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Gamification in the Gambling Market
This is an excerpt from Business of Sports Betting epub, The by Becky Harris,John T. Holden & Gil B. Fried.
Gamification has been one of the most popular buzz-words of recent years. The alleged gamification of stock trading was one of the features of the Robinhood app that drew scrutiny. Although Robinhood subsequently removed a number of controversial features from the app, gamification remains a common feature across a variety of industries and apps (Fitzgerald, 2021). Gamification refers to the addition of game-like features to nongame environments. This is often done to encourage people to participate or reach milestones. One prominent example is the gamification of the fitness industry, which has built step-tracking devices that make it a celebration of sorts to reach various step goals during the day: Sometimes there will be a confetti-like splash on a screen or a vibration when a user reaches a predetermined achievement.
Gamification in the gambling market has been viewed with skepticism. There are concerns about the potentially negative impact on at-risk populations if gambling products are gamified. However, despite concerns, gamification is rapidly coming into the gambling space. Indeed, gamification is likely one of the things sports leagues see as having the most potential to engage fans. Many companies are exploring additional ways to engage with fans, including through the use of digital assets like non-fungible tokens (NFTs). Some companies have already begun integrating NFTs into their product offerings. For example, DraftKings launched the NFT-based Reignmakers product ahead of the 2022 NFL season (Cohen, 2022). Partnerships between broadcasters and sports betting companies are also leading to new types of gamification, with some companies offering integrated content that allows bettors to place bets in states with legal sports betting and allows those in states without legal sports betting to engage in free-to-play contests (Fisher, 2021).
Sports betting is, in a way, the gamification of watching sports for many people. It is an additional element that people engage in while consuming sports products. Sports betting companies have leaned into this additional experience with advertising that magnifies the excitement of sports. One company has used the slogan “make every moment of the game mean more” (Nevins, 2022). The integration of in-play betting into sports has long been viewed as a potential means of growing interest among fans. NBA commissioner Adam Silver has talked about the opportunities to engage fans through gambling (Grimes, 2021). There has also been a push to create unique betting experiences for those who are in stadiums using both in-play betting and free-to-play games. These experiences enable companies to generate consumer data, which can be used to create more unique personal experiences (Levene, 2022).
Virtual Currencies
Virtual currencies and cryptocurrencies have emerged as speculative investments subject to extreme volatility. Some countries have taken steps to regulate virtual currencies, but the United States has been slower in choosing what to do about regulation. Although various federal agencies have issued guidance, this has largely been done at the agency level as opposed to a more broadly accepted universal policy. There is wide debate as to whether virtual currencies fall under the definition of currencies; however, some U.S. regulators have been affording Bitcoin the status of currency since approximately 2013. Others, such as the Financial Crimes Enforcement Network, define a currency as “coin or paper money of the United States or of any other country” (Holden, 2018, p. 50). The transition of virtual currencies from niche market to a more mainstream investment has caused many to wonder when they will be able to wager using virtual currencies.
There is a thriving industry of online casinos that are willing to accept virtual currencies as a form of payment (Collier, 2022). Although Wyoming’s sports betting law, passed in 2021, became the first to allow operators to accept cryptocurrency wagers provided those currencies can be converted into U.S. dollars, it does not appear that any sportsbook operator has accepted wagers in Wyoming in a currency other than U.S. dollars (Nelson, 2021). Other states are considering moves to allow bettors to use cryptocurrency as well. Despite the novelty of Wyoming’s law, there has been a recent trend toward the acceptance of cryptocurrencies, with some states even beginning to accept tax payments and payments for services in certain cryptocurrencies. Nevertheless, the anonymity associated with many virtual currencies may create challenges for sportsbooks trying to satisfy Know Your Customer and anti-money laundering guidelines if widespread adoption of virtual currencies were to occur (Rybaltowski, 2022). The concerns about the ability of a sportsbook to meet regulatory requirements are partnered with concerns about the volatility of virtual currencies, because fluctuations could expose sportsbooks to an even greater risk of loss than setting a few bad lines. Barstool Sportsbook allowed consumers to make deposits to their accounts in various virtual currencies in two states; however, the widespread adoption of virtual currency appears to be several years away (Cunningham, 2022). Cryptocurrencies raise concerns for lawmakers because of their anonymity. Unlike traditional transactions that pass through financial institutions that have reporting requirements, most cryptocurrency transactions take place outside of our antiquated regulatory system. This makes the systems desirable for those looking to evade monitoring.
The esports industry may serve as a cautionary tale. After there was widespread trading in virtual weapon skins, which served as a type of virtual currency, there were several scandals and investigations into the use of the skins as a means of payment for online gambling. The Washington State Gambling Commission launched an investigation into the use of the skins as a form of payment on gambling sites and sent a letter to a game maker demanding that the company cease violating the state’s gambling laws. However, the company responded that it did not permit users to engage in the types of prohibited practices the gambling commission was concerned about and that any violations were in contravention of the company’s terms of service (Holden, 2018). The skins gambling industry has faded significantly from the limelight while virtual currencies have increased exponentially in popularity; even Major League Baseball has explored entering the world of crypto assets (Roberts, 2018). It is not known whether we will ever see a professional league coin; however, the widespread adoption of virtual currency in a growing number of industries is likely to continue, even with the negatives that come with a move away from traditional fiat currencies.
Blockchain
A blockchain is a type of database in which information is stored and transfers are documented. A digital ledger records every transaction that occurs and serves as a permanent record of an event involving a transfer (Houser & Holden, 2022). There have been ongoing discussions of the possible adoption of blockchain technology in the realm of sports betting. There is an opportunity for a sportsbook to offer a product with a very low commission to consumers because the blockchain’s verification of outcomes would enable cost savings for bookmakers. At the moment adoption remains in the early stages (Luo, 2022). DraftKings is already reported to be scoping out the potential for blockchain technologies. It has been working with start-up Zero Hash, which serves as a validator of contracts. DraftKings’ interest in the blockchain space is part of the company’s continued look toward future technologies and how they may be used in conjunction with current or future products (Tan, 2022).
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