In an earlier generation, playing video games was largely perceived as an unproductive, childhood diversion. Today, however, 71 percent of parents with children between the ages of 13 and 18 believe that playing video games has certain benefits. Among these benefits is the potential opportunity to earn money as a professional gamer.
In keeping with the growing societal acceptance of video games, a new sports industry sub-segment has emerged—esports. Esports (short for “electronic sports”) refers to professional organized video gaming, in which players compete either individually or on teams—hoping to achieve the best overall time or score in a video game. Like traditional American sporting events, esports can be watched online via streaming platforms such as YouTube, or on traditional television broadcast channels like ESPN. Many esports players compete in leagues, some with legal structures similar to the NBA or NFL, where gamers sign contracts with teams and receive a salary from the team owners or sponsors.
Distinguishable from other major sports leagues, however, is the unparalleled pace at which esports are growing in popularity. Indeed, in 2019, one of the most prominent esports events—the League of Legends Championship—had more worldwide viewers than the NBA finals. By the end of 2022, experts predict that esports will have reached approximately 29 million viewers per month across the United States. Moreover, while traditional professional sports are typically governed by a single league and center around a specific prize—take, for example, the Stanley Cup—there are several leading professional esports leagues, and the teams within each league typically only specialize in playing a single video game title, like Call of Duty or NBA 2K.
The rapid rise in the popularity of esports brings a host of novel legal considerations. The most pressing of these considerations include: (1) intellectual property concerns; (2) labor and employment issues; and (3) the need for industry regulations.
Intellectual Property Concerns
The intellectual property concerns in esports are distinct from those in professional sports, primarily because each esports game is “owned” by its producer rather than existing in the public domain. The proprietary nature of esports games permits producers to redesign the games and rewrite the rules for play as a means to spark greater consumer interest. In addition, the game producers have the authority to prevent non-partner leagues and tournaments from building events around the games they design. The control that video game producers enjoy over their games is bolstered by consent requirements like end user licensing agreements (EULAs), which require players to accede to various terms and conditions before playing the developer’s game. Thus, game producers have not only the power to prevent others from using their games without permission, but also the ability to recapture a share of the proceeds from the revenue streams derived from their games.
In practice, many of the most commercially successful esports leagues and tournaments are operated by the producers of the games themselves. Typically, game producers are best positioned to absorb the costs associated with starting new leagues and tournaments (e.g., renting space for the event, paying personnel costs, and advertising) because these leagues serve as excellent marketing opportunities that promote future game sales. However, with the explosion of the esports industry in the United States, leagues and tournaments not centered around single game titles such as League of Legends or Call of Duty are beginning to materialize. In these instances, third parties interested in developing a league or tournament must obtain a license from the video game producer that permits the use of the copyright-protected video game in the development of the tournament or league. Doing so helps avoid copyright-protection issues that can result, such as what occurred in 2013, when the organizers of the Evo Tournament used Super Smash Bros.—a game created by Nintendo—as part of its tournament without Nintendo’s permission, and Nintendo immediately shut down all live streaming from the event.
Labor and Employment Issues
Labor and employment law also is seeing new issues related to esports. In the United States, the relationship between most professional sports teams and their players is that of employer-employee. But, in the world of esports, the relationship is not as clearly defined. As such, some may argue that esports workers are best described as independent contractors. The advantages of players being independent contractors as opposed to employees are numerous for team owners—for example, if players are only independent contractors, leagues can pay them less and offer them fewer workplace protections. However, misclassifying esports players could engender liability issues and limit opportunities for league and overall industry growth.
The two primary federal-law tests used to determine employment status are the economic realities test and the right of control test. The economic realities test explores how much control the employer exerts over the worker, the worker’s opportunities to make a profit, the skill required to perform the job, and the extent to which the worker must supply their own equipment. The right of control, or “common-law agency” test, considers the employer’s right to control the manner and means by which the worker completes the work required, and relevant factors include where work occurs, whether the work is part of the employer’s ordinary business, and whether the employer offers benefits. Leagues like the League of Legends Championship Series, Call of Duty League, and Overwatch League directly compensate their players, offer players benefits like health insurance and housing, and supply their players with equipment like consoles and headsets. Under the economic realities and the right of control tests, it is likely that professional esports players who play for these leagues are employees—not independent contractors.
Because the players of many professional esports leagues are likely employees, esports leagues may soon experience player-led unionization efforts. Should esports players successfully unionize, major subjects of bargaining may include: (1) workplace safety, as players sometimes report practicing for 10-14 hours per day for days on end; (2) greater compensation, as players in the major esports leagues only receive base salaries of approximately $50,000, which pales in comparison to the amount of money coming into esports from outside investors; and (3) the potential for outside revenue-generating opportunities through live-streaming platforms like the Amazon-owned Twitch. These platforms allow players to earn up to nearly $10,000 per hour by playing a certain sponsor’s game via livestream for fans to watch, but oppressive league contracts currently limit many such opportunities.
Implementing Industry Regulations
General industry regulatory issues also present unique hurdles in the world of professional esports. Over the last few years, the incredible rise in the popularity of esports has fueled the creation of esports leagues across the country. For example, two of the most popular esports leagues, the Overwatch League, and the Call of Duty League, were only formed in 2018 and 2020, respectively. The rapid development of esports teams and leagues across the country has resulted in very few regulations governing the sport. In particular, the lack of regulations surrounding doping and match-fixing present problems for the esports industry.
As a whole, the esports industry lacks regulations surrounding banned substances—regulations that are strictly enforced by other American professional sports leagues. Currently, only one major esports league—the Electronic Sports League (ESL)—has a banned substance policy. While in the NFL, for example, substances of concern typically include performance enhancing drugs that enhance physical strength like anabolic steroids, in professional esports, the drugs of choice for competitors are cognition-enhancing medications like Adderall. Adderall is attractive to esports players due to the laser-like focus, energy boost, and quick reaction times it offers. The use of prescription medication like Adderall—a controlled substance—is so widespread in professional esports that it is often bought and sold at esports tournaments. In fact, former Call of Duty world champion, Adam Sloss, cited the prevalence of Adderall abuse in esports as the driving factor behind his choice to end his professional gaming career.
The current lack of banned substance policies promulgated by esports leagues is problematic, because if professional esports continues to be plagued by drug-taking rumors, leagues will struggle to attract and maintain major corporate sponsors. Moreover, abuse of drugs like Adderall presents a serious health risk to players, and the lack of doping regulations in esports poses integrity concerns, because players use and abuse prescription drugs to gain an advantage over other competitors.
Because doping scandals pose a significant threat to the burgeoning esports industry, esports leagues must consider implementing strict banned substance policies like those promulgated by the NFL, NBA, and MLB. The banned substance policies enacted by the NFL, NBA, and MLB are strict liability policies, where those who test positive for a substance on the prohibited list are subject to severe penalties. However, these leagues all allow for what is known as a therapeutic use exemption (TUE), which functions as a form of reasonable accommodation under the Americans with Disabilities Act (ADA) by permitting athletes to take otherwise banned substances as long as they have a legitimate, and medically substantiated reason for doing so. If and when esports leagues adopt banned substance policies, they must allow for TUEs so they do not risk violating the ADA by outright banning a player from taking a medication, like Adderall, that the player medically needs.
Just like how the ESL is the only major professional sports league with a doping policy, it is also one of the only esports leagues with a match-fixing policy. At present, match-fixing dominates the professional esports industry, with even the FBI investigating the latest scandal. Match-fixing in esports is unsurprising, because many of the participants in esports contests are relatively young, and most esports players are not yet paid even close to what professional athletes in the four major American sports leagues earn. Additionally, because the brain’s reaction time begins declining after the age of 24, professional esports athletes tend to enjoy shorter careers than NFL or NBA athletes (who are 26 years of age on average), and as a result of these short career lengths, players’ income-generating incentives are high.
Operators of esports contests need to be as vigilant, if not more so, than the four traditional professional sports leagues in the United States in seeking to combat the fixing of competition results. To address the current match-fixing problem in esports and to prevent future issues, esports contest hosts may seek to educate all esports participants on the legal risks of engaging in match-fixing, use mathematical experts to detect unusual betting patterns in advance of matches, and consider paying contestants a fair market wage to discourage the desire to engage in such antisocial behavior. As a growing number of investors in the esports marketplace come from the traditional sports world, some of the strategies that have been long used in traditional sports to deter the fixing of sporting events may also carry over to the realm of esports.
Further Reading: For a greater understanding of the burgeoning esports law industry, consider reading the recent book the authors of this article wrote for the American Bar Association titled “Esports and the Law: A Game Plan for Business and Legal Trends.” Also consider exploring the articles below:
- Intellectual Property: “A Short Treatise on Esports and the Law: How America Regulates Its Next National Pastime,” written by John Holden, Marc Edelman, and Thomas Baker for the Illinois Law Review.
- Labor and Employment:
- “The Econtractor? Defining the Esports Employment Relationship,” written by John Holden and Thomas Baker for the American Business Law Journal.
- “A Tough Pill to Swallow: Making the Case for Why Esports Leagues Must Adopt Strict Banned Substance Policies to Prevent Disability Discrimination,” written by Rebecca Rosenthal for the Virginia Sports and Entertainment Law Review.
- Regulating the Esports Industry:
- “Time to be Grown-Ups About Video Gaming: The Rising eSports Industry and the Need for Regulation,” written by Katherine E. Hollist for the Arizona Law Review.
- “You Must Construct Additional Pylons: Building a Better Framework for Esports Governance,” written by Laura Chao for the Fordham Law Review.
About the Authors
- Rebecca Rosenthal is a litigation associate in New York City, and the author of three esports law publications. She can be reached at firstname.lastname@example.org.
- Thomas A. Baker III, J.D., Ph.D., is a professor of sport law in the Sport Management & Policy program at the University of Georgia, where his research centers on the commercial regulation of sport (including esports). He can be reached at email@example.com.
- Marc Edelman is a professor of law at the Zicklin School of Business, Baruch College, City University of New York, as well as the director of sports ethics at the Robert Zicklin Center for Corporate Integrity and the founder of Edelman Law. He may be reached at firstname.lastname@example.org.
- John Holden is an assistant professor at Oklahoma State University in the Department of Management, where a significant portion of his research focuses on the regulation of the esports industry. He can be reached at email@example.com.