UK Commission Targets The Threat Of Illegal Skin Betting In Esports In New Report

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The UK Gambling Commission called on esports games publishers to recognize the “legal, moral and commercial imperatives” to tackle the threat of exploitation by third parties offering illegal skin gambling to consumers.

The gambling watchdog — in a paper largely about esports — added that publishers should act to prevent such activity. The commission also said they should work with relevant authorities.

What the UKGC said about esports

In the report, the UKGC said it is worried about the “parasitic” nature of many sites that offer skin gambling. CEO Sarah Harrison said unlicensed sites were a “hidden form of gambling.”  They are a “clear and present danger” to players, including underage participants, she opined.

She also talked about the prosecution in February of FutGalaxy. That situation demonstrated that the commission wouldn’t hesitate to take action should it deem that illegal gambling activity involving a UK-domiciled player was taking place.

The minster responsible for gambling, Tracey Crouch, said the government was concerned about “websites [without licenses] jumping on the back of popular video games and encouraging children to gamble.”

The new position paper builds on the responses the commission received previously in its previous discussion paper on esports, virtual currencies and social casino published last year.

Data on esports betting

The commission points out data about the participation rate among gamblers. The percentage that have ever bet on esports is surprisingly high at 8.5 percent. It cautions that the figure for recent esports betting falls to 3.5 percent.

In an explanatory note, it also adds that the figure for participation will likely be skewed towards those who are more engaged online and therefore more likely to have bet on esports. The commission adds that it is consulting with operators over changes to the reporting system. That will help it more clearly track future participation in esports betting.

David Clifton, partner at legal consultancy Clifton Davies, said the commission’s latest missive on the related issues of esports and virtual currencies “shouldn’t send out shockwaves.”

He said the paper “removed some doubt with regard to the commission’s approach.”

Integrity issues in esports

Clifton added though that the esports sector – and the publishers in particular – should note that it has “the chance to get its act together” with regard to integrity issues. “On integrity, the paper makes the point that publishers are gaining from this, fundamentally because of the activities of the skins,” he said.

The commission makes it clear that though there is no evidence to date of esports events in the UK presenting “serious” integrity risks. The same goes for wagers on esports events. But it warns that organizers and promoters “should avoid complacency” and explore additional controls.

“Equally the licensed betting industry should satisfy itself that competitions upon which markets are offered are effectively managed to mitigate the risk of corruption with its attendant consequences for their consumers,” the document added.

Skin betting etc.

The commission has particular concerns over the thorny issue of in-game items and virtual currency. Specifically, the position paper notes that the industry’s opinion that game networks have “occasionally” allowed users to exploit the open nature of the systems to buy and sell in-game items. Further, the industry is underestimating the scale of the problem.

“Based on open source research, the volume, variety and sophistication of websites advertising opportunities to exchange in-game items for cash, indicates that to term such circumvention of regulation as ‘occasional’ risks understating the extent of this issue,” the paper states.

The commission notes the “apparently indiscriminate provision and promotion” of these websites. That could be especially harmful to underage players. “It creates a situation where children are readily able to able to access activities commonly accepted as being appropriate only for adults in tightly regulated environments,” the paper states.

In strongly worded terms, the paper states that the video game industry “should not be, or perceived to be, passive to the exploitation of their player community by predatory third parties.”

More duties for esports publishers

The paper adds: “The significant risk of harm posed by these unregulated gambling websites, whilst unintended, is nonetheless a by-product of the manner in which games have been developed and in-game economies incorporated for commercial benefit.”

In such circumstances, the game publisher becomes the “de facto bank,” per the UKGC:

“Where a player loses their entire ‘skin’ inventory having staked them unsuccessfully on gambling activities, one option for them is to purchase new ‘skins’ from the game publishers, either for use within the game or for further gambling stakes.”

One gambling industry insider suggested the commission might be “overly specific” in this regard. He added that secondary markets such as those existing in esports “create a halo of activity outside of the game which is positive for publisher.”

“It creates a user-generated content and community conversation which is gold-dust in terms of retention,” he added. “If it helps players engage with the game, the publisher has no reason to discourage such activity. It’s the wholly user-generated activity that is really sticky and attractive to publishers.”