Esports, Skins Betting and Wire Fraud Vulnerability

Abstract

Esports are now entering at least their fourth decade and are accessible internationally thanks to wide-spread global high speed internet access. The increasing recognition of esports in North America as a legitimate force in the sporting and entertainment markets, follows years of acceptance in other markets, such as those in South Korea. Consequently, the growth of ancillary betting markets has followed. One particular sub-segment of the betting market eclipses the value of the esports North American market itself: the skins betting market. The esports betting market can be segmented into 1) the market that accepts real money wagers on esports competitions; and 2) the market that uses virtual weapons skins from games like Counter-Strike: Global-Offensive (CS:GO) to fuel an abundance of different gambling options, ranging from esports sportsbook betting to the acceptance of wagers on virtual coin flips.

Weapons skins are decorative, and often garish, cosmetic ascriptions to knives and weapons within CS:GO. While skins-like tradeable items are available in other popular games, including Defense of the Ancients 2 (DotA 2), the focus of this paper is on CS:GO skins. The emergence of the skins betting industry raises an important question: Does the skins betting industry violate federal or state gambling laws. The question has become more prescient given a series of cases involving social casino games where a variety of federal courts have declined to extend gambling laws to transactions involving in-game currencies. The application of most gambling laws to skins betting appears to be questionable—absent a finding that skins constitute something of value or a prize. Despite this, prosecutors seeking to deter fraud possess a handy statutory tool within their utility belt, a Swiss army knife of statutes called the federal mail and wire fraud statutes.

Keywords: Esports, Wire Fraud, Skins Betting, Corruption, Cryptocurrency, CS:GO

JEL Classification: K00, K10, K14, K33, K40, K49, L50, L59, L63, L80, L83, L86, L89, O34