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Gambling and the Law: Nevada legalizes parimutuel betting on esports

26 June 2017

The real goal is regulation, and saving eSports from itself.

Betting on other people playing video games is different from betting on other
people playing football, in one major respect: The National Football League oversees the
game to the point where it checks the air pressure in footballs. There is no equivalent
organization with eSports.

Even the games are owned by companies. Every few weeks, they change the
game. Could betting on football be regulated if the owner of the entire game were to
arbitrarily change the shape of the ball every week?

The Nevada regulators had, somewhat reluctantly, allowed Nevada-licensed
bookmakers to take heads-up betting on eSports. Accepting wagers on “other events” has
been permitted for decades. In fact, state regulators have had to close down betting on
events like the Oscars. Someone from PricewaterhouseCooper put those names into
those sealed envelopes, including the one opened by Warren Beatty. A tougher problem
developed with the TV show “Survivor.” Viewers could bet on the outcome; but, reality
shows are at least partially scripted. Normally, the worry is that insiders will place bets
on event outcomes that have already happened. But would it be a crime if the producer
of a reality TV show bet on his favorite contestant and then rigged the show so she won?
Which brings us to eSports. It would have been politically embarrassing if
regulators had said that you can’t trust eSports events to be run fairly. Nevada regulators
allowed parimutuel betting on jai alai. I remember watching a game in the MGM
Grand’s fronton. A great sport to watch. But not one generally thought of as a model of
self-regulation.

Maybe most importantly, Nevada has declared how eSports betting will take place
from now on: parimutuel pools. This is important because it will eventually eliminate a
major eSports’ problem: The betting of skins.

Skins are avatars. A player can win, or buy and sell on secondary markets, a skin
that will make his weapon look fantastic. But the weapon’s strength remains the same;
the change was only electronically skin deep.

The money, however, is real. Players are buying and selling skins for hundreds of
dollars.

Most eSports wagers use skins as currency. But the secondary markets, in fact, the
very idea that skins are worth anything, is based on artificial shortages in artificial
markets. For those who don’t remember, here’s a link to “Bubble bursts on Beanie
Babies,”

There are a lot of people who still hate Beanie Babies.

A lot of Millennials are going to lose a lot of money when the eSports skins
bubble bursts. Nevada’s regulators deserve credit for forcing the elimination of skins
betting, before it got even bigger. Parimutuel betting does not work with skins.

The Nevada gaming/entertainment industry has already invested real money in the
expectation that eSports will draw Millennial fans to its restaurants, shops and casinos.
So, Nevada regulators have publicly announced that eSports is an industry whose
integrity can be trusted . . . but only if the Nevada regulators say so.
Expressly allowing parimutuel betting will greatly increase the amounts wagered.
Even the announcement garnered attention.

Gaming regulators do not have any direct power over eSports events. But they
have absolute control over the state-licensed sports books. As of July 1, 2017, books will
be able to operate sports pools on any “other event” that has been approved by Nevada
regulators. But there are requirements.

First, everyone has to agree on when the game is over. A “licensed sports pool
shall not accept a wager on an event unless the date and time at which the outcome of the
event is determined can be confirmed from reliable sources satisfactory to the chairman
or from records created and maintained by the book in such manner as the chairman may
approve.”

Then, regulators put the entire burden of controlling eSports on the one party they
have power over: the sports book. The books, will, of course, pass the burden on to the
eSports event organizers.

The new rule requires that the sports book has to provide “such other information
or documentation which demonstrates that:

(1) The event could be effectively supervised;
(2) The outcome of the event would be verifiable;
(3) The outcome of the event would be generated by a reliable and independent process;
(4) The outcome of the event would be unlikely to be affected by any wager placed;
(5) The event could be conducted in compliance with any applicable laws; and
(6) The granting of the request for approval would be consistent with the public policy of
the state.”

It is a rather brilliant move. Nevada regulators get to set all of the standards,
pretty much for the entire world. And they don’t have to do any of the actual work.
There’s nothing wrong with this; I don’t think we really want Nevada gaming regulators
to oversee professional football games.

Instead, they have said to the bookmakers, “Better get everybody together and
figure out a way to create an eSports-NFL.”
I. Nelson Rose

Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Gambling and the Law

> More Books By I. Nelson Rose

I. Nelson Rose
Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

> More Books By I. Nelson Rose