may have played in bedrooms back in the days of Pong, and which their kids and grandkids have inherited. These days, the games have developed far beyond Pac- Man and Asteroids in terms of complexity and graphics. But they remain a skill—like football or basketball, but with glorified joysticks instead of balls. Esports players may tackle games like Madden NFL or NBA 2K, but more often go for shoot-’em-up combat games like Call of Duty.

“Just like traditional ‘stick-and-ball’ sports, esports betting can be a fan betting on the outcome of a professional match,” Schorr says.

To ensure the esports industry doesn’t become the Wild West with no rules, the Nevada legislature approved a law last summer requiring the state Gaming Control Board to create an Esports Technical Advisory Committee. The bill empowered the committee to make recommendations for esports and the board to adopt regulations based on those recommendations. The upshot will be to determine what kind of esports matches casinos can take bets on.

Schorr calls the committee a welcome development. “It was a very cumbersome process for a sportsbook operator to get approval from the regulators to take a wager on esports,” he says.

Nevada currently handles esports betting by requiring sportsbooks to submit applications that are subject to approval by the Gaming Control Board.

“This is definitely going to be the wave of the future,” board member Philip Katsaros told CDC Gaming Reports. Esports “has a lot of momentum and it’s going to continue to grow. … I’m glad we’re getting ahead of it as much as we can, since it’s already been a train running down the track for a while.”

For Las Vegas, it’s about betting on big tournaments and events. That could mean a League of Legends world final or gaming operators holding their own tournaments, Schorr says. “The Overwatch League is something we should be completely comfortable betting on each game, and not just the winner of the league,” he says.

The Hyper-X Arena at Luxor in Las Vegas caters specifically to esports enthusiasts.

In peer-to-peer esports betting, two people or teams bet against each other in games of skill. This element is still in its infancy from a gambling perspective, but a company called Gamer Wager has been licensed by the U.K. Gaming Commission to take such bets.

According to the company’s website, “We have been in development since 2016 and are expanding to daily/weekly/monthly tournaments in the near future. Our aim is to let people bet on themselves in a fun and compliant way.” Look for these bets to hit the U.S. market in 2022.

In more mature betting markets like Europe, esports is already a Top 5 sport, Schorr says, and the U.S. lags behind much of the world when it comes to embracing the phenomenon.

“In Europe and Latin America, esports has been a big vertical in online sports betting for some time,” says Brandon Apter, spokesman for Esports Entertainment Group, founded by former online gaming exec Grant Johnson. “It’s just beginning to be legalized here in the U.S., and we’re very optimistic about the market potential.”

The Canadian-based group is “fueled by the growth of video gaming and the ascendance of esports with new generations,” per its website. Its mission statement is to “help connect the world at large with the future of sports entertainment in unique and enriching ways that bring fans and gamers together.”

Nowhere to Go But Up

Johnson recognized that esports would be a major new vertical for sports betting, Apter says, with first-person shooter games such as Overwatch and Call of Duty among the most popular titles. Don’t discount the popularity of sports simulation games like Madden, FIFA, NBA 2K and iRacing, all of which gained big followings during the Covid lockdowns.

“Taken altogether, I think the entire esports space will rank as a Top 5 sports betting vertical within the next five years,” says Apter. “Over time, it will likely slot in behind football and basketball, but ahead of hockey and baseball.”

To illustrate the potential of esports, just look at the International Dota 2 tournament, which took place in October in Bucharest. According to PC Gamer magazine, Team Spirit from Eastern Europe won Dota 2’s Aegis trophy three games to two, and pocketed more than $18 million. The runners-up, China’s PSG.LGD, had to settle for $5.2 million.

That kind of money isn’t chicken scratch. Neither is $69 million. That’s what the Entain Group plans on investing this year in newly acquired Unikrn, a Seattle-based leader in esports betting. Entain plans to enter the esports market next year with Justin Dellario, former vice president of original content for Twitch, serving as managing director of esports.

“Entain is all about creating exciting and innovative products for our customers,” Dellario said in a statement. “With Unikrn, we’ll now be able to offer competitive gamers and esports fans alike rewarding experiences surrounding the games and events they love.”

Entain has acquired Unikrn’s technology, products, platform and brand including U-Mode, which enables gamers to bet on their own ranked matches in competitive video game titles.

In order to understand the impact that esports will have on sports betting, “You first have to look at the impact it’s already had on the general public’s sports consumption habits,” Swissman says.

Esports has attracted legions of fans, become a wildly popular spectator sport around the world, and is increasingly visible in the U.S.

“This trend has existed for years, and I don’t see it reversing or going anywhere but up, especially in the states,” says Swissman.

So why hasn’t esports grabbed hold yet as a betting platform like more traditional sports?

Swissman thinks the disconnect between esports’ popularity as a spectator sport and betting owes to the fact that most esports enthusiasts are currently under the legal gambling age. “There hasn’t been much demand, but I think you’ll ultimately see full team/tournament/league wagering opportunities, along with more progressive in-game-style wagers.”

Like Apter, Swissman believes esports will end up side by side with more established sports in both the retail and the online space. “I also think casinos will begin to house their own esports tournaments and events,” he says.

Imagine a weekend-long esports team tournament or an esports season that’s a couple of months long, Swissman says. It works on a fantasy sports level too. Fantasy participants could draft teams, as in football and baseball. The much shorter season could evoke more interest among casual bettors.

“This may actually grow the fantasy market,” Swissman says. “Correspondingly, casinos could house these tournaments to help generate interest in the wagering component of esports.” As a bonus, these tourneys are relatively inexpensive when up against traditional sports.

However, when casinos housed esports tournaments in the past, profits didn’t follow because the events were “not well aligned and integrated into the rest of the resort experience,” according to Swissman.

But that could all change as esports gain in popularity. For all the buzz around the games, they’re just beginning to make inroads in the U.S.

As Apter says, “Esports fans are very passionate, and all indications show that they want to bet on their favorite teams just as much as traditional sports fans do.”