ESI Gambling Report: New Jersey nears esports betting legislation

The prospect of esports betting is as bright as it has ever been.

Competitive gaming at large has filled mainstream media roles, occupying centre stage during the pandemic’s screenplay. The same could be said for its betting precinct, which saw an ocean of operators, big and small, dock on esports’ shore. And now legislation surfacing in New Jersey may signal there’s more across the horizon.

The bi-partisan bill, A637, has been unofficially referred to as the ‘esports betting bill’ since it was initially sponsored by a trio of assemblymen in New Jersey. That bill has now advanced to the Senate where New Jersey lawmakers will have the final say on whether or not to include its constitution within the state’s legislature.

With the interest and awareness of esports betting growing globally, Esports Insider will weigh in on the bill’s significance in this edition of the ESI Gambling Report, presented by Oddin.gg.

Policy reform is coming

The New Jersey Assembly voted unanimously to pass a bill permanently including esports in the state’s legal sports betting industry last month.

A637 was introduced in January, and on July 31st, was approved in unanimous decision by the lower house. The legislation revises and expands the definition of certain sporting events, including esports, as it pertains to the Garden State’s sports betting regulations.

As proposed, the bill would deem esports a ‘sporting event’ in the eyes of the New Jersey Division of Gaming Enforcement (DGE). Under this law, operators can add esports to its menu of offerings, so long as it meets the “appropriate policies and procedures” outlined by state regulators.

RELATED: ESI Gambling Report: Integrity, regulation, protection in fast-growing esports betting market

Before the new legislature is enacted, it’ll have to receive a passing grade from the Senate. If approved, operators will be authorised to accept esports bets of up to $100 (£76.48), with a potential winning bet of $500 (£382.40). That wager limit could increase as well if an esports event is sanctioned by the DGE.

Current legislation permits New Jersey sportsbooks to accept wagers on esports, but only with state regulatory approval. That blessing was bestowed by the DGE in November, allowing the Borgata casino in Atlantic City to accept the state’s first-ever legal esports bet on the League of Legends World Championship finals.

The original sports betting bill, A4111, passed alongside the repeal of PASPA, infamously excluded esports from the state’s legal offerings. Namely, lawmakers were apprehensive about the youthfulness of both fans and competitors of esports.

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With A637, language was included to soothe concerns of predisposing minors to gambling. As presented, the bill would maintain its prohibition of wagering on esports if the competition is sponsored by, or affiliated with a high school. Additionally, esports tournaments where the majority of competitors are under 18 years of age, as well as events taking place in New Jersey, or that are affiliated with a New Jersey-based team, would be deemed a “prohibited sports event.”

Despite not offering a blanket approval solution, there’s potential for the handle within New Jersey’s sports betting market. As of June, the state recorded $582,639,000 in revenue since going public a little more than two years ago. The appetite to bet is clearly present, and the opportunities which come along with the esports audience are beginning to reveal themselves.

Market upshots

Reporting around the betting volume drawn by the Garden State’s one-time esports exemption in November 2019 has been mixed; regardless, analysts and operators were likely not forecasting a big payday anyway, but more so an opportunity to test the waters of this market.

If by offering the esports event bookmakers were able to activate even a handful of bettors, it would still equate to “a meaningful win,” according to Eilers & Krejcik Gaming partner and gambling industry analyst, Chris Grove.

Chris Grove | Photo credit: Eilers & Krejcik Gaming

“It’s not an NFL Sunday, but you have to remember in New Jersey, and in any state market, the opportunity to gain or reactivate, even dozens of customers, let alone hundreds or thousands, with a new product or a new market – that’s material.

“These are pretty small markets, and there are lots of brands in them. If you can put League of Legends or Counter-Strike on the board, and as a result, pick up 50 new customers and maybe activate another couple of dozen customers that you wouldn’t have gained or activated otherwise, that’s a meaningful win in New Jersey,” Grove told Esports Insider. “You don’t need big customer numbers to move the needle.”

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Consumer research agency 2CV and market researcher ProdegeMR reported esports gambling revenue is set to eclipse $14 billion (£11.5 billion) in 2020 as a result of the coronavirus outbreak. If this forecast is on par, esports will still only capture a fraction of the reported $220 billion global sports betting market.

While the esports betting handle may not be able to compete with the likes of major markets like football and soccer quite yet, it’s potential to harvest new consumers could very well be the key to ignition. Esports has proven a golden entry ticket to unlock millennial and generation X audiences, and it’s value for casinos and sportsbooks is far up there in terms of its importance.

Health and safety mandates imposed by the pandemic took traditional sports betting offerings offline, piloting crowds of non-endemics operators to experiment with esports for the first time. While those with digital sportsbooks were able to bandage revenue wounds slightly, it was clear the nuanced and complex world of esports wasn’t a territory that operators could simply stroll into.

That very reason is why Co-founder and CEO of GameCo, Blaine Graboyes, tells ESI coming from a place of authenticity is of paramount importance.

“Our outlook is to be successful, particularly in North America, you need to have an esports DNA background, relationships, and perspective. Offering it as an additional market with a traditional sportsbook, we don’t believe is going to have the effect and impact that makes it possible.”

Last week, the Las Vegas-based gambling company GameCo unveiled its esports betting brand, iGameCo. The newest entity will offer a range of wagering products including a full-service esports betting solution built specifically for the North American sports betting market using data platform GRID’s technology.

RELATED: GRID & GameCo: Building an esports betting product for all

“[Operators] recognise that each of these [sports] is essentially a different market that has its own fans, its own language, its own season, its own activity,” Graboyes added. “The reality is there are these different games: Counter-Strike, Dota 2, League of Legends. And one of the things that we’re really focused on is changing the dialogue around that; it’s not esports as a homogeneous blob of games and betting markets.”

Esports is often pigeonholed as one thing, when in fact the differences between Counter-Strike: Global Offensive and Dota 2 are as direct as the contrast between hockey and baseball. Professional gaming is far from a new concept, but its novelty to the sports betting industry has continuously highlighted an important educational piece.

That barrier of entry is long and winding for those foreign to esports. Markets, pricing, and customer acquisition are all top of mind for operators attempting to break the ice with offerings. 

The burden of adoption won’t fall entirely on the sportsbooks, rather it will be an ongoing, collaborative effort between all interested parties. Bookmakers, regulators, and the esports industry at large will together serve as the engine pushing this innovation forward in the United States.

Cause and effect

Although A637 will give New Jersey’s licensed operators the tools they need to include esports on their betting menus, there’s no promise they will actually start building.

Even as one of the first states to adopt legal sports betting, New Jersey is still a very young market. Sports betting in the United States came into existence in a rush, and it remains a very dynamic and competitive industry.

Photo credit: Poker News

The value of esports in the betting fold is perhaps not in question. It very well could be a matter of operators prioritising their agenda during a time when the industry is proverbially assembling the plane mid-flight. 

Major retail gambling entities like MGM, which recently became the official gaming and entertainment partner of Major League Baseball, are busy tending to national partnerships and relationships. That’s not to say esports won’t have room to grow, as it had begun expanding in the West, but it may be a matter of striking while the iron is hot.

Amid the pandemic, esports had superseded the industry’s list of priorities – simply because obligations surrounding traditional sports betting had vanished. Nevada was the case in point; the state’s regulators issued 13 separate licenses for esports leagues and tournaments between March and May of this year. Of that, major retail sportsbooks such as the likes of William Hill took advantage, adding esports to its catalogue of offerings.

RELATED: ESI Gambling Report: Esports betting, a global lifeline for operators

The United States and its regulatory reception to esports has seen considerable advancement this year. Though the chicken-and-egg paradox of whether the demand for esports betting or the offerings should come first is still in play.

All things considered, this bill will help ease that transition by making life easier for sportsbooks wanting to offer esports. With time to evaluate the scope of the handle and its promise, the market will have its best chance yet to reveal its value to operators.

Although through a larger scope, for esports to truly become a heavyweight handle in the global gambling industry, Chris Grove explained it would simply take “time.”

“Maturity needs to happen across a number of facets of the landscape. Esports needs to mature in terms of the formalisation of leagues, franchises, schedules, rules, and integrity. Game developers need to mature in terms of their willingness to engage with the betting aspect,” Grove told ESI.

“The simple answer is time. When you dig into that answer, what you realize is that all of the major stakeholders that need to be on board for esports betting to really reach a state of maximization, all of those stakeholders still have a lot of learning, a lot of growth, and a lot of key, often difficult decisions to make before we can get to that point.”

RELATED: ESI Gambling Report: Esports betting spike recedes, maintains flight

Operators may remain sceptical of esports, even with the A637 bill on its way to the Senate for final approval. Understandably, sportsbooks have a lot to unpack here, and in a world of sharp money bettors and bookmakers arriving late to the party, matters will likely move slowly to begin with.

The A637 bill arrives at an interesting time in the sports betting panorama where traditional sports are, albeit in a reduced capacity, coming back online. But in every crisis is an opportunity, leading Graboyes to insist the time is ripe for this innovation.

“This is an opportunity to rethink our business, rethink our customer, rethink our offering,” said Graboyes. “The [operators] we focus on working with are the ones that are using this as an opportunity for disruption and innovation, because the time is now to do it.”

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