Gary Denham, the Founder and CEO of Wamba Technologies, is developing the patented Esports platform, Gamers Oasis, which involves in-game wagering. The popularity of online esports is on the rise, raising questions about its legality, particularly in relation to gambling activities. Online esports entail virtual competitions within video games, with players paying an entry fee into a competition and potentially winning money back online.
In the United States, esports are not considered gambling due to a legal framework that distinguishes skill-based competitions from games of chance. However, many consumers mistakenly believe that esports involve gambling. This confusion has caused companies to miss out on potential revenue, as the industry could potentially generate over $100 billion in annual revenue from the more than 3 billion gamers worldwide.
The definition of a wager, according to Congress, involves staking or risking something of value on the outcome of a contest, sporting event, or game subject to chance. In video games, the element of chance is minimal, as players compete against each other with known, predetermined conditions. The impact of random elements in games is limited, allowing skill, strategy, and expertise to determine the outcome of esports competitions.
There are three main reasons why confusion persists about whether esports should be classified as gambling. First, some people do not fully understand the definition of esports, which involve skill-based competitions with no element of chance. Second, there is lingering confusion from the online poker industry in the early 2000s, where debates about skill versus chance led to regulatory challenges. Finally, some states classify online esports as gambling, despite allowing them in person, leading to inconsistencies in regulations across the country.
To address these misconceptions, companies in the esports industry need to collaborate with lobbyists and governing agencies to clarify the legal status of online esports. By educating consumers and the public about the distinction between skill-based competitions and gambling activities, companies can create a more transparent and accountable industry that will allow for growth and expansion. Clearing up these misunderstandings will enable the esports industry to thrive and reach its full potential.
