On May 22, 2015, Riot Games, Inc., creator of League of Legends, announced changes to the League of Legends Championship Series rules. One of the notable changes is the addition of Rule 11.3, the “Best Interests of the LCS” rule. This rule states:
"LCS officials at all times may act with the necessary authority to preserve the best interests of the LCS. This power is not constrained by the lack of any specific language in [these rules]. LCS officials may use any form of punitive actions at their disposal against any entity whose conduct is not within the confines of the best interests of the LCS." (Emphasis added)
These rules are known as “bests interests of the game” clauses, and some derivation of this clause exists in most, if not all, professional sports. This clause is an important addition for Riot, as it grants Riot the authority to act in response to matters which are not explicitly covered by the rules. It also brings Riot’s rules a bit closer to those which exist for professional sports.
Professional sports leagues have used these clauses to punish activity of both players and teams that do not neatly fit into the predefined rules and provisions established through the collective bargaining process. A recent example of such a clause being invoked was Alex Rodriguez’s suspension from Major League Baseball for 211 games (which was later reduced to 162 games) for his use of performance enhancing drugs and attempting to obstruct and frustrate Major League Baseball’s (“MLB”) investigation into his conduct. MLB specifically noted that Rodriguez’s punishment was based upon his violation of the prohibition against using banned substances and the “best interests of the game” clause.
On one hand, the vague nature of a “best interest of the game” clause is necessary because it is impossible to foresee all potentially harmful events and subsequently create a rule barring such activity. However, the broad language of the clause creates the opportunity for abuse, to which there is little recourse, unlike in professional sports. In professional sports, a decision to punish a player by the sport’s commissioner can be challenged in arbitration because the commissioner’s authority is granted by the collective bargaining agreement between the league and the players’ union. However, as the LCS Rules are not collectively bargained, Riot has the ability to create and enforce rules as it sees fit, with legal impunity.
What is even more troubling is the fact that Riot explicitly denies appeals for its discipline. Rule 11.1 explicitly states “All decisions regarding the interpretation of the rules…and penalties for misconduct, lie solely with the LCS, the decisions of which are final” and “LCS decisions with respect to these Rules cannot be appealed.” Effectively, the new “best interests of the LCS” rule authorizes Riot a broad disciplinary power to which there is no recourse at law or even an appeal.
At the very least, an appeals process should be implemented to curb some of Riot’s unyielding disciplinary power and grant a modicum of rights to the players. However, as the LCS is not collectively bargained, such a decision would have to come from Riot themselves, which would be unlikely. Given the finality of Riot’s disciplinary system, it will be interesting to see how Riot utilizes this rule in the future.
(This article also appeared on Gods of Mayhem)
At the beginning of any relationship between an esports player and their team, a contract should be entered into that describes the services the player is to perform, compensation, and the duration of the agreement, amongst other clauses. Depending upon how this contract is drafted, a player will either be considered an employee of the team or an independent contractor. This distinction is critical in establishing the obligations that a team has to a player and the rights that the player holds. In the esports business, the trend has been to attempt to classify players as independent contractors.
Esports teams, like many other businesses, would prefer to employ independent contractors instead of employees for several reasons, including:
How Courts Determine Independent Contractor Status
However, what esports teams may be unaware of is that calling players independent contractors is not enough to actually be considered such. In fact, many of these contracts, if challenged in Court, would be found to create an employee/employer relationship. Due to the overwhelming benefits to a business using independent contractors, Courts have scrutinized independent contractor agreements by utilizing tests to determine whether such a relationship is sufficiently established, or if the agreement instead creates an employee/employer relationship. New York Courts utilize two tests, the first being the Economic Realities Test, which is as follows:
The second test is the Common Law Test, which is as follows:
In both of these tests, the totality of the answers of the above questions will be examined to determine how to classify the parties' working relationship. It is worth noting that these factors are not exhaustive, and the Court may undertake additional inquiry. An example of an additional factor in the esports context would be whether the player is required to wear a uniform.
Analyzing Player Contracts: Economic Realities Test
Teams typically exert a great amount of control over their players in a variety of ways. This could include booking player travel, requiring players to use equipment provided by team sponsors, requiring players to promote team sponsors, requiring players to be active on social media/Youtube/streaming services, requiring players to live in a team house, and more. This factor is extremely important, as independent contractors are supposed to maintain a great deal of control over their work and environment.
Secondly, players are very invested in the team. Their actions and cooperation with other players are how the players (and team) can profit by winning matches and tournaments. This factor may also weigh against esports players being found to be independent contractors by a Court. However, the third factor supports the notion that players can be independent contractors, as the work requires highly skilled individuals who may work at their own initiative (in some circumstances).
The fourth factor is completely determined by the contract itself. Generally speaking, the longer or more permanent a contract seems, the more likely it is that they are not an independent contractor.
The fifth and final factor strongly holds in favor of finding an employee/employer relationship, as the players are a crucial component of the team's business. From the totality of the factors within the Economic Realities Test, it appears likely that a professional team would be found to create an employer/employee relationship with its players.
Analyzing Player Contracts: The Common Law Test
The Common Law Test is unclear in this scenario. An argument could be made that the first factor, whether the worker works at his/her convenience, could go either way in Court. Certainly there are things the player must do at certain times (matches, tournaments, etc.) but they may not be on a strict timetable for content creation. This factor would be determinate upon each individual team's practices.
The second factor, whether the worker is free to engage in other employment, slightly holds in favor of an employee/employer relationship. Players can be free to partake in tournaments without their team should the team not participate, but players cannot play for multiple teams in the same events. By default, in those situations a player cannot work for multiple teams.
Fringe benefits is an interesting factor in this analysis, as it can arguably be in favor of or against a finding of an employee relationship, depending upon the specific team's actions. Independent contractors technically should receive no fringe benefits (meals, company car, benefits, etc.). However, if a team allows a player to keep items that were provided by third parties, namely sponsors, or allows the player to live in team subsidized housing, then the player can be said to have received fringe benefits. In those examples, this factor would lean towards the finding of an employee/employer relationship. However, any benefits are team specific.
The fourth factor, whether the player was on the team's payroll is also team dependent, as some teams pay salaries and some do not. Generally, a salaried worker is much more likely to be found to be an employee and not an independent contractor.
The last factor in this test, whether the worker was on a fixed schedule, is very similar to the first factor. As stated in analyzing the applicability of the first factor to the esports team/player relationship, this factor can go either way.
Importantly, the Court can examine additional factors to each test. A factor that has been employed by New York Courts was whether the worker is required to wear a uniform. In the esports context, a uniform can be said to be a team's jersey. This factor could realistically go either way in determining whether an employee/employer relationship exists. Although players are largely required to wear team jerseys at events, many, if not most, are not required to do so when creating content.
Effectively, players who are classified by a team as being independent contractors may not be held to be independent contractors by the Court, if their contract is challenged. Should the Court find that an employee/employer relationship exists, then a team loses all benefits of hiring the player at independent contractor status and is then subject to the totality of laws involving employee/employer relations. Therefore, the team would incur increased costs and liability. Although each State's law will differ as to how these contracts are analyzed, it appears that there are strong arguments to be made under New York law that esports players are actually employees of their teams and entitled to benefits as such.
What is one thing that all eSports players, teams, and organizations have in common? Their need for sponsorships. But once a sponsor is interested in a sponsorship opportunity, which may be difficult to achieve, a sponsorship agreement must be carefully drafted that identifies the terms of the sponsorship. This can be tricky if you have never drafted and negotiated such an agreement before. Below are 10 important elements to every eSports sponsorship agreement. This list is not meant to be all inclusive, but is an introduction to the bulk of the provisions which should be included in a sponsorship agreement.
1. Identify the parties
For clarity, identify the parties right away in the contract. That includes both the Sponsor and Sponsee (the organization/team being sponsored) and their respective addresses.
2. Length of Agreement
How long is the sponsorship agreement to last for? If the sponsorship is for an event, you want to make sure that the term of the agreement lasts through the expected duration of the event, and perhaps also leaving some additional days for timely rescheduling.
3. Identify what is being sponsored
Is this an event sponsorship? A team sponsorship? Whatever the case may be, you want to specify what is being sponsored. If you’re a team, then briefly discuss the team, what you play, and maybe even some recent accomplishments to remind the Sponsor why they want to align with your brand. If you are putting on an event, then discuss the details of the event (i.e. if it’s a tournament, how it’s structured), and how it is broadcasted (if at all).
4. Sponsor Responsibilities
This is where sponsorship agreements begin to get tricky. In this portion, you want to clearly define what the Sponsor’s responsibilities are. If the Sponsor is providing money, as many do, then specify how much, and the dates by which payment must be made.
If the Sponsor is providing products, defining the Sponsor’s responsibilities can be difficult. The Team would want this clause to be as broad as possible, allowing it greater access to products (in terms of amount or frequency). However, the Sponsor would want this clause to be narrow and tightly defined in order to limit its obligations to the team. Like with the cash sponsorships, time frames should be established when the products are to be provided. If the sponsorship is for a period of time where it would be expected that multiple rounds of products would be provided to the team, then it should also be defined how additional product requests will be made and handled. This contentious point must be negotiated thoroughly.
5. Team/Organization Responsibilities
Conversely, the Sponsee’s responsibilities must be defined. Effectively, this section describes what the team or organization will be offering the Sponsor in exchange for the sponsorship. It can also be used to retain some exclusive rights (i.e. control over certain aspects of a tournament). The team or organization would want this provision to be drafted as narrowly as possible, to limit their exposure and obligations to the Sponsor, while Sponsors could seek to broaden this provision.
This provision is especially important, as it defines the exclusivity, or lack thereof, of a Sponsor. Teams and organizations obviously want to have more than one sponsor, so exclusivity provisions must be carefully drafted. Sponsees should seek to categorize the sponsorship narrowly, that way it can offer exclusive sponsorships in many categories. However, sponsors may seek to broaden any category they feel is too narrow. For example, a team would want to categorize a prospective soda sponsorship as an exclusive soft drink sponsorship, specifically excluding energy drinks (as there are some soda alternatives to energy drinks). This would allow the team to offer exclusive sponsorships for soft drinks and energy drinks, respectively, thus potentially increasing its sponsorship dollars.
7. Sponsor’s promotional entitlement
This section describes what promotions the Sponsor is entitled to in exchange for their sponsorship. This section can be drafted broadly or narrowly, depending upon the specifics the Sponsor requires. Some examples of narrow provisions are specifying the size of the Sponsor’s name and logo that will be used on a stream, how often the stream’s casters mention the Sponsor, and the specifics of website promotion (banner size, placement, etc.). An example of a broad provision would be limited social media promotion at the discretion of the Sponsee.
8. Intellectual Property
Promotion of the Sponsor necessarily entails that intellectual property will be used, including the Sponsor’s name, and possibly logos. It is necessary to include a provision stating that the Sponsee can use such intellectual property to further the goals of the sponsorship agreement. Also worth including is a provision allowing for the limited use of the Sponsor’s intellectual property in the future, as it pertains to recordings or repackagings of the event or team during the sponsorship term. This gives Sponsees the flexibility to use old content without having to blur any names or logos.
9. Cancellation provisions
These provisions are extremely important, as they define when the Sponsor and Sponsee may cancel the agreement. Such provisions are very context dependent, and as a result, vary from contract to contract. One such example would be the cancellation of a sponsorship if a certain number of teams withdraw from the event being organized by a Sponsee.
10. Miscellaneous provisions
Several miscellaneous provisions should be added to the end of the contract, including, but not limited to, choice of law, arbitration, indeminity, waivers of liability, warranties, notice, and severability.
Drafting sponsorship agreements is no easy task, but the above should serve as a basic intro guide to drafting the meat of the agreement. It is important to remember that the strength of any contractual relationship is equal to the strength of the contract itself. If you need any assistance drafting or negotiating sponsorship agreements, contact me at Roger@RRQlaw.com or (917) 477-7942.
Several weeks ago, Aware Gaming sold its spot in MLG's Pro League Season 2 to TCM Gaming. Effectively, this left half of Aware's roster without organizations to compete with in Season 2. Unfortunately, judging by the tweets of players like TJHaly and Huke, Aware's players may not have known about the sale of the pro league spot until it happened.
Aware selling its spot in Season 2 highlights the fact that players need to have protective measures built into their contracts. Nothing can ensure that a team won’t sell their league spot, but measures can be taken to protect players (at the contract negotiation stage) should these events ever occur. Obviously different players will have different leverage to seek any protections, and teams may be resistant to offering any protections, but protective measures are worth exploring.
Building protections into contracts
Aware has every right to sell its league spot. However, players have every right to request provisions in their contract that they be compensated should such an event occur, especially within defined windows of time prior to the season. For instance, if the team sells the league spot within X days/weeks of the start of the season, then a defined amount of money must be paid to the player. As most teams aren't flush with cash, this would act as a disincentive for teams to sell their season spots. However, teams could push back against this (especially the less established teams) so that they would have the freedom to do as they please with their season spot. Realistically, a team that is 100% secure about participating in the season has no reason not to include such a provision if requested, since they know the triggering event (the sale of the spot) is not going to occur. Its important to note that such a provision does not necessarily have to require money, but can instead require specific goods.
One of the simplest but significant provisions which should DEFINITELY be negotiated are escape clauses. (I talked about escape clauses here).Those clauses allow the player to cancel the remainder of the contract should defined situations arise. For instance, such a clause can allow a player to cancel his contract with a team should the team sell their league spot. Other triggering events can include nonpayment, benching for a portion of time, etc. Using the example of such a clause that is triggered by the sale of a league spot, teams may be resistant to implementing such a clause in a player’s contract. The team’s goal would be to retain the players so that they can still have something to draw viewership, despite not competing in the league. However, the player, who obviously would want to join a new team, may have a stronger position here. Not wanting to agree to such a provision conditioned upon selling a league spot shows uncertainty, which can lead to a great deal of bad PR for the team. The last thing the team wants is bad PR because it hurts its viewership and could keep talented players from joining. Importantly, escape clauses are time sensitive. Once a triggering event occurs, the player would have a defined window by which to exercise the clause and cancel the contract. If that window is missed, the player can’t cancel the contract without breaching it.
These are only two brief examples of how players can protect themselves in their team contracts. Players should always seek to incorporate protections into all of their contracts, especially their team contracts. It is not the team’s responsibility to protect a player’s rights, and even if a union were to exist, it is the responsibility of the player to seek rights beyond what a union can guarantee. Like pro athletes, players should protect themselves through their contracts, even if that means bringing in someone else to help them do so.
TL/DR- Players should seek protections in their team contracts. Here are two examples.
Too frequently do eSports players find themselves in situations where they feel trapped in a contract with their team. Fortunately, there are ways to negotiate terms to a player contract that would allow the player, or team, to exit the contract with no further obligation during the initial contract negotiation. These specific provisions are called escape clauses.
This post will focus on how players can utilize escape clauses to their advantage, should they successfully negotiate such terms, through the lens of a very recent example involving a League of Legends player who went by the tag name of Kori.
The relevant facts
Kori was a player for Supa Hot Crew ("SHC"), a European-based League of Legends team, and was owed several months of pay from the organization. Meet Your Makers ("MYM"), another European-based League of Legends team, purchased SHC's roster at the end of 2014, which included Kori's contract. Given that AK3 GmbH and their CEO Sascha Ackerman, who owned SHC, were also involved in the business management of MYM, Kori was concerned about similar non-payment issues with MYM.
Upon informing MYM's business manager that he wanted to leave the team, the manager made several threats, effectively holding Kori to his contract. Kori then fled the team (and Europe) to play for Roar, a North American team in a different league. Upon Kori's departure, MYM contacted Riot Games (the game developer and effective league office) asserting that Kori breached his contract. Riot responded by disallowing Kori to play for any other team worldwide while still under contract. Subsequently, Kori returned to MYM. Riot then performed an investigation into the allegations of Kori and MYM, issuing punishments to both parties.
How escape clauses could have allowed Kori to leave
Escape clauses allow either party to cancel a contract if certain conditions are met. The beautiful thing about escape clauses is that they can be drafted around almost any desired set of circumstances. The tricky part, obviously, is to get both parties to agree to the clauses' inclusion in the contract, and the specific triggering circumstances. I haven’t seen Kori’s contract, but here are a few different kinds of escape clauses that would have allowed Kori to cancel his contract if they were hypothetically included.
One example of an escape clause would allow a player to cancel his contract under a change in management. Under such circumstances, Kori would’ve been able to cancel, or effectively opt-out of, his contract when SHC’s roster was purchased by MYM. An example of a similar clause in action can be found in the professional sports world. Earlier this Baseball offseason, Joe Maddon, the then manager for the Tampa Bay Rays, canceled his contract when the General Manager left the team for the Los Angeles Dodgers. Maddon’s contract had an escape clause which allowed him to cancel his remaining duties under his contract should the General Manager change. Within days of exercising his escape clause, Joe Maddon was signed as the manager for the Chicago Cubs.
The “change in management” language can be so general as to include a change in the management structure/personnel of the signing team, or can be as specific as to limit the player’s opt-out rights to a change in team/organization. Of course, a team may be more agreeable to an escape clause that is limited to a change in team/organization, as the signing team will no longer be paying and playing the player anyway.
However, if a purchasing team is made aware of a player having such a clause, it may devalue the purchase price of the roster due to the uncertainty of that player remaining with the team. If a player or their agent wanted to get really creative with such an escape clause, they could add exclusive renegotiation windows with the purchasing team to negotiate a contract extension in lieu of the player opting out. Doing so may make that player’s contract a bit more valuable in a purchase as it can add stability.
Importantly, this kind of escape clause is time sensitive. Each clause will specify a window by which the clause must be utilized, or else the right lapses. That means if the circumstances arise which would trigger the escape clause, the player would only have X days to affirmatively choose to cancel the contract. If that time period expires without the contract’s cancellation, the player cannot then try to cancel his/her contract without being in breach.
Another kind of escape clause is one that will allow a player to cancel their contract upon nonpayment. Following a missed payment date, these clauses allow for a period of time (generally a few weeks) by which to make the payment. If the payment is not made in that window, the clause would allow for the Player to cancel their contract. If Kori would have had such a clause in his contract (assuming there were no other barriers to payment), following his first date of nonpayment, he would have entered into the timeframe where he could cancel the contract. Should that timeframe have passed, he would not have the right to cancel the contract until the next date of nonpayment.
This kind of escape clause is frequently found in ongoing service contracts, which a player contract technically is. Negotiating this kind of escape clause can also be particularly telling of how secure a team is financially. Significant push back from a team on this provision could indicate unstable financials, because why would a team worry about a player leaving for nonpayment if timely payments are not an issue. It is important to note that some jurisdictions may consider nonpayment a material breach of contract, thus cancelling the remainder of the contract. However, even in those jurisdictions, an escape clause tied to nonpayment can be effective because it clearly spells out (for both parties) that nonpayment is a viable reason to cancel the contract and neither party would need a lawyer to tell them of their contractual rights.
These are just some examples of escape clauses as they hypothetically would have applied to Kori’s contract dispute. The tricky part with escape clauses, or any clause a player desires, is negotiating their acceptance by the team. That’s where leverage comes into play. Different players of different abilities and “star power” will have differing amounts of leverage to utilize in negotiations with a team, and will thus be able to command differing levels of contractual protection.
I hope this sheds some light on a way that player contracts can be utilized to define and protect players’ rights in the absence of a union.
TL;DR- Escape clauses in player contracts can offer some protection to players
Earlier this year, I launched 1337 Sports Management, a sports agency dedicated to servicing professional gamers in the eSports industry. Building off of my my Sports Law practice here, starting my own agency has always been a desire and the logical next step in my career. As many sports agents do, I will maintain my law practice and my agency simultaneously, and I expect my law practice and agency to benefit from one another.
Many of the legal issues faced by businesses and athletes are also prevalent in the eSports industry. However, eSports has long needed the professional assistance of lawyers and agents to fully harness their revenue potential. Individual players and team businesses have long been denied the compensation and legal rights they are entitled to/deserve. With my law practice and sports agency, my goal is to help rectify some of these longstanding issues in the eSports industry.
I'm excited for the future of my law practice and sports agency. I hope you enjoy the ride with me!
Recently, strong allegations have surfaced that esports is suffering from a performance enhancing drug ("PED") use problem. These PEDs are not the steroids and human growth hormones of other sports, but are instead neuroenhancers.
These kinds of drugs (Adderall, Ritalin, Selegiline, etc.) are known as "smart drugs" due to their abilities to enhance focus, calmness, and act as stimulants, which debatably enhance performance in professional gaming. Although there appears to be much confusion as to whether such neuroenhancers are banned from professional gaming (a quick Google search reveals many questions on the topic and few actual answers), if it is banned, there appears to be little enforcement as noted in the link above.
Irrespective of neuroenhancers' status as potentially banned substances in professional gaming, utilizing such substances can have an impact upon a player's/team's existing sponsorship agreements.
As I noted previously, sponsorship agreements generally contain morals clauses. A morals clause allows a sponsor the opportunity to cancel a sponsorship should the athlete or team act in a way that is harmful or damaging to the sponsoring brand. In other words, morals clauses allow sponsors a means of exiting a sponsorship agreement with an athlete engaged in a scandal or otherwise illegal activity.
The use of neuroenhancers in pro-gaming, regardless of whether the substance is banned, can trigger a sponsorship's morals clause in several ways:
Any of the above reasons, which certainly is not an exhaustive list, could also be the cause of a scandal within the sport. Although scandals could be sufficient to independently trigger a morals clause, when combined with any of the above points, a scandal makes it much more likely.
Similarly, a team sponsorship may be impacted by a team member's use of neuroenhancers. Depending on how the morals clause is written, a single team member's actions may be sufficient to trigger the morals clause and permit the sponsor to cancel the sponsorship agreement.
As the esports industry determines methods for curbing its PED problem, teams should keep in mind that any PED use can impact the sponsorships that they have worked hard to obtain. No team would want to lose its sponsor because a morals clause was triggered in an effort to perhaps gain a competitive advantage. Even worse, future sponsors may be hesitant to sponsor a player and/or their team due to past PED use.
Last week, I discussed why professional gaming teams should become businesses in order to secure sponsorships. With the staggering growth of eSports, online viewing of eSports competitions totaling 2.2 billion hours, and a dedicated gaming arena opening in Ohio, professional gaming is quickly becoming its own segment of the sports and entertainment industry. Although professional eSports teams may lack a traditional front office, there is room for a business adviser who secures sponsorships and other business opportunities for teams.
This business adviser would serve in a similar capacity to a sports agent for the team. Traditionally, sports agents represent individual professional athletes in negotiating their on-field contracts and securing endorsement agreements. However, as professional gaming is a tournament based league without individualized salaries, salary negotiation services and individual representation would be irrelevant.
Instead, a professional gaming sports agent would focus on sponsorships and other business opportunities for the team. An effective agent could leverage a team's substantial online presence (Twitter followers, YouTube subscribers, Twitch followers, etc.) to sponsors in return for sponsorships to provide products and financial support for the team. Such a tactic is not new for agents, as they have leveraged online followings for professional athletes and then-amateur athletes (see here) into sponsorships. Utilizing an agent would be in the best interest of eSports teams, as it leaves the players to focus on their sport while the agent secures much needed sponsorships to help get the team to additional tournaments.
The question then arises as to how agents would be paid. Normally, sports agents take a percentage of their players' salaries that they negotiated (generally 3-5%) and a higher percentage of any endorsements they secure (15-20%). However, that preexisting model does not fit professional gaming because players, or even teams, are not paid a salary. Additionally, many professional gaming sponsorships supply products, and not cash, which would be impossible to take a percentage of. Instead, agents would likely seek a percentage of tournament winnings in exchange for their services, as well as a percentage of any sponsorship money secured for the team.
Due to an agent's necessary reliance on tournament winnings and substantial online followings to be paid, teams that have yet to make a name for themselves in professional gaming may find it difficult to find an agent to represent them. It is important to remember, in both professional sports and e-sports, that agents do not establish a brand, but leverage an existing brand and shape it. An agent needs a foundation to leverage, and only the team itself can create that foundation.
Given the increase in popularity of eSports, and the money that is starting to flow through the industry, there is rising potential for a budding agent role for teams.
In the past few years, e-sports (playing video games competitively for profit) has seen staggering growth in the United States. This growth has largely been fueled by the development of a professional tournament association, the inclusion of e-sports in the X Games competitions, and at its core, technology which allows players to connect and compete in ways never previously possible.
Viewership of the e-sports tournaments is also extremely high. Last year, online viewers watched a total of 2.4 billion hours of competition footage. Live events have also sold well, prompting Major League Gaming (the preeminent e-sports tournament body) to establish an arena in Columbus, Ohio. As with the rapid rise of any industry segment, e-sports tournaments have received sponsorships from well-known brands such Coca Cola and American Express. Although the tournaments and their governing bodies have received substantial sponsorship income, teams have not had the same financial success.
Many teams are able to secure small sponsorships which supply products such as controllers and apparel. However, there is a lack of sponsorship dollars supplied to the teams, which may be what is needed most as the expenses of professional gaming can be high. One of the reasons that teams have difficulty securing sponsorships is due to their business organization, or rather the lack thereof.
For e-sports to develop into a true professional league, and for teams to see the sponsorship dollars they desire, teams will have to learn from the businesses of their MLB, NFL and NBA counterparts. Firstly, professional sports teams are business entities, not just a group of people who are acting together. This is extremely important because State law differs as to whether unincorporated associations can enter into contracts, and as to the rights of these associations as a whole. Further, choosing a business entity for the team simplifies the sponsorship process for the brand as it eliminates any question regarding whether the contract is enforceable.
The choice of what business entity to select is a trickier subject, and would have to be determined on a team by team basis. At this early stage of professional gaming, there is no "one size fits all" approach. Professional sports teams have Owners and front offices that handle the business end of the team while the players play. However, that wouldn't be the case at this stage of e-sports. Simply put, the players will also have to handle their team's business. That can become problematic in several situations, especially when team members are minors. Minors' business activities are restricted by State and Federal law, but State law may allow for some creative business-formation possibilities if there are team members over 18 who can start the business. For instance, some states allow minors to be shareholders in a business. Any team considering turning their team into a business should consult an attorney before doing so.
There are a myriad of reasons teams don't receive the sponsorships they desire, including the lack of a formalized business structure. If your team wants to be treated as a legitimate business, make sure your team is actually a business first.
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