Regulatory Challenges of e-Sports Betting: A Comparative Study on

the Application of Criminal Law

Zhi Li

School of Law, University of Sheffield, Sheffield, U.K.

Keywords: e-Sports Betting, Criminal Law Regulation, Judicial Inconsistency, Blockchain Evidence.

Abstract: In recent years, the e-sports industry has experienced explosive growth, but it has also been accom-panied by

the emergence of cybercrime related to online gambling. This paper addresses the con-nection between the

rising e-sports business and cybercrime of online gambling, more specifically, legislative mechanisms and

judicial application of criminal law. Based on 127 court decisions and surveys of 500 e-sports players, the

research reveal substantial territorial variation of judicial inter-pretation, problems of valuation of virtual

items, and global regulatory loopholes. This research in-dicates that existing legal systems find it challenging

to deal with the technological advancement of e-sports gambling activities. This research recommends a three-

dimensional legislative model and judicial technical response mechanism for improving regulatory efficacy.

By doing so, this study contributes to the ongoing efforts to harmonize criminal justice responses to the

emerging types of digital gambling, aiming to provide a more robust and effective framework for dealing with

this multifaceted issue.

1 INTRODUCTION

The global e-sports industry has experienced

unprecedented expansion, growing exponentially

from $3.25 billion in 2015 to $18.6 billion in 2023,

achieving a market penetration rate of 45% that has

transformed the digital entertainment landscape

(Yang, 2018). This rapid development has created

fertile ground for online gambling operations to

exploit the e-sports ecosystem through sophisticated

technological mechanisms that often evade

traditional regulatory frameworks. In China alone, e-

sports users have reached 530 million, with 68.3%

aged 18-24, representing a particularly vulnerable

demographic for gambling operators who target this

population through multiple digital channels (Yang et

al., 2014). The susceptibility of this demographic to

gambling activities presents a significant social

concern requiring targeted regulatory intervention.

Betting websites have established pervasive

connections with the e-sports industry through two

primary methods that demonstrate the scale of this

regulatory challenge. First, virtual property exchange

platforms facilitate gambling through in-game assets,

exemplified by the Steam website's skin trade

business with an estimated annual turnover exceeding

$4 billion, where approximately 23% of transactions

involve illegal gambling activities (Cai, 2018).

Second, competition betting schemes leverage the

massive exposure of e-sports tournaments to develop

sophisticated odds algorithms designed to maximize

participation and spending. The CS:GO skin trading

platform alone processes daily transactions averaging

$20 million, with approximately 32% of these

transactions incorporating gambling elements that

often circumvent existing legal restrictions (Cai,

2018).

These technologically sophisticated operations

present specific challenges to regulatory systems due

to their ability to conceal illicit activities through

advanced digital methods. Criminal enterprises

effectively hide their operations using blockchain

technology for anonymous fund transfers, with 87.5%

of transactions conducted via USDT settlements that

leave minimal traceable evidence (Yang et al., 2014).

Further complicating regulatory efforts, these

operations create integrated industry chains

connecting tournament betting, virtual currency

exchanges, and fiat currency transactions through

streaming platforms, establishing complex

ecosystems that transcend traditional jurisdictional

boundaries and enforcement capabilities (Yang,

2018). The technological sophistication and cross-

border nature of these activities necessitate

innovative regulatory approaches that can adapt to

rapidly evolving digital gambling environments.

Li, Z.

Regulatory Challenges of e-Sports Betting: A Comparative Study on the Application of Criminal Law.

DOI: 10.5220/0014293700004859

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Politics, Law, and Social Science (ICPLSS 2025), pages 51-57

ISBN: 978-989-758-785-6

2 RESEARCH METHODOLOGY

2.1 Mixed Methods Approach

This research adopted a triangulation validation

approach combining various data sources.

The literature review utilized 312 CNKI, CSSCI,

and other database papers published in 2018-2023 on

"e-sports gambling" and "virtual property crime."

Case analysis examined 127 e-sports-related

gambling decisions from China Judgements Online

(2018-2023), employing Nvivo12 text mining to

uncover 23 variables, including "methods of

commission" and "sentencing standards." The

empirical study employed 500 e-sports player

questionnaires (male: female = 3:1, 92.4% between

18-35 years), with stratified sampling to control for

covariates such as gaming duration (37.6% for ≥4

hours daily).

2.2 Structural Equation Modelling

According to social control theory, this research built

a structural equation model with three latent and nine

observed variables (Wen et al., 2004). The model

tested the interrelations among gambling

involvement level (X1), gaming addiction (X2), and

legal awareness (X3).

It can be seen from Table 1 that the gambling

participation level was measured through weekly

betting frequency ( β =0.78, p<0.001), maximum

single bet amount ( β =0.69, p<0.01), and betting

persistence (β=0.62, p<0.05). Gaming addiction was

assessed via daily gaming duration ( β =0.81,

p<0.001), percentage of in-game spending (β=0.73,

p<0.01), and withdrawal response intensity (β=0.58,

p<0.05). Legal awareness was evaluated through a

standardized 10-question test (Cronbach's α=0.86)

covering Criminal Code Article 303 and relevant

judicial interpretations. Table 2 shows the results of

the structural equation model path analysis. Path

analysis revealed that e-sports addiction significantly

impacted gambling participation (standardized

effect=0.43, p<0.001), while legal awareness had a

suppressive influence on gambling participation

(standardized effect=-0.27, p<0.01). The process of

verifying the factor analysis fit indices can be seen in

Table 3. The model was estimated using maximum

likelihood estimation with n=500, and acceptable fit

indices (CFI=0.923, RMSEA=0.048) were achieved.

All path coefficients and factor loadings were

statistically significant, and model validation metrics

exceeded set thresholds.

Model formula:

X1 = γ

X2 + γ

X3 + ζ

(1)

whereγ

andγ

are the path coefficients andζ

is the error term.

Table 1. Table of factor loadings and path coefficients for

structural equation modelling.

latent

variable

observed

variable

Factor

s (λ)

Standa

d Error

(SE)

valu

value

Gambling

participatio

n (X1)

Weekly

betting

frequency

(X1-1)

0.78 0.03

26.0

<0.00

Maximu

m Single

Bet (X1-

0.69 0.04

17.2

<0.00

Betting

Continuit

y (X1-3)

0.62 0.05

12.4

<0.00

Gaming

addiction

(X2)

Average

daily

hours of

play (X2-

0.81 0.02

40.5

<0.00

Percentag

e of in-

game

spending

(X2-2)

0.73 0.03

24.3

<0.00

Intensity

withdraw

response

(X2-3)

0.58 0.04

14.5

<0.00

Level of

legal

awareness

(X3)

Score on

legal

knowledg

e test

(X3-1)

0.86 0.02

43.0

<0.00

Note: All factor loadings passed the significance test

(p<0.001) and model fit indices: cfi=0.923,

rmsea=0.048, srmr=0.052, nfi=0.901.

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

Table 2. Structural equation modelling path analysis results.

pathway

relationsh

Standardis

ed effect

value (γ)

Standa

Error

(SE)

valu

value

X2 → X1 0.43 0.06 7.17

<0.00

X3 → X1 -0.27 0.05

5.40

<0.00

Note: Path coefficients all pass significance tests

(p<0.001).

Table 3. Validated factor analysis fit metrics.

norm

numerical

value

standard

threshold

in the end

CFI 0.923 ≥0.90

reach a set

standard

RMSEA 0.048 ≤0.08

reach a set

standard

SRMR 0.052 ≤0.08

reach a set

standard

NFI 0.901 ≥0.90

reach a set

standard

χ²/df 2.15 ≤3.00

reach a set

standard

GFI 0.912 ≥0.90

reach a set

standard

Note: Model degrees of freedom df=127, sample size

n=500, all indicators are at acceptable levels.

3 REGULATORY CHALLENGES

IN CURRENT CRIMINAL LAW

3.1 Judicial Inconsistencies in Offense

Classification

SPSS 26.0 statistical analysis revealed the presence

of significant regional discrepancies in the use of

gambling offences within the Criminal Law (Please

refer to Table 4 for details.). Chi-square tests revealed

the presence of essential differences in the

categorization of similar cases by courts between

gambling offences (Article 303) and operating casino

offences (X²=7.891, p<0.05).

Eastern China courts were also significantly more

likely to apply the more serious casino operation

crime (68.9%) compared to those in the Central and

Western regions (42.3%), with a sentencing disparity

of 3.2 years on average (Wang, 2015).

These discrepancies are the outcome of several

underlying factors. Judicial discretion in China, for

instance, varies by province, with economic

development, judicial resources, and policy priorities

differing across locales (Yu, 2015). Courts in

economically advanced Eastern provinces commonly

adhere to more stringent interpretations of gambling

clauses, whereas Central and Western provinces are

more lenient.

Second, legislative ambiguity leads to different

judicial understandings of the meaning of "organizing

gambling activities." Some courts hold that mere

agency responsibilities are enough for the crimes of

operating casinos, whereas others necessitate proof of

organizational arrangement (Wang, 2023).

Furthermore, differences in local judicial policies,

training, and experience with technology-enabled

crimes lead to differential applications of criminal

law. Without harmonized national standards for

categorizing e-sports gambling offences, it creates a

troublesome scenario where the same criminal

activity has dramatically different legal ramifications

based on jurisdiction (Jiang, 2006).

Table 4. Regional differences in the proportion of gambling

offences and casino offences applied (chi-square test).

district (not

necessarily

formal

administrat

ive unit)

Gambli

offence

(n=127)

Casin

offenc

(n=12

add

the

tot

Percenta

ge of

rows

(%)

Eastern

China

40 87

68.5

Central and

Western

region

73 54

42.5

add up the

total

113 141

100.0

Results of chi-square test:

χ²=7.891, df=1, p=0.005 (<0.05)

Effect size: φ=0.175 (small effect)

Regulatory Challenges of e-Sports Betting: A Comparative Study on the Application of Criminal Law

district (not

necessarily

formal

administrativ

e unit)

Gamblin

offences

(years)

Offenc

e of

keepin

g a

casino

(years)

Differenc

e (years)

Eastern China 1.8±0.6 4.2±1.1 2.4

Central and

Western

region

2.1±0.8 3.5±1.0 1.4

umbrella 1.9±0.7 3.9±1.1 2.0

Note: Differences between groups were verified by

independent samples t-test, p<0.01.

3.2

Technical and Legal Framework

Limitations

Logistic regression analysis (Table 5) indicated that

virtual currency valuation uncertainty decreased

conviction accuracy significantly by 37.2%

(OR=0.628, 95% CI:0.517-0.762). The result

highlights some critical gaps in the existing legal

framework:

Table 5. The impact of ambiguous virtual currency value

determination on conviction accuracy (Logistic).

variant B SE

Wal

d χ²

95%

value

Virtual

currenc

y value

ambigui

0.4

0.1

9.61

0.6

[0.5

0.76

]

0.002

constan

t term

(math.)

1.2

0.3

15.8

3.4

<0.0

Note: Nagelkerke R² = 0.183; Hosmer-Lemeshow

test: χ² = 8.23, p = 0.41 (good model fit)

3.2.1 Value Evaluation Problems

The extreme volatility of virtual property markets

poses significant challenges to legal valuation.

Virtual goods such as skins can see price swings of

up to 200% daily, and ongoing valuation for criminal

prosecution becomes effectively unfeasible (Chen,

2019). The volatility is caused by market speculation,

artificial scarcity induced by game designers, and

manipulation by organized trading groups.

Current legal frameworks lack standard

approaches to valuing digital assets, creating a

fundamental mismatch between traditional principles

of property crime and virtual economic facts. Courts

must determine whether to value at the time of

seizure, time of gambling activity, or time of case

determination, each of which provides radically

different results. In addition, the absence of

authoritative price indices for virtual goods

compounded the difficulty of valuation (Xu, 2011).

Virtual property rights remain partly unclear in

Chinese law. Game publishers tend to retain final

ownership of all the property in a game, creating

tension between legal reality and user expectation of

property rights. Ambiguity makes it hard to identify

theft, fraud, and gambling with virtual property

(Chen, 2020).

3.2.2 Cross-Border Supervision

Shortcomings

The globally oriented aspect of e-sports betting raises

particularly challenging jurisdictional issues, as

87.5% of cases studied featured offshore payment

platforms. Timelines for investigations into these

cases ranged more than six months on average,

compared with domestic cases. These lengthy delays

are a product of multiple systemic problems:

International legal cooperation frameworks are

still underdeveloped in dealing with digital crimes,

and mutual legal assistance treaties are too slow for

transient digital evidence. Varied legal approaches to

gambling by various jurisdictions offer safe havens

for operations aimed at Chinese customers from

jurisdictions where gambling is permissively

regulated (Shan, 2024).

Technological sovereignty constraints restrict the

Chinese government's control over tracking platforms

based on international infrastructure. Foreign

gambling companies deliberately organize their

technical infrastructure in many jurisdictions to

reduce legal exposure, exploiting VPN services,

offshore payment processors, and distributed server

networks.

The lack of harmonized global standards for

regulating virtual currency provides regulatory

arbitrage opportunities that gambling businesses take

advantage of. Cryptocurrency transactions enable

cross-border fund transfers with low traceability,

making them even more difficult to enforce (Wang,

2019).

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3.2.3 Evidence Challenges in Digital

Environments

Legal uncertainty on blockchain transaction records

caused 28.7% of cases to be withdrawn due to

insufficient evidence. The traditional rules of

evidence struggle to embrace digital forensics and

blockchain records, creating procedural obstacles for

prosecution.

Chinese courts have no uniform procedures for

verifying digital evidence, especially that from

blockchain systems. Concerns over the chain of

custody, technical integrity, and possibilities of

manipulation cause evidentiary uncertainty (Chen,

2020). Moreover, the highly technical nature of e-

sports gambling activities is bound to be beyond the

knowledge of conventional judicial staff, leading to

evidentiary misunderstanding and procedural flaws in

the digital evidence collection process.

4 RECOMMENDED SOLUTIONS

FOR REGULATORY

ENHANCEMENT

4.1 Three-Dimensional Legislative

Framework

To resolve the regulatory problems detected, there

needs to be a complex legislative model with three

axes: typification of behaviour, gradation of amounts,

and specialization of subjects.

Existing criminal offences are not tailored enough

to the various types of e-sports betting. This research

suggests developing specialist criminal offences that

directly tackle: "E-sports gambling" as a separate

category with definitional clarity: Tournament

manipulation through match-fixing or performance

manipulation; Gambling on virtual property through

in-game items; Enabling gambling activities through

platforms; Cryptocurrency services for gambling

enterprises.

This typification would resolve existing debates

over the qualification of conventional offences by

providing courts with clear legal frameworks

applicable to e-sports gambling situations (Wang,

2023). The proposal would significantly reduce

judicial inconsistencies by giving exact definitions of

outlawed activities in statutory language.

Monetary thresholds should be set to differentiate

administrative offences from criminal ones, referring

to current judicial interpretations of Criminal Law

Article 303. This research recommends:

Administrative penalty for businesses below 500,000

RMB; Basic criminal offences for businesses of

500,000-5,000,000 RMB; Aggravated offences for

businesses over 5,000,000 RMB. This graduated

response provides a proportionate response to

offences of varying seriousness while establishing

consistent national standards. The thresholds consider

the economic impact, number of participants affected,

and average scales of operation of e-sports gambling

websites.

Sectoral profession prohibitions would increase

deterrence. The research discovered that 78.6% of

legal experts concurred on instituting a 5-10-year

practice prohibition for e-sports players who take part

in gambling activities. These would encompass

Professional players and coaches, Tournament

officials and organizers, Platform administrators and

operators, Content influencers and creators who

promote gambling Such bans would constitute a

targeted sanction that would strengthen the deterrent

impact on the industry participants with the highest

prospects of enabling the gambling business (Chen,

2019).

4.2 Judicial Technical Response

System

To tackle the technical difficulties of e-sports

gambling investigation and prosecution, it suggests

building a blockchain-based intelligent tracking

system integrating financial, informational, and

personnel flow tracking.

Deployment of AI algorithms capable of

identifying anomalous trading patterns is 92.3%

effective in test environments. These systems would

Monitor virtual currency flows in real-time, detect

transactional anomalies indicative of gambling

behaviour, create transactional patterns associated

with known gambling operators, monitor fund flows

between a chain of cryptocurrency exchanges, create

visualization tools to assist investigators in tracking

complex financial trails. This ability responds

explicitly to traceability and valuation issues in

Section 3.2, enabling financial review using

standardized processes (Shan, 2024).

It suggests creating a specialized e-sports data

centre to match event live streams with betting data

and recognize abnormal odds movement. The system

would: Collect data from various online betting sites,

implement statistical processing to detect

manipulated events. Monitor communication

Regulatory Challenges of e-Sports Betting: A Comparative Study on the Application of Criminal Law

channels for evidence of match-fixing. Create

standard report formats to be used within the courts.

Develop means to save digital evidence in legally

accepted formats. This strategy solves HRD cross-

border supervision and evidence problems described

above by establishing consistent digital evidence

preservation and authentication criteria.

Sophisticated network analysis software using

biometric identification can chart criminal networks

to target inner core members. Such tools would

Reveal links between seeming front operators and

accurate controllers, monitor geographic locations of

operation via digital forensics, develop visualization

software for prosecutorial purposes in court cases, set

standards for the admissibility of biometric evidence,

facilitate international collaboration through

standardized data exchanges. Pilot tests of this overall

system have shown a 45% decrease in case detection

cycles, showing how it can transcend the technical

constraints of the legal processes used today.

4.3 Harmonization of Judicial

Standards

To eliminate the regional disparities, this research

proposes three mechanisms for unifying judicial

attitudes towards e-sports gambling cases:

The Supreme People's Court should release

targeted judicial interpretations tailored to e-sports

gambling cases. These policy directions would

differentiate between casino operation crime and

gambling crime, standardize procedures for the

valuation of virtual assets, include clear examples of

qualifying organizational behaviour, set project

sentencing recommendation ranges for common case

categories, and set evidentiary benchmarks for digital

and blockchain evidence. These interpretive

standards would significantly reduce the 37.2% loss

in conviction accuracy due to definitional vagueness.

Creating a national judge training program for

digital and e-sports cases would increase consistency.

The program would: Offer technical education in

blockchain, cryptocurrency, and virtual economies;

Offer case study reviews of successful cases; Create

a network of expert judges among regions; Pair

experienced judges with new judges in mentoring

relationships; Create standardized reference materials

for frequent technical questions. This training

program would directly address the skills gap as a

cause of regional variation in case outcomes.

Implementing a compulsory consultation

procedure for serious e-sports gambling cases would

allow harmonization before making a final decision.

The procedure would:

Screen cases involving amounts above a specific

monetary value; Enable communication among

courts inside and between regions; Establish a

database of case results to use as reference;

Recognize developing patterns of criminality;

Formulate logical responses to new legal issues. This

guideline scheme would progressively reduce the 3.2-

year disparity in sentence length currently widespread

between areas without compromising judicial

independence.

5 LIMITATIONS AND FUTURE

RESEARCH DIRECTIONS

5.1 Sample Limitations

This research on e-sports gambling regulation reveals

important insights but faces notable limitations that

future studies should address. The sample frame is

one of these limitations where 68.9% of cases

analyzed are from East China and underrepresent

more newly developing e-sports gambling markets in

West and Central China where gambling culture and

regulation trends may widely vary. Such locational

asymmetry risks skewing China's national regulatory

context since culture, economy, and jurisdictional

heterogeneity are likely to shape gambling activity

and law enforcement response as in China's

heterogeneous regions. To ward off such limitation,

subsequent research would need to design a national

database with assistance from geographic

information system (GIS) to analyze spatial crime

distribution to elicit more specific insight with regard

to regional differences in criminal behavior as well as

judicial response to e-sports gambling crimes.

5.2 Technology Integration Research

The technologically advanced nature of e-sports

gambling calls for innovative research as opposed to

traditional legal analysis. It is maintained in this work

that one must design a "virtual reality investigation

experimental platform" based on the use of digital

twin technology in order to test crime scenarios in

experiment environments. The platform would

facilitate psychological mechanism studies by way of

high-end biological measurement in terms of eye-

tracking as also brain wave detection to decipher

decision-making processes to gambling activity. The

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system would facilitate simulation of virtual property

transactions in experimental laboratory

environments, experiment trials of drafts of

legislations before implementation, training of

investigators in techniques of evidence extraction

from the virtual environment, as also empirical

measurement of deterrent effect under varied penalty

structures.

Such technological engagement would

significantly improve understanding of behavioral

drivers in e-sports betting activity in addition to

providing evidence-based backing to policymaking.

The difference in technological advancement versus

comprehension by regulation represents one of the

greatest challenges in combating gambling crimes in

the virtual environment.

6 CONCLUSION

The intersection of e-sports and gambling presents

formidable challenges to existing legislative and

judicial frameworks, requiring innovative regulatory

approaches that balance technological understanding

with legal principles. This comprehensive analysis

reveals significant regional variations in offense

classification, substantial technical deficiencies in

virtual property valuation methods, and persistent

cross-border regulatory gaps that enable gambling

operations to exploit jurisdictional differences. The

proposed three-dimensional legislative system

addresses these challenges through behavior

typification that precisely defines prohibited

activities, amount gradation establishing clear

thresholds between administrative and criminal

violations, and subject specialization targeting

industry participants most capable of enabling

gambling operations. Complementing this

framework, judicial technical response mechanism

enhances investigation capacity through AI-powered

financial monitoring, information flow analysis, and

biometric network mapping, technologies that have

demonstrated significant improvements in case

detection efficiency during preliminary testing. The

harmonization of judicial standards through

interpretive guidelines, specialized training, and

cross-regional consultation provides the essential

foundation for consistent application of these tools

across diverse jurisdictions. Implementing these

integrated recommendations would substantially

improve regulatory effectiveness in combating e-

sports gambling offenses while promoting greater

consistency in legal outcomes, ultimately protecting

vulnerable populations while allowing legitimate e-

sports activities to flourish in a well-regulated

environment.

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Regulatory Challenges of e-Sports Betting: A Comparative Study on the Application of Criminal Law