From Unikrn To Skin Betting: How The Supreme Court's Sports Gambling Ruling Impacts Esports

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Founded in 2014, Unikrn is a Seattle-based web platform where users can bet on the outcome of esports matches, from League of Legends to Counter-Strike: Global Offensive . Backed by, among others, Mark Cuban and Ashton Kutcher, Unikrn has pulled in $10 million in equity financing, plus around $80 million from last year’s sale of its Ethereum-based cryptocurrency. And with the Supreme Court’s decision Monday to effectively open the door for state-regulated betting on sports, Unikrn stands to win big. “We’ve been expecting this for a while,” says Rahul Sood, Unikrn’s cofounder and CEO. “We felt that fantasy was operating in a loophole and it was unsustainable, so instead we focused on building technology around sports betting knowing that the U.S. would eventually come around. And we effectively built a technical motor on Unikrn that put us light years ahead of anybody else in the space. So, we’re excited about this.”
With an impending license coming through to operate in Malta, Unikrn will be open to 80% of Europe, but with the ruling, the company may now be able to sell to the 40% of its global users located in the U.S. These customers currently bet on games using a valueless, free-to-earn virtual currency that can’t be pulled out of the service.
“When we open it up, it’s going to be a significant uptick for us,” Sood says.
It’s not just the obvious players like gambling sites that will feel the waves of this ruling, though, especially in the burgeoning, ever-complicated world of esports. From team owners, to the publishers who run the leagues, to the audience itself, gambling touches upon the many segments in the industry. After all, the total number of esports wagers annually might’ve already crossed a billion dollars.
Unikrn’s Sood claims legal wagering alone accounts for around $2 billion, with illegal transactions knocking it up to around $8 billion. Similarly, a report from software analytics company Narus and research firm Eilers & Krejcik Gaming claims the whole market will hit $6.7 billion in 2018.
The relationship between video games and gambling has been spotty in the recent past, ranging from match fixing in major esports to underage players betting on unregulated third-party sites . Most of it runs through something called “skin betting.” Valve’s Steam, the largest PC gaming online store, allows users to take cosmetic items from games like CS:GO and either buy-and-sell them on a market or trade items with each other. Prices for items can be absurd. For example, a set of clothing in PlayerUnknown’s Battlegrounds – what amounts to a trench coat and bandanna with no gameplay benefits – is currently selling at around $600.
Cosmetic items in games clearly have real-world value. So, it’s not surprising third-party sites, most notoriously CSGO Lounge, popped up allowing unregulated gambling using these virtual assets, whether that be a roulette wheel with likely fudged odds or bets on esports matches. The British Gambling Commission’s 2017 annual report found that 11% of 11-16-year-old kids in UK engaged in skin betting. After a little legal pressure and fevered controversy, Valve – who gets a cut from skin sales on Steam – decided to shoot out cease-and-desist letters to these unregulated grey markets and began instituting caps and time-limits on trading to prevent its platform from being used for illegal gambling.
Credit: Valve 'Counter-Strike: Global Offensive'
The hope from industry insiders is that state regulations will help put a final nail in the coffin of these third-party sites, while also improving the integrity of matches.
“There will always be betting on sport, and when it’s underground, in dark, and in grey markets, then there are constant attempts to manipulate the market and manipulate sports competition,” says Ian Smith of the Esports Integrity Coalition. For the past two years, ESIC has worked with gaming control boards and gambling sites like Unikrn to help facilitate communication and ensure the integrity of matches. But it’s been quite the effort without proper regulation. “A well-regulated system addresses some of those challenges better than just ignoring the fact that betting’s going on.”
Looking forward, though, gambling in esports also presents the same benefits to team owners and broadcasters as it does in traditional sports. Essentially, more engaged viewers and more ad and sponsorship opportunities.
“We’ve seen that betting increases fans’ engagement with the content they bet on,” says Jurre Pannekeet, the head of esports at marketing research firm Newzoo. “Enabling betting will increase the number of matches fans watch to follow their bets, which is something the whole industry, ultimately, benefits from.”
Michael Brown at United Entertainment Group likened it to the NFL and fantasy football. “Engagement in a sport increases in proportion to the rise of fantasy sports. As esports fantasy increases, combined with legal sports betting, I can see a rise in viewership as peop...