(This post was created by Mark Hamilton, Jr., a rising 3L at Marquette University Law School and intern at Quiles Law)
The State of Nevada has been working on legislation relating to esports for a significant amount of time. Since its inception in March 2021, the purpose of Nevada State Bill 165 (“Esports Bill”) was to help increase economic activity in the State through the draw of esports events. Nevada wants to be one of the first locations mentioned when it comes to hosting an esports competition. But, what does being first entail? Initially, this proposed Esports Bill was to be the first of its kind, creating a regulatory body for esports events in the State. What Nevada overlooked, though, is the reluctance of developers and other organizations to cede power and control to an independent commission.
Ultimately, the Esports Bill has been passed and signed by Governor Steve Sisolak. However, the bill is not what it once was. At the strong urging (and threats) of esports game developers, there have been major changes to the bill. In this blog post, I will discuss the Esports Bill, its original intentions, and its final form.
Nevada Esports Bill: Original Plan
Since first drafted in March 2021, the Esports Bill intended to create an independent regulatory commission. This commission was to resemble the Nevada Athletic Commission, which is responsible for the governance of mixed martial arts in the state.
The commission was going to be tasked with creating regulations to govern esports competitions. Some of the areas that would be regulated included integrity of competition, testing for controlled substances, qualifications for hosting and participating in tournaments, and approval of venues. The Esports Bill also would have given the commission the ability to create enforcement processes/mechanisms for the regulations. In other words, the State of Nevada could have made a violation of the commission’s rules a misdemeanor.
Nevada Esports Bill: The Changes
The major opponent to the original plan of the Esports Bill was the Entertainment Software Association (“ESA”). The ESA is an association that serves as a voice for the video game industry and focuses on building the “best future” for the industry overall. ESA believed that the proposed bill and its increased regulation on esports events would actually harm the growth of the industry. In fact, the ESA believed that if the Esports Bill were to be passed in its original form, the likelihood of Nevada being the leader in esports events, as it desired, would be severely diminished. However, ESA was not opposed to Nevada growing and helping foster the development of esports overall, but simply resistant to increased regulation.
Responding to such concern, Senator Ben Kieckhefer (the sponsoring senator) proposed amendments that made significant alterations to the Esports Bill. The amendments created an Esports Technical Advisory Committee with the members being appointed by the Gaming Control Board (Gaming in the gambling sense of the word). The necessity of this change was vital to ESA, as it feared an entirely independent regulatory body. Considering ESA’s concerns, Nevada feared that publishers and tournament organizers might decide to avoid the State of Nevada altogether and host events elsewhere if the independent regulatory body were to remain in the Esports Bill.
The Nevada Esports Bill as Signed into Law
The bill itself is straightforward and short. The Gaming Control Board is to appoint members to the Esports Technical Advisory Committee that consists of industry professionals. The professionals could include anyone spanning from game publishers to hosts to broadcasters and even participants. Once the Committee is developed, they will be tasked with providing recommendations to the Board on how to safeguard the integrity of Esports, especially when wagers are placed at such competitions. The bill goes on to state that the Board may adopt regulations as necessary to carry out and further the recommendations of the Committee.
While the bill is not lengthy by any means, it represents the State’s furtherance of its efforts to attract esports to Nevada, and in concept, is something other States will likely emulate.
The Esports Bill which was signed is vastly different from how it was initially conceived, and frankly, removes much of the teeth included in the initial legislation. While the creation of an advisory group is welcomed, the removal of any independent authority from the group makes its efforts subject to the approval of the Gaming Control Board. Inherently, the Gaming Control Board is concerned with gambling, betting, and integrity endeavors, and while esports betting is a lucrative piece of the industry, there’s so much more to esports than just betting. Nevada had an opportunity to raise the playing field with its legislation, and instead punted. Here’s to hoping that similar legislation by other States encourages Nevada, and others, to enact regulations with teeth as it pertains to esports.
By all accounts, 2018 was a monumental year for investment in esports. According to a report published by Deloitte and The Esports Observer in April 2019, investments in esports increased from $490 million in 2017 to $4.5 billion (!!) in 2018. Also in 2018, 53% of the industry’s 380 million-person global fan base was comprised of fans aged 21 to 35. This is one reason investors are attracted to the market, as this demographic is widely considered a valuable audience for advertisers.
Additionally, investors also see this as an opportunity to get an early stake in an industry that is growing at an unprecedented rate and is expected to continue to mature in a similar manner. In February 2019, NewZoo’s 2019 Global Esports Market Report projected that revenues for the esports industry would increase from its estimated $1.1 billion in 2019 to anywhere between $1.8 and $3.2 billion by 2022. The report also anticipates the total audience to nearly double by 2022 to 645 million fans. With projections like these, it is understandable that investors are pouncing on opportunities within the industry in as many ways as possible. But who are these investors and what are they investing in?
Who are the investors?
According to the Deloitte report, private equity and venture capital groups were responsible for 60 esports investments in 2018. While these groups undoubtedly dominated the investment market within the esports industry, interestingly, a significant subset of individuals involved in the private equity transactions were athletes and entertainers.
Over the past few years, athletes and entertainers have consistently continued to grow their stake in the burgeoning space. In 2015, former NBA player Rick Fox, co-founded Echo Fox, an esports organization that has grown to become one of the more popular brands within the industry. Since then, dozens of athletes (both former and current) and entertainers have joined in some capacity, including Michael Jordan, Stephen Curry, Alex Rodriguez, Drake and Diddy. In addition to their capital infusions, athletes and entertainers are in a strategic position to help grow the target of their investment by leveraging their fanbases and current brand partnerships.
What are the Investment Opportunities?
By far, the most popular investment opportunity for all investors is in esports organizations. For the unaware, esports organizations comprise multiple teams competing in several titles, most frequently under single branding. According to Deloitte, $193 million was reportedly invested into this category in 2018. This is primarily because investors see this as an opportunity to own a stake in an early stage sports business that hopefully could be as valuable as a traditional sports team in time.
Investing in existing teams has become a common approach for some professional athletes and entertainers, but others have taken a similar approach to Rick Fox by running their own organization. Los Angeles Rams lineman Roger Saffold (Rise Nation) is one of the most publicized examples, but NBA players Jonas Jerebko (Detroit Renegades) and Jeremy Lin (J.Storm) have purchased their own esports teams as well. However, running an organization may not be the most viable option for the vast majority of athletes and entertainers, as it requires them or their business partners to spend a lot of time handling day-to-day operations.
Other Opportunities: Developers, Media Platforms, Agencies, Esports Funds, etc.
While team investment may appear to be the easiest and most popular way to obtain ownership interest in esports, it is by no means the only way. As with any other industry, the esports landscape provides an assortment of opportunities. Developers, like Riot (League of Legends), Activision Blizzard (Overwatch, Call of Duty), and Epic (Fortnite), are often considered to be attractive investment opportunities, given that they essentially own the intellectual property (i.e. “the football”) behind their respective esports ventures. Individuals may look to invest in a lesser-known developer in hopes of finding the next League of Legends or Fortnite.
Additionally, media platforms have grown to be an appealing investment play within the industry since Amazon acquired Twitch for $970 million in August 2014. Recently, an up-and-coming social broadcasting platform that distributes esports, gaming, and music content, Caffeine, received a $100 million capital infusion from Fox. Though many of these investments are made by larger businesses or funds, athletes and entertainers could look to leverage their unique combination of stardom and capital in return for equity in budding platforms like Caffeine, which was cofounded in April 2016.
Some athletes have even jumped in on other big-picture plans as their way of getting involved in the esports industry. In 2018, Kevin Durant, Odell Beckham Jr., and the St. Louis Cardinals participated a $38 million funding round for Vision Esports, a holding company set up to invest in a collection of esports businesses. This is not a bad option for those individuals who may not know exactly what to invest in, and trust the industry knowledge of those individuals running the investment fund.
The examples described above are only a fraction of the endless amount of investment opportunities available within the esports industry. From teams to technology to third party tournament organizers, there is an option for every type of investor who is looking to get involved in the space. Unfortunately, as with any new industry, there are a significant number of con-artists seeking to obtain investment on false pretenses, which may be difficult to detect by those not involved readily involved in the esports industry. If you have any questions regarding potential investment opportunities or how to structure a particular transaction, please feel free to contact us.
If we can help you accomplish your Do's, or assist in rectifying your Don'ts, feel free to contact us.
(This post was submitted by Patrick Hankins, a rising 3L at Marquette University Law School and an intern at Quiles Law)
In his complaint filed against FaZe Clan, Turner “Tfue” Tenney alleged that FaZe signed H1ghSky1, an eleven-year-old gamer, and lied about the minor’s age (claiming that he was thirteen, which has proven true) in order to meet the minimum age requirements for Twitch streaming and competitive Fortnite events. It has been alleged that to maintain the charade, FaZe Clan also pressured H1ghSky1 and his family to maintain the lie. Unfortunately, H1ghSky1’s Twitch account has been banned, presumably due to his actual age not satisfying Twitch’s terms of service.
Given the recent discussion of underage players triggered by this incident, this blog post explores the various potential legal issues of signing a minor to a player contract and methods to prevent these issues from affecting an organization.
Minors Can Disaffirm a Contract
Minors only have the capacity to enter voidable contracts. Generally, jurisdictions allow minors to “disaffirm” a contract before or reasonably after turning 18 years old or if the minor dies within the contract’s effective period.
Disaffirming a contract is any conduct or statement by the minor giving notice of intent to disaffirm, or otherwise leave the contract. To disaffirm a contract, express notice is not required. Typically, this is accomplished by the minor’s oral or written declaration of intent not to fulfill the contract.
Void vs. Voidable Contracts
Void contracts, as the name suggests, mean that a contract is void from the beginning. There is no need for a party to disaffirm the contract because the contract is not enforceable. Contracts that delegate the minor’s authority to contract, any contract by a minor relating to interests in real property (i.e. land ownership), and contracts relating to personal property not in the minor’s immediate possession are considered void at their inception.
In contrast, voidable contracts have the status of potentially becoming void at the request of the wronged party. A contract with a minor is a voidable contract, but it is not void until the minor disaffirms the contract. If the minor does not void the contract, it remains effective even if the contract is voidable.
Generally, parental consent (along with additional terms for the parent) is included in contracts with minors to retain the parent as a guarantor for the minor’s services. Should the minor disaffirm a contract, the disaffirmance does not also apply to the parent’s obligation as a guarantor. The parent would remain liable, based upon the terms of the contract, regardless of the minor’s disaffirmance.
Legally emancipated minors may enter into contracts as if they were 18 years old. Emancipation is the permanent release of parental control and authority over a minor. Effectively, this allows a minor to collect personal earnings and terminates legal parental duties to support the minor. Some states allow minors to emancipate through an express agreement by parent and minor, or an implied agreement from acts and conduct that indicate consent. Other states even have laws that outline procedures which require court petitions that confirm the minor’s emancipated status.
Misrepresentation of Age
Generally, a minor who misrepresents their age will not be bound to a contract. The voidability of the contract depends on the minor’s actual age; the misrepresented age has no effect on whether the minor can disaffirm the contract. In fact, some courts allow minors, despite their fraud, to seek recovery of the consideration paid or seek other equitable remedies.
However, a minority of jurisdictions have established statutes that prevent a minor from disaffirming a contract based on age misrepresentation or if the other party had good reason to believe the minor was able to enter the contract. In those locales, a party’s reliance on a minor’s statements regarding age can serve as the basis of recovery. There, the minor must be retaining benefits provided by the contract which causes substantial harm to the other contracting party.
Some states allow a minor’s contract related to art, entertainment, and professional sports if a court has approved the contract. Once a minor’s contract has been approved by a court, disaffirmance of the contract is only permitted in statutorily provided instances. The states that require court approval also require a parent or legal guardian to establish a trust that keeps a percentage of the minor’s earnings which are not distributed until the minor turns eighteen or otherwise obtains a court order.
What can esports orgs do?
Contracting with a minor is a risky business practice. If an esports organization is seeking to sign a minor player, they should ensure that their contracts adhere to local law not only where the organization is operating, but also where the minor is located, to ensure that sufficient changes to the contract are made, if necessary.
Further, organizations should maintain a rigorous age screening process as misrepresentations of age, even a seemingly insignificant leap from eleven to thirteen years old can have larger ramifications such as violations of streaming platforms’ terms of service or games’ competitive rules. A violation of these terms means ineligibility for streaming or competition, which can have a significant negative impact for the organization.
Thus, esports organizations should not fully shy away from signing minors to player contracts, but keep in mind the extra steps required to establish an amicable agreement that serves both players’ desires as well as organizations’ needs to compete, stream, and influence across multiple platforms.
As we have discussed previously, intellectual property is a core part of every business. Intellectual property encompasses a variety of works including trademarks, copyrights, patents, trade secrets, and propriety data, amongst other things. Assets like a company’s trademarks (i.e. logo or slogan) can be extremely valuable in commercial affairs because, if properly maintained, these rights provide owners with an exclusive right to use and monetize their creations. This means owners have sole control over who is able to use their intellectual property and how it can be used. Oftentimes, intellectual property owners will use these rights strictly for their own monetary gain, but owners can also sell these rights, or uniquely license them to another party.
What is Licensing?
Licensing is a business arrangement where the owner of certain intellectual property rights (licensor) agrees to authorize another party to use such rights (licensee) in exchange for compensation. This compensation can vary in form, but will typically comprise of a one-time, upfront fee or a percentage of all gross or net revenues received from the use of the licensed intellectual property, otherwise known as royalties. One common example of licensing occurs in the retail market, where a company may enter into a retail licensing deal with an apparel company that allows the apparel company to use its trademark (i.e. the licensor’s name or logo) on all types of clothing sold in exchange for a percent of the profits from apparel sales using the licensed mark.
Businesses frequently use this kind of arrangement because it provides them with another way of profiting off of their intellectual property without completely transferring or assigning all of their ownership rights to another party. Through licensing partnerships, a company is able to use the expertise of another business that operates in a different sector, like manufacturing, to reap commercial benefits from that sector at minimal cost. For example, a company that only creates comics books may license its characters to a toy company without having to use its resources on costs or labor associated with the production of action figures. In most cases, the comic book company would not have to take an active role in any of the production, distribution, or marketing of the action figures, and would still receive a percentage of any sales of this product. Licensees welcome these partnerships because they are able to profit off the popularity of the licensor’s brand.
Licensing arrangements are most effective when they are solidified through a written contract. This provides all parties with necessary control and reduces the risk associated with the agreement. Parties in a licensing deal are able to determine when (duration of term), where (territory of use), and how (scope) the intellectual property can be utilized. By defining these terms effectively, a business has the ability to profit from different sectors (i.e. apparel, entertainment, etc.) in an efficient manner. Additional protections can also be added to ensure that a partnership is operating successfully. A licensor may require that certain benchmarks be met in order for the licensee to keep the using its rights. For instance, a licensor can require that the licensee meet a minimum annual revenue target in order to ensure that the licensee is adequately marketing the product bearing the licensed intellectual property. Licensing agreements that include provisions like this may provide for the return of all intellectual property rights to the owner if these goals are not met. These types of provisions can act as added security in the event one side fails to meet certain quality control or performance standards.
Licensing in Esports
Licensing partnerships are especially apparent within the esports industry. Game developers, like Riot, Activision Blizzard, and Epic Games, license their games to tournament organizers through various types of licenses so that these organizers can use games like League of Legends, Overwatch, or Fortnite in their tournaments. Additionally, esports teams will often enter into licensing deals with apparel companies to produce products like performance wear, fanwear, and other accessories. Influencers can also enter into their own licensing deals for branded products. Most recently, Ninja, through his partnership with Red Bull, entered into an exclusive licensing deal with Walmart for the sale of his unique headband. Sponsorship agreements will also oftentimes include language that defines terms of licensing, if any, between the parties as both parties will use of each other’s intellectual property (logo, slogan, etc.) in sponsorship activation. The amount of licensing opportunities within esports is endless and these types of partnerships will continue to make up a significant portion of all business transactions within the industry as it grows.
Any time intellectual property is involved, which is almost always certainly the case, companies will have the opportunity to license it for commercial gain. Through a licensing arrangement, both parties to the transaction can reap certain benefits. Licensors may be able to use a licensee’s production, distribution, and marketing network, while licensees can profit off of the licensor’s brand appeal. Still, while these types of deals seem easy to complete, there are a number of concerns that must be considered before executing a deal. Be on the lookout for a future post where we will address these concerns.
(This post was contributed by Alan Conklin, a third year law student at the Villanova University School of Law and intern for Roger Quiles, Esq.)
A FIFA YouTube gaming star and his business partner appeared in court on February 6, 2017 to defend allegations that they violated the UK’s Gambling Act.
During Monday’s hearing at the Birmingham Magistrates’ Court, Craig Douglas, better known under the YouTube alias NepentheZ, pled guilty to charges of advertising unlawful gambling and being an officer of a firm that provided facilities for gambling without a license. For his actions, the Court ordered Douglas to pay £91,000 (est. $97,000).
His business partner, Dylan Rigby, was forced to pay a much heftier fine. Rigby, who created and ran the gambling website, pled guilty to two charges of providing facilities for gambling and one charge of advertising illegal gambling. For these offenses, Rigby was ordered to pay fines and costs of £164,000 (est. $175,000).
The website, FUTgalaxy, allowed users to gamble virtual currency they earned playing FIFA 17 on real life matches played in the UK, France, Germany and Italy. If successful on their bets, users could then transfer the virtual currency back to the video game or exchange it into actual currency through an online black market.
Gambling in the UK
While it is typically legal to gamble on sporting events in the United Kingdom, the country’s Gambling Act of 2005 strictly forbids providing facilities for gambling without having an operating license. The United Kingdom’s Gambling Commission (the “UKGC”) has made it clear that the Act extends to popular forms of esports gambling that involve virtual currency.
In August 2016, the UKGC published a discussion paper entitled “Virtual currencies, eSports and social gaming.” In the paper, the UKGC addressed virtual currency betting, a type of gambling that has become prominent in the esports community over the last few years. Virtual currency betting is identical to traditional gambling but instead of using monetary currency, players use in-game items they have earned which have assigned values. For example, in FIFA 17, players can earn FIFA coins by winning matches and competitions in the game’s Ultimate Team mode. These coins can then be traded for different items that have assigned values. The fact that this type of currency can be traded for items with real values, or for actual currency, has led the UKGC to consider it a “de facto virtual currency.” Accordingly, the UKGC requires any facility that fosters gambling with this type of currency to have an operating license. This license requirement is intended to protect consumers, especially children and other vulnerable people who may be exploited by this new form of gambling.
Here, Douglas and Rigby did not have an operating license for their gambling site, effectively making it illegal. Additionally, Douglas often promoted the unregulated site to his 1.4 million YouTube subscribers, many of which were under the UK’s legal gambling age of 18. In one video from his YouTube channel, Douglas even acknowledged the age limit and stated, “You don’t have to be 18 for this, because this is a virtual currency.” The unregulated site had no age restrictions and allowed minors to use a credit card to place bets in the form of FIFA coins. FUTgalaxy generated a pre-tax profit of around £96,000 (est. $103,000) between July 2015 and February 2016.
More to come?
This case is an important milestone in the esports industry, as it marks what may be the first successful government prosecution of a person involved in unlicensed gambling of virtual items. It will be interesting to see whether this ruling will have any impact on future virtual currency issues across the globe, including the United States, which has much stricter gambling regulations.
In the United States, one State has already had to address the issue of virtual currency gambling. In October 2016, the Washington Gambling Commission (the “WGC”) ordered Valve Corporation, the creator of Counter-Strike: Global Offensive (“CS:GO”), to stop its skin transferring system, which allowed CS:GO players to use skins, or in-game items that can be used to change the appearance of game characters or guns, as virtual currency. Unregulated gambling websites, similar to FUTgalaxy, allowed skins to be bought and sold for actual currency, essentially assigning the skins a real-world value. On these sites, players were able to bet their skins on esports matches, coin flip games, lotteries and casino games like blackjack and roulette. This unregulated market was on pace to exceed $7 billion in 2016 prior to the WGC’s order. Trevor Martin and Tom Cassell, popular YouTube personalities, owned one of the most notorious skin gambling websites, the now defunct CSGO Lotto. Value Co., Martin and Cassell are currently in a class-action suit that alleges the parties created and promoted an illegal gambling market. However, unlike in the FUTgalaxy case, US and state government agencies have yet to take any action against these parties since the gambling sites have been shut down.
With the rapid growth of the esports industry in today’s world, it is very unlikely this will be the last gambling case involving virtual currency.
The eSports industry at large has had difficulty curbing the problem of poaching, the practice where one team inappropriately entices a player to join its team while that player is still under contract with another team. Without fail, every few months a new poaching scandal arises. The frequency of these poaching scandals begs the question as to how teams can protect themselves from this happening. Without stricter league governance to disincentivize poaching, the only other option for a team to protect itself is through a lawsuit for tortious interference.
Currently, there is a dispute between two prominent League of Legends teams, Team Solo Mid and H2K, over whether a player entered into a binding agreement with H2K before Team Solo Mid made a counteroffer which the player accepted. However, what makes this particular incident unique is that H2K has made it known that they are considering pursuing legal action against Team Solo Mid for its tortious interference with the player’s agreement with H2K.
Many of the facts surrounding this incident are still unknown and such a lawsuit between these two international businesses raises many questions (like what jurisdiction the case could be brought in). This blog post will address one of the most basic questions involved, specifically, what is a claim for tortious interference? Although the question of jurisdiction will alter the analysis of what’s needed to prove such a claim, this post will examine the cause of action under New York law (as that is where I’m licensed to practice).
In order to prove a claim for tortious interference with a contract in New York, the Plaintiff must show:
In the esports poaching context, this means that the aggrieved team must show:
Although tortious interference can give eSports teams some protection under a poaching scenario, that protection is measured due to the difficulty of proving the claim. In New York, succeeding on such claims has become difficult for a several reasons, one of which being that the complaint asserting the cause of action must specify with particularity how each element of the claim is met (as opposed to making generalized assumptions/conclusions).
Due to the required particularity that a complaint must have in order to assert a viable cause of action, that standard effectively requires that the aggrieved team has sufficient knowledge of the other team’s actions and intentions prior to starting the lawsuit in order to allege facts which support the claim. However, there is no black and white test to determine if a team can allege a sufficient amount of facts to support the cause of action. Of course, the more facts that can be alleged the better. But, this means that bringing any such claim lacks certainty of success from the outset.
Further, such claims may be difficult to prove from an evidence standpoint, as intent and knowledge have high bars of proof to satisfy. What may be particularly helpful from an evidentiary perspective are logs of any online communications, as much of the eSports industry relies upon Skype and similar programs for communications. However, obtaining such communications during the discovery process of such a lawsuit is no easy task as well.
Lastly, it is difficult for tortious interference claims (in general) to succeed due to the availability of the Economic Interest affirmative defense. For reference, an affirmative defense is a set of facts which if the Defendant proves successfully can mitigate or negate liability. In order to prove the Economic Interest defense, the Defendant must show that it acted to protect its own legal or financial stake in the third party’s business. However, the bare fact that the Plaintiff and Defendant are competitors is not enough to justify Defendant’s alleged actions and avail them of this defense. In the context of a poaching situation in eSports, this defense would likely not be available unless a team can show a valid economic interest and not just assert that they were trying to gain a competitive advantage.
Although it may be difficult for an eSports team to pursue a lawsuit for tortious interference when another team has poached a player, it is nonetheless a viable option for a team seeking to protect its interests. Unfortunately, the few governing bodies of esports leagues have done little to disincentivize poaching, forcing teams to either accept the situation, or attempt to avail themselves of their legal rights. However, the cost of legal fees associated with pursuing a lawsuit may discourage teams from enforcing their legal rights. Unfortunately, those costs and the lack of significant league action may force teams to simply accept that their player has been poached.
Its important to remember that poaching, or tampering, is not unique to the esports industry. However, other industries have found more effective ways of disincentivizing the problem. The professional sports industry has had tampering issues arise, but set strict rules and penalties for all tampering offenses, including steep fines, the suspension of the offending person, forfeiture of draft picks, and the prohibition of signing the player being tampered with. Without stronger league governance regarding poaching, like we see in the pro sports industry, teams are left to navigate the costly and difficult road of pursuing legal action for tortious interference if they want to protect themselves.
Here's my latest post for The Legal Geeks. In this post, I discuss the difficulties that pro gamers have experienced in obtaining visas to work abroad. Although the United States allows pro gamers to obtain athlete visas, much confusion exists as to how, if at all, pro gamers and their teams can satisfy the visa requirements.
Give the article a read and let me know your thoughts in the comments below!
Recently, I was interviewed by eSports Guru on the topic of player-team contracts in eSports and their importance. I've added the article to the Media tab above. Check out the article about the interview and let me know your thoughts!
Performance enhancing drug (“PED”) use in esports has long been an issue whispered about within the gaming community. These PEDs are not steroids and human growth hormone as we know from other sports, but are instead prescription drugs known as psychostimulants or neuroenhancers. These kinds of drugs (Adderall, Ritalin, Selegiline, etc.) are abused by players as a means of enhancing focus, calmness, or to otherwise act as a stimulant. However, due to the lack of drug testing by professional esports leagues and tournament bodies, there have been very few instances of confirmed PED use during matches. Unfortunately, there is now another example of such drug use.
On July 12, 2015, a Youtube video was posted where professional Counter Strike: Global Offensive player Kory “Semphis” Friesen asserted during an interview that he and his team took Adderall during a major ESL tournament. The relevant portion of the interview is as follows:
Friesen: “The ESL [team communications] were kinda funny in my opinion. I don’t even care, we were all on Adderall [laughs]”
Interviewer: “Really? [laughs]”
Friesen: “I don’t even give a fuck, like its pretty obvious if you listen to the [team communications]. I don’t know, people can hate it or whatever.”
Interviewer: “Everyone does Adderall at ESEA Lan right?”
Interviewer: “Just throwing that out there for the fans, that’s how ya get good”
In addition to the disappointing language encouraging others to violate tournament rules and abuse prescription medications, such PED use can impact the player and team’s contractual relationships.
Many contracts, especially sponsorship agreements, contain morals clauses. This type of clause allows a contracted party the opportunity to cancel their remaining obligations under the contract should the other party act in a way that is harmful or damaging to its own brand. The reasoning behind such a clause is that by cancelling the contract, a party can protect themselves from being associated with the brand damage caused by the other party. In the sponsorship context, this allows a sponsor to exit a sponsorship should the sponsee player or team be engaged in a scandal or otherwise illicit activity.
Although there has not been a reported contractual exodus in this matter like when Lance Armstrong was found to have been using PEDs, the use of PEDs in esports can trigger a contract’s morals clause in the following ways:
It is unknown whether or not Friesen and his team obtained the Adderall licitly and for a valid medical purpose. However, in the event that the individuals obtained the substance for an illicit purpose such as those described above, that action would likely be enough to satisfy a morals clause. Importantly, a morals clause can also be placed in a player-team contract, thus putting the players’ livelihood at stake should they utilize PEDs.
Additionally, the team itself could face legal backlash over its players’ PED use from sponsors, as sponsorship agreements routinely contain morals clauses. Depending on how the morals clause is drafted in the team’s sponsorship agreements, the actions of all players (or even a substantial number of them) may be sufficient to trigger the morals clause and permit the sponsor to cancel the sponsorship agreement. As Friesen’s admission has caught the attention of many people in the esports industry at large, time will tell if there is any sponsor backlash.
Eventually, the esports industry is going to have to implement effective methods for curbing its PED problem. Until then, teams should keep in mind that any PED use can impact the sponsorships that they have worked hard to obtain, and thus discourage any PED use by its players. No team or player would want to lose their contracts because a morals clause was triggered in an effort to gain a competitive advantage. Even worse, potential sponsors or teams may be hesitant to sponsor or employ a player and/or their team due to past PED use. Statements referring to taking Adderall as how you “get good” are not only irresponsible for encouraging activities that may cost players and their teams contracts, but also because they effectively encourage criminal behavior.
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