Emerging Legal Issues in eSports

By: Neil Braslow, Esq.

Walters Law Group

The booming eSports industry is expected to become a $3 billion dollar industry by 2017. As a relatively new industry experiencing unprecedented growth, legal issues are continuously emerging. While eSports is a niche that is developing its own set of unique issues, many of the hurdles are similar to those faced by other traditional sports organizations.

Similar to almost all traditional sports organizations, the significant eSports profits are going to the event venues and owners. Just like in traditional sports, event venues benefit from merchandising, concessions, and ticketing. In addition to the event venues, governing bodies are starting to form, and will dominate the majority of revenue streams in the near future. Governing bodies have the benefit of potentially lucrative broadcasting deals. As the younger generation continues to move away from traditional sports to eSports, television channels are gobbling up eSports content at an astounding rate. Additionally, eSports is the ideal fit for newer platforms that are looking to become major players in sports content acquisition such as YouTube, Twitter, Facebook, and Instagram. With younger viewers seeking outlets other than traditional TV to view sports content and programming, eSports could position itself to be a leader in this area.

Blizzard Entertainment recently announced the formation of an eSports league which will adopt the hallmarks of traditional sports leagues. Teams will be based in a major cities worldwide, and players will be scouted and signed through free agency. Keeping with their model of a traditional sports league, players will receive guaranteed salaries and benefits. While the salary structures are currently unknown, if eSports continue to grow at the current rate, players will be set to earn salaries that rival those of professional baseball and basketball players. However, since the industry is still relatively new, it is expected that salaries will begin at a somewhat modest rate. In order to supplement potentially modest salaries and prize money, cyber athletes should look to the structures adopted by traditional professional athletes to grow their revenue streams.

Endorsements and sponsorships will begin to become a significant factor in player revenue streams as eSports continues to grow. Just like endorsement and sponsorship contracts in traditional sports markets, cyber athlete should become knowledgeable and seek appropriate counsel for agreements that they are entering into. Endorsement and sponsorship contracts should specifically outline the expectations and scope of considerations for the cyber athletes. Additionally, cyber athletes should avoid entering into agreements that are overly restrictive and poorly drafted. As an example, a skilled cyber athletes could be paid $10,000 for using particular equipment during a mainstream gaming tournament. For the equipment brand, having the player being seen using their equipment would be worth the investment. Additionally, a player endorsing their brand could significantly boost sales and brand awareness. A cyber athlete endorsing gaming equipment will soon be no different than a basketball player wearing a particular brand of sneakers or a tennis player using a certain type of racket.

Unlike most traditional professional sports, eSports is still determining how to move forward with intellectual property (IP) issues. Traditional sports leagues and teams generally copyright, trademark, and license their IP. The main issue for the eSports industry is that game publishers, studios, and commercial organizations usually own and control the IP. Specifically, this becomes a major issue during tournament and league play. For example, cyber athletes typically do not even own their own avatars during these competitions. While some cyber athletes have been able to navigate their way through tricky IP issues, it appears to be a significant hurdle for players that will require further clarification moving forward.

While eSports continues to take the world by storm, legal issues are emerging at almost the same rate. The previously mentioned issues only touch upon some of the different areas of law that the eSports industry should be concerned about. Gambling, governing law, regulations, and player representation are just some of the additional issues that the industry is facing. Considering the popularity and ever expanding monetary value of the eSports industry, it will be critical to sort out and address these legal issues. While eSports has many of the same legal issues as traditional professional sports, the niche issues will need to be addressed so the industry can continue to flourish.

Walters Law Group, represents clients involved in all facets of the eSports industry. Nothing in the foregoing article is intended as legal advice. Neil Braslow, Esq. can be reached via email: neil[at]firstamendment.com, or toll free: 800.530.8137.

Can You Actually Win at Daily Fantasy Sports?

By: Neil Braslow, Esq.

Walters Law Group

Supporters of daily fantasy sports (“DFS”) like to argue that it should be labeled as a game of skill, not as a game of chance. Some individuals even claim to be so skilled that they are experts or professionals, while others simply play for recreation and fun. While the DFS industry has significantly improved its public perception over the past several months, the industry continues to face scandals over the integrity of its gameplay. DFS might be a game of skill, but it appears that the skills of a few users has greatly impacted and ultimately hurt the DFS industry. With the current state of the DFS industry, it might not matter whether you’re a self-proclaimed expert or a casual player – you may just have no chance of winning.

DFS powerhouse DraftKings confirmed that they have opened an investigation into their recent “Fantasy Football Millionaire” contest. In a recent Wall Street Journal article, DraftKings head of compliance Jennifer Aguiar confirmed: “We are in the process of an ongoing investigation.” While it is unclear as to the exact details of the investigation, it appears that it is focused on the site’s limits on how many entries each user can submit and the level of cooperation they can have with other players. Other company representatives declined to comment further on the specifics of the investigation, and they said the company hasn’t yet determined if there was any wrongdoing.

Contests such as “Fantasy Football Millionaire” allow users to submit up to 150 entries. The individual that won the contest, as well as his brother, are part of a small group that wins the majority of the DFS prizes. A 2015 Bloomberg Businessweek article highlighted just how much this small group wins: “[T]he top 100 ranked players enter 330 winning lineups per day, and the top 10 players combine to win an average of 873 times daily. The remaining field of approximately 20,000 players tracked by Rotogrinders wins just 13 times per day, on average.” Hypothetically, each brother could have entered 150 lineups into the big money DraftKings contest, with no overlap between their lineups. In essence, this would have given them 300 lineup entries into the contest if collusion was involved, assuming that it was only the two of them. 

Since winning usually requires submitting a lineup with players that few other entrants have selected, it is possible that lineup collusion can greatly increase chances of winning. With entries costing $20 each, an individual who wanted to submit the maximum of 150 entries would have spent $3,000 in entry fees. For the average DFS user who submits 1 entry for $20, with a lineup that likely includes popularly selected players, the odds of beating a professional DFS player with 150 entries is nearly astronomical. Having more lineups allow a DFS player to increase the variance of lineups that they submit for a contest. As a result, this greatly increases their chances of hitting on a winning combination.

The website RotoGrinders.com provided some statistical analysis of this particular “Fantasy Football Millionaire” contest. Of the over 256,000 entries, only about 33% were single entry contestants. That means that all other entries were individuals playing with at least 2 or as many as 150 entries. Of the single entrants, the best finisher came in fourth place.

Whether the brothers colluded or not, the DFS industry needs to take a harder look at what it can do to create an even playing field for all users. FanDuel has started introducing a “No-Pros Zone” which excludes players with significant DFS experience and limits contest entries per user. With both DraftKings and FanDuel advertising that anyone can get rich over night by winning one of their big money contests, it remains to be seen if they can clean up their contests enough to make that statement into a reality. As of now, it seems like the only users that are getting rich are the professionals.

In addition to player collusion and multiple entries, the big scandal from last year is still fresh in the minds of many DFS players. Through a data leak at DraftKings, it was discovered that employees from DraftKings were competing, and most of the time winning, in FanDuel contests, and vice versa. Since that time, both companies have adopted employee guidelines which prevent such activities from occurring. DraftKings has gone as far as to create a game integrity and ethics team to deal with some of these issues, and both companies are constantly revising their bill of rights for players. In fact, DraftKings said that their internal fraud system first detected the suspicious activity with the “Fantasy Football Millionaire” contest.

With so many issues of gameplay integrity, it is hard to imagine a single entry DFS user winning one of the big money contests. However, it appears that DraftKings and FanDuel, as well as smaller DFS companies, are starting to realize that players are seeking contests involving only other novice and casual DFS players. It is sometimes easy to forget that the DFS industry as a whole is still almost brand new. As the industry continues to grow and evolve, the big money contest loopholes that are currently being exploited by the professional players will hopefully be closed. For now, chances are that you will probably not become a millionaire playing DFS. However, with the new player guidelines, regulations, and fraud prevention software, the odds appear to be growing in your favor.

Walters Law Group, represents clients involved in all facets of the online gaming industry. Nothing in the foregoing article is intended as legal advice. Neil Braslow, Esq. can be reached via email: neil[at]firstamendment.com, or toll free: 800.530.8137.