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Clare Fitzgerald

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Nevada Gaming Policy Committee gets a lesson in eSports

16 May 2016

By Clare Fitzgerald
The Governor's Gaming Policy Committee held a wide-ranging meeting in Las Vegas on Friday morning to discuss what's looking like the next big thing in the gaming industry: eSports, or competitive video gaming.

"The eSports industry is projected to exceed $1 billion soon," said Craig Levine, CEO of the Electronic Sports League. "Gaming is just the new passion point for this digital generation."

Gov. Brian Sandoval, who led the meeting; the committee members; and the full lineup of speakers all seemed bullish on the opportunities presented by eSports and other technological advancements to expand Nevada's gaming industry, and stressed the importance of proper regulation in all aspects of development.

Over the course of nearly three hours, the Committee heard testimony on an eclectic group of topics, learning why professional video gamers like their food on a stick, the circumstances under which eSports betting might already be legal in Nevada, and what might be getting in the way of pooling online poker liquidity with New Jersey.

The first half of the meeting was dedicated to educating the committee on eSports and the different possibilities for betting on them. The second half examined the development of regulated online gambling in the United States over the past few years and likely opportunities for expansion.

The speaker lineup featured experts from several different sides of the industry, including Fifth Street Gaming CEO Seth Schorr, who discussed the new eSports lounge at the Downtown Grand Las Vegas; professional eSports athlete Johnathan "Fatal1ty" Wendel; and Scott Ball, the poker manager for live streaming platform Twitch.

The new eSports lounge at the Downtown Grand is the first of its kind in Las Vegas.

The new eSports lounge at the Downtown Grand is the first of its kind in Las Vegas.

Innovation, economic development and gambling on video games

In contrast to Wednesday's Congressional hearing on daily fantasy sports, this Committee was in general well prepared, and the mood in the room was curious, friendly and enthusiastic. The Committee members seemed to have some working knowledge of eSports and of video gaming generally — particularly Nevada Gaming Commission Chairman Tony Alamo, who proudly identified as a console gamer, telling MGM CEO Jim Murren that he and his gaming buddies made sure to protect the perimeter of the Aria Resort & Casino in Rainbow Six: Vegas.

Steve Hill, the director of the Governor's Office of Economic Development, discussed how eSports fit in to the Office's economic development plan, and particularly its objective of attracting innovative industries to the state. Hill made the case that eSports is exactly the sort of emerging innovative opportunity the state is looking for — one that will appeal to the next generation of Nevadans coming up through the school system and create jobs they will be interested in in a wide variety of fields.

Fifth Street Gaming CEO Seth Schorr explained the steps the Downtown Grand has taken to "position itself as an eSports destination," focusing on "boutique" daily events for eSports enthusiasts in its recently opened eSports lounge. The casino hosted a residency for the LA Renegades, a professional eSports team, in order to study the players and their audience, and to use the findings to tailor their hospitality offerings to the eSports community's tastes. For example, they discovered that eSports players like their food on sticks, so as not to get their hands and equipment dirty, so the casino is now expanding its food-on-a-stick options. The Downtown Grand is also in the process of adding Twitch access to all its hotel rooms. One idea Schorr repeatedly visited was that eSports is already popular and has a robust and enthusiastic community, both locally and worldwide — he even talked about working with local LAN parties to send over-21 eSports players to the casino, and under-21 players away from it. A video about the new lounge also highlighted the scope of eSports' popularity, featuring footage from the League of Legends Championship Series Spring Finals at the Mandalay Bay Events Center, which attracted more than 10,000 attendees.

In response to questions from the Committee, Schorr also discussed the wagering options for eSports. Currently, the Downtown Grand only offers prizes to players, with each tournament having a fixed entry fee and prize payouts. But other jurisdictions, such as the U.K. and Australia, do allow spectators to bet on eSports outcomes.

Twitch Community Developer and Poker Manager Scott Ball, wearing a purple Twitch T-shirt under his sports jacket, gave a presentation titled simply "What is Twitch?" Twitch, in short, is a game-focused live streaming platform with a robust chatroom feature. In addition to video games, Twitch now has channels for poker, music and creative work. Ball explained that Twitch is very popular with millennials who desire authenticity and dislike being advertised to. Live streaming allows companies to get their product in front of an audience without traditional advertisements, by sponsoring broadcasts, teams and tournaments and creating free Twitch content. Ball reported that the casino industry was very quick to embrace Twitch after the platform launched its poker channel two years ago.

Craig Levine, CEO of the Electronic Sports League, discussed the measures the eSports industry is taking to protect game integrity through organizations like the eSports Integrity Coalition and the recently announced World eSports Association. Levine also reported that the industry is actively looking to work with governments to police the integrity of the games.

Johnathan Wendel was the first eSports professional in the world, starting his career in 1999. (photo by WikiMedia Commons/Gia To)

Johnathan Wendel was the first eSports professional in the world, starting his career in 1999. (photo by WikiMedia Commons/Gia To)

The testimony that elicited the most reaction from the Governor and the Committee was Johnathan Wendel's account of his life as a professional eSports player. Wendel, better known by the gamertag "Fatal1ty," described a training regimen similar to that of professional athletes before being bombarded with questions.

Wendel explained that eSports training has gotten more sophisticated than when he began his career in 1999, with top eSports teams often living together in training houses. He noted that the career longevity of a typical gamer is also longer than it used to be, in part because game titles have a longer lifespan, and because of the additional opportunities to make money — such as salary from being on a team, sponsorships, and Twitch or YouTube subscriptions. A current Las Vegas resident, Wendel told Gov. Sandoval that Las Vegas is an attractive home for eSports players due to the fast, low-cost Internet connection.

An in-depth discussion between Committee members and Art Manteris, the vice president of Race and Sports Operations at Station Casinos, raised the possibility that eSports betting may already be legal in Nevada. If eSports is considered its own type of event, it would be possible to allow betting on it if it meets the requirements for betting on non-sports events under Regulation 22.120. But if eSports is an athletic event, then it is covered under the existing sports betting regulations. Setting the odds would require some research and for the oddsmakers to develop a new skillset, but Manteris believes the success of MMA in Nevada demonstrates that they are up to the challenge.

Senior Partner at Narus Advisors Chris Grove brought up an additional type of betting on eSports: skin betting, or the trading of virtual in-game objects. The skin betting market has no formal oversight, and up to $6 billion worth of skins is expected to be wagered in 2016.

Online poker, geolocation and New Jersey

Following the eSports discussion, Grove gave an overview of the state of online gambling in the U.S., noting that the demand for online gambling expansion in many states may have declined due to the explosion of alternatives such as daily fantasy sports. He concluded that 2016 is likely to end with no new states launching online gambling products.

Michael Cohen of Caesars Acquisition Company gave a statistics-heavy presentation on liquidity in online poker and the efficacy of geolocation technology, which he testified has greatly improved over the past four years.

He also recommended expanding the Multi-State Interstate Gaming Agreement between Nevada and Delaware to include New Jersey.

"I would like nothing better than to have an agreement with New Jersey," said Sandoval, but that New Jersey had been "reluctant" to sign an agreement. "I don't want to get you in trouble with New Jersey, but do you have any thoughts or observations as to why there would be a reluctance to have the two most mature, best gaming jurisdictions come together on online poker?"

Cohen did not. Neither did Greenberg Traurig lawyer Mark Clayton, who explained that the Multi-State Interstate Gaming Agreement had been written specifically to provide an "excellent framework for other states to join the agreement." Nevada Gaming Control Board Chairman A. G. Burnett reiterated that he is "ready and willing" to sign an agreement with New Jersey "at any moment."

Clayton also explained that, if California passes its iPoker bill, adding California to the agreement could also open up the possibility of Nevada handling California's licensing. This would make California's online poker operators eligible for a Nevada preliminary finding of suitability, thus allowing them to start operating sooner.
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