Last Week in Tech Law and Policy, Vol. 23: The Rise of eSports

(by John Dubiel, Colorado Law 2L)

In August of 2015 teams from around the world competed for a total prize pool of $18,429,613 with the winners taking home over $6 million. A competition called The International 2015 took place at KeyArena in Seattle, Washington, with a live audience, all for a video game, DOTA 2.

This was the largest prize pool ever for an eSports competition, but competitive gaming has existed since the early 1980’s. One of the first games to be played competitively for money was Swordquest: Earthworld. The prize pool there was a jeweled talisman, valued at $25,000. Now there are eSports tournaments for League of Legends, Counter-Strike: Global Offensive, Starcraft 2,  DOTA 2, and others taking place almost hourly. As  interest in eSports has grown, legal challenges have become more apparent; players now have contracts, people are betting on every game, and every game involves intellectual property.

Contracts

With the amount of time players have to spend playing their respective games, many seek an organization that can offer a consistent paycheck. Much like traditional athletes, professional gamers are recruited to teams at a very young age, some as young as 15 years old. At this young of an age most of the players have no idea that they are going to need an agent and that the organizations may take advantage of the players in their contract negotiations. In one instance a League of Legends player (“Kori”) was not paid by his organization for over 3 months and when he tried to leave the organization, the manager threatened to have the player’s mother’s house taken away, since she had been the one to sign the contract.

There are many issues that eSports contracts must address that are not usually at issue in normal sports. For one, a lot of times teams will want to kick one player out of the team due to some internal dispute between the players, which will result in the player being kicked most of the time. (One of the winner’s of The International 2015, discussed above, was kicked from his team almost immediately after.) Valve, the creator and owner of DOTA 2, is trying to add some stability to rosters by requiring teams to have lock their rosters in place quarterly. Still, contract complications arise when a player can be kicked without the organization’s input and then disparage the team on social media.

In most traditional sports the owner and team make money from ticket sales at stadiums.  Although there are some live events for eSports, most fans do not attend in person but rather stream them for free on streaming services such as Twitch or Youtube Gaming. So what can organizations do to bring in funds? Obviously sponsorship helps, but do they need to contract the team members to show up at signing events? How do you as an organization address that your players may live all across the country? Should the organization require the players to stream with advertisements when they play casually? Can the organization make money off of this when their players are streaming a game that is owned by an entirely separate organization?

Intellectual Property

This brings up another issue: the intellectual property rights of the games in question. Riot Games, the owner of League of Legends, maintains all of the property rights to all League tournaments. This allows the organization to easily control the professional scene and make sure the money from the tournaments stays within the company. However, they allow players to stream when they are only playing casually. Valve (DOTA 2) takes an entirely different approach and allows many other organizations to hold events, from small internet based tournaments to local area network (LAN) tournaments in front of a live audience.

Gambling

Another legal issue for eSports is gambling. Currently in the United States there are laws in place that prevent organizations from taking cash bets on eSports. There are efforts under way to repeal these laws, but right now it is not legal to bet cash on the matches. However, most of the games feature in-game purchases of different costumes (more commonly referred to by the community as “hats”) for each character. Gamblers can then bet these in game items on any match. Winners can then sell these items on open markets provided by each game. Some of the games even track the current value of items like stock prices, showing the trending value of each “hat.” Essentially these organizations are skirting laws in place by marketing gambling prizes as electronic flare in fact have cash value.

Conclusion

Although eSports laws are very similar to traditional sports’ laws, there are some key differences that need to be addressed. As the eSports scene continues to grow it will offer opportunities to many attorneys looking for a new area of law.