With the recent exponential financial and viewership growth of E-sports, E-sports gambling has become a lucrative commercial market globally. Many larger betting organisations, such as Sportsbet and Ladbrokes, have jumped on the bandwagon to grab their share of profits. Several of the smaller E-sports betting focused websites, or skin betting sites, continue to raise legal concerns over their questionable regulation and ease of access to minors.
What is skin betting?
Participation in skin betting peaked around 2016, with thousands of users logging in to websites such as CSGOLounge and DOTA2Lounge every day to gamble. However, mid-way through 2016 these sites began to face scrutiny due to their lack of legitimacy. Particularly, their ease of access induced minors to sign on in breach of global gambling regulations.
The sites argued that gambling was not taking place as virtual items were used, instead of real currency, ignoring the fact that the virtual items could be bought and sold for real money. As there was very little E-sport gambling legislation, it was difficult to determine whether these sites were illegitimate or not.
The first action to combat the breaches by skin betting, was taken by Value, the company which owns Steam. Value sent out cease and desist letters to several websites using its platform for gambling. Value argued that such use was against its user agreement. This brought skin betting websites into the public arena within many countries, such as the United States.
The US introduced legislation to better regulate these online businesses and many skin betting sites were shut down. Some stated they would seek licensing in the hopes of legitimising themselves. However, it was thought that this would be the end for skin betting in general.
Under Australian legislation, video games are considered ‘skill games’ rather than ‘chance games’, leaving the activities surrounding them to often go unconsidered. So far only the National Territory legislation has taken any notice of E-sport betting through allowances under its Racing and Betting Act 1983.
What is the issue? Hasn’t it been dealt with in the past?
Despite the 2016 backlash, several skin betting sites remain active, just with a different approach. To stay open, skin betting websites have taken several new precautions to avoid a potential shutdown.
These sites no longer operate in countries that have taken a proactive and robust approach to regulating e-sport betting. Many skin betting sites have applied for and received licenses in countries that have made some minor regulations, but still have a long way to go in terms of proper legislation.
In another broad approach to avoid regulators, sites have introduced is virtual currency, typically in the form of tokens. Virtual currency can either be bought with real currency or traded for skins. This is a clever move by the skin betting sites as it removes concerns surrounding the unregulated use of virtual items for gambling; it is now like buying chips at a casino.
Skin betting sites have also changed their user agreements, inserting clauses that state they may not be legal in every country. However, these clauses place a burden on the user to know if what they are doing is illegal in their country, a clever trick that provides a sense of legitimacy.
However, the primary concern of inducing minors still exists. No new systems have been set up to catch minors gambling, such as the need for photo ID upon registration.
Skin betting sites continue to push the boundaries of what can and cannot be considered legal under Australian gambling legislation and regulations. The businesses whose platforms are used by these sites are not participating in their regulation. As Australian law has not modernised, there is little that can be done to address the concerns over skin betting. E-sports has proven itself to be a profitable marketplace and the law needs to begin taking steps to improve both regulation and compliance.
If you would like further advice, please contact Digital Age Lawyers on 02 8858 3211.
About the Author
Nicholas Fisher is an intern at law under the supervision of Katherine Hawes, the Principal Solicitor of Digital Age Lawyers.