‘Like a Thunderbolt’: Will Esports Betting Give Online Sportsbooks a Boost?

Billions are being bet on video games every year by a demographic that is attractive to sportsbook operators. But gambling on esports has its own unique challenges.

Last Updated: Jun 21, 2022 4:35 PM ET Read Time: 10 min
Esports
Photo By - USA TODAY Sports

The Toronto Maple Leafs haven’t played at Maple Leaf Gardens since 1999. However, earlier this month, another Toronto team suffered a devastating defeat in the same building, now called the Mattamy Athletic Centre. 

While the Toronto Ultra had closed as underdogs at online sportsbooks of around +120 (which works out to 2.20 or 6/5, depending on your odds preferences), the professional Call of Duty team had fought to a 2-2 tie with the Atlanta FaZe. 

All that was left was a fifth map of the first-person shooter, another game of "search and destroy" that Ultra excels at, and in front of a pro-Toronto crowd that was going bonkers for their squad. It was intense, or about as intense as watching video games can be. 

But, if you’re a Toronto fan, what happened next may not come as a shock. FaZe blew out the Ultra on the map, sending Atlanta to the finals of Canada’s first-ever Call of Duty League (CDL) Major tournament. 

Still, despite the loss for the hometown team, which is owned by Toronto-based esports company OverActive Media, the event appeared to be a success. 

Thousands of people visited the arena from June 2 to 5 (including a reporter from Covers) to take in the professional esports matches, and the tournament racked up hundreds of thousands of views on YouTube. The Globe and Mail’s senior media writer described it as "a dazzling bit of showmanship,” in which 12 teams battled for $500,000 in prizes in a setting reminiscent of a professional wrestling event. 

At least a few people had money riding on the outcome of the games as well, and perhaps a few other events going on that weekend. Although Call of Duty is not the most popular esport in the world — League of Legends, Counter-Strike: Global Offensive, and Dota 2 are widely recognized as being at the top of the heap — fans of the game are viewed as more likely to bet on the stick-and-ball leagues that drive the industry.

“My guess is the crossover between sports bettors and COD players is very, very high, like significantly higher than League of Legends would be, or Dota or Counter-Strike,” said Steven Salz, co-founder and CEO of Rivalry Corp., a Toronto-based online sportsbook operator. “COD seems to be played by more of a casual, mainstream audience.” 

There is also an effort underway by some online sportsbooks to win over the esports demographic more broadly, which is attractive to operators for a few different reasons.

Bettable esports matches are being played around the clock, all over the world, and by players who are closer to the beginning of their wagering than the end. A report by the integrity-services division of Swiss technology company Sportradar AG found almost US$50 billion bet across major game titles in 2021. 

U.K.-based Entain PLC, the owner of bwin and 50% partner in BetMGM, has said esports has more than 450 million viewers. The global gaming giant estimated the esports and skill-based wagering market (the latter of which involves players betting on their own performance) would be worth around US$12 billion in revenue by 2025, which helps explain why it acquired the assets of esports betting company Unikrn last year. 

“There's huge affinity amongst this group for wagering, with the vast majority of them already doing so in sports betting or gaming, which suggests that there is not only a latent market in skills-based wagering, but also opportunities to cross-sell into real money betting in other sports,” said Jette Nygaard-Andersen, Entain’s CEO, during an investor event last August. 

"This is a nascent and rapidly growing market providing a huge opportunity," she added, according to a transcript.

The opportunity is still there, and at a time when the stock prices of sportsbook operators have been crushed. Investors have grown more concerned with profitability, and the potential lifetime value of esports bettors could be a good-news story to tell the markets. 

Bookmakers have been making inroads into esports by offering betting markets and signing sponsorship deals, as evidenced by the CDL’s New York Subliners sporting the DraftKings logo on their jerseys during the Toronto Call of Duty event. DK CEO Jason Robins noted in a 2020 Bloomberg interview that esports had given his company a boost during the early days of the COVID-19 pandemic. 

But, for the moment, the promise of esports has yet to be fulfilled. There are unique challenges we well for operators trying to cash in on video-game gambling, such as keeping up with youth culture and ensuring matches are on the level. 

“Esports should not be viewed through the lens of being a mere extension to the main sports offering, but rather its own entity and a means through which sportsbooks can also reach out and appeal to new audiences,” a recent white paper from esports-data company Abios and sportsbook-technology firm Kambi said. “Only when a best-in-class esports betting offer is in place can any meaningful cross-sell opportunities be realized.” 

Move over, Eddie Vedder

In a past life, Adrian Montgomery oversaw bookings at Vancouver’s Rogers Arena. And a few years ago, some guys walked into the nearly 20,000-seat venue looking to take it off Montgomery’s hands for almost a whole week — an expensive proposition in the live sports and concerts business. 

The proposed event back then was an annual world championship for a video game called Dota 2, with a prize pool of around US$25 million, or about US$10 million more than the purse for this year’s Masters golf tournament. While the money was eye-catching, was it even possible to sell out the home of the NHL’s Vancouver Canucks just so people could watch and play a video game? 

“Dude,” one of the guys told Montgomery, “we can sell out KeyArena in Seattle quicker than Pearl Jam.”

Granted, KeyArena is now called Climate Pledge Arena, but tickets to “The International 2018” were still gone about an hour after they went on sale, Montgomery said at the Canadian Gaming Summit in Toronto this month. The event itself produced seemingly never-ending lineups and record concession sales.

“Which was hard to do, because I think in the whole tournament, the building sold three beers and I bought two of them,” said Montgomery, the now-CEO of Enthusiast Gaming Holdings Inc. “This is not a hard-drinking crowd, but they ate an awful lot of hot dogs.” 

What also hit home for Montgomery, who was back then the president and CEO of Aquilini Sports and Entertainment, was the reaction of the relatively young fans to the esport being played. It was similar to how most people would respond to a Canucks game.

Coincidentally, Enthusiast has a financial interest in the Seattle Surge, a Call of Duty team that won the Toronto CDL event earlier this month. The company boasts an army of esports athletes, content creators, and media properties. 

“We're effectively a conduit to engaging with young people through their love of video games and esports,” Montgomery said. 

The audience at CGS included members of the gaming industry and those who regulate the sector. Montgomery told them the esports demographic is one the NFL or NBA would “kill” to have, with the average fan being in their early to mid-20s and earning a household income of around $70,000 a year.

They are also four-and-a-half times more likely to bet on traditional sports, he added. 

“It is very real,” Montgomery said of esports. “It is very big. And it hit me like a thunderbolt.”

Boots on the ground

Montgomery was on a panel with Salz, the CEO and co-founder of Rivalry

Rivalry is known for its esports betting markets, and caters to the crowd who will sit down and watch professional video games. That’s why the company had boots on the ground at Toronto’s CDL event earlier this month, alerting COD fans to the company’s presence and offering them a way to wager on the games.

The bookmaker can do so because it is live in the regulated market for internet casino gambling and online sports betting in Ontario, the capital of which is Toronto. The iGaming market launched on April 4 and there are now more than 15 online sportsbooks legally taking bets in Canada’s most populous province, Rivalry included. The books are allowed to offer betting markets on esports, too

Rivalry recently reported that its betting handle was C$40.2 million for the three months ended March 31, up 273% year-over-year and 62% from the fourth quarter of 2021. Roughly 90% of that wagering with the online bookmaker was on esports, according to Salz, which Rivalry would like to see diversified into other sports. 

The CEO likened the situation to the “meme stock” frenzy that kicked up around companies such as GameStop. Sure, new investors piled into the market during that time, but they also created investment accounts and got a crash course in markets they may now dabble in for life.

“We use esports betting as kind of like that top of funnel to sports betting for a new demographic or generation,” Salz told Covers in an interview. 

Call of Duty hasn’t been a big driver of the growth in Rivalry’s handle. As far as esports go, it is not yet one of the big boys, although the spread of legal sports betting in the U.S. and Canada could help get it there.

“There are certainly some titles that see more popularity in the American market than in Europe, such as Call of Duty,” Abios executives Oskar Fröberg and Tomas Ericsson said in their recent white paper. “For it to overtake the big three of LoL, Dota 2 and CS:GO will remain to be seen, but this is at least not likely to happen within the next 12-24 months.”

A matter of integrity 

There are, however, some serious things to think about by bringing betting and video games near each other, such as remaining compliant with the various rules and regulations of legal betting states and provinces, as well as ensuring the integrity of games.

“Several jurisdictions do not permit betting on events where minors are participating, or a majority of the participants are under the age of 18,” the Abios/Kambi white paper said. “It’s important for sportsbooks to have the necessary structures in place for compliance with all local requirements, working in close cooperation with partners and data suppliers.”

A failure to do so, the paper warned, could cause long-term damage to an operator’s reputation.

“At the same time,” it added, “being forced to close these markets where an operator has not done its due diligence can not only mean a potential loss in revenue, but also risks customer churn to sportsbooks with the technology to properly reconcile these requirements.”

Ensuring there is no match-fixing is no small thing either. This year’s report by the integrity-services division of Sportradar found that esports had the second-highest frequency of suspicious matches among sports, at a rate of one in every 384 fixtures. 

“Another unique aspect of esports is the fact that many of the fixtures are played remotely/on-line, often with the participants hundreds of miles from one another,” the report stated. “This creates unique risk factors to these tournaments, as signs of match-fixing can be more easily kept secret and undetected by spectators when done from home, as opposed to a venue.” 

Any whiff of funny business could chase away bettors. And with the handle on esports growing, steps have been taken to ensure games are sound.

While no company owns football, Activision Blizzard Inc. owns Call of Duty, and the California-based company announced in 2020 an agreement with Sportradar for “a comprehensive integrity program” to protect the CDL from "betting-related" corruption.

“Under the terms of the deal, Sportradar will monitor global betting activity related to domestic and international Overwatch League and Call of Duty League competitions organized by Activision Blizzard Esports and will report any potential integrity issues to the company to help safeguard the integrity of the competitions,” a press release said

Back at the Gardens 

The crowd at Toronto’s Call of Duty tournament didn’t seem too worried about integrity, but they did not necessarily seem like huge bettors either, at least not at first blush. 

A few fans sitting behind Covers mentioned that they bet on football and hockey, but not esports. Yet aside from the Rivalry brand ambassadors and the Subliners’ DraftKings logos, no other operators appeared to have a presence at the event. 

Some of that could be because operators are choosing to use a lighter touch with a crowd containing spectators under the legal gambling age. Promoting sportsbooks in and around that audience may not sit well with parents, lawmakers, and regulators. 

Gambling in general does not appear to be as central to esports at the moment as it is for other sports, such as football, especially since wagering on esports isn’t allowed in some states with legal betting. Millions are wagering and playing fantasy sports every year in connection with the National Football League; the same probably can’t be said for Call of Duty. 

Still, there is probably more of that activity connected to esports than the casual observer may think. There is a legacy of “skin gambling” — wherein in-game items are wagered — and free-to-play “pick’em” games are prevalent, such as one for the CDL that lets fans predict match results for a shot at winning prizes. 

Furthermore, betting markets on esports are already significant and projected to grow even larger in the years ahead. 

The recent white paper from Abios and Kambi, citing data from H2 Gambling Capital, forecast that gross gaming revenue from esports betting will rise to $960 million a year by 2026 from $401 million in 2020. Research conducted for the Fantasy Sports & Gaming Association in May even found that esports had seen a “huge jump” in popularity among daily fantasy sports players. 

The return of in-person esports events could create additional interest.

Toronto's Call of Duty tournament was bumping at times. Even so, it will likely pale in comparison to the crowd set to show up for a League of Legends event scheduled to take place later this year at Scotiabank Arena in downtown Toronto. When the current home of the Toronto Maple Leafs and Raptors played host to a LoL event in 2016, the facility was sold out for two days

Meanwhile, the Call of Duty season is ongoing, with the fourth major scheduled to take place next month in New York. Qualifying for the tournament begins this week, and the Seattle Surge and Atlanta FaZe are sitting on the shortest odds to win the major. As of Tuesday afternoon, both teams were +240 at bet365

However, the odds of esports becoming and remaining a bigger staple of sportsbook offerings could be much shorter. Although COD and LoL are no longer getting a lift from COVID-19-related lockdowns, their betting markets are becoming mainstays for bookmakers. 

“Esports is firmly a part of the modern betting landscape, and it will undoubtedly continue to be important in the future,” said Filip Kristersson, esports product manager at Unibet, in the white paper. “2022 won’t break as many records as 2020, but it will not be without growth.” 

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