iGB North America magazine IGBNA Aug/Sep | Page 10

Law and Legislation

ESPORTS: THE NEXT
REGULATORY FRONTIER?
With the eSports phenomenon blowing up, Christopher L. Soriano and Eric D.
Frank, Duane Morris LLP, look at the potential regulatory issues raised by sites
now offering fantasy contests and betting on eSports games.
If we told you a sports league was
constructing 10,000+ square foot arenas
in Columbus, Ohio and Orange County,
California, its major sponsors included
brands such as Coca Cola, Dr. Pepper, Nissan
and America Express and that Amazon

Championships, one of the largest eSports
competitions in the world held annually
in Seattle, has a prize pool this year that
is over $17 million, a 55% increase from
the 2014 prize pool, which had increased
over 200% from the year before. Not to

“Inevitably, when people start playing games
against each other for money, the questions get
asked about whether the activity is gambling
and should be regulated (and taxed).”
bought a streaming service surrounding
the sport for approximately $1 billion, you
would think we’re talking about a sport
you’d see daily on SportsCenter and that
every American was talking about. But
we’re not. We’re talking about eSports competitive gaming or organized video game
competitions. These competitions vary from
full scale tournament-style competitions
taking place at large venues to computer,
game console or mobile competitions
between friends.
The eSports industry is blowing up. For
years, China and South Korea have been
the hub of eSports but the phenomenon
is growing exponentially in the US and
Europe. The ongoing International DOTA 2

mention, the 2014 International had over 20
million total viewers, including two million
concurrent viewers for the finals. The
League of Legends World Championships
amassed 32 million viewers with 8.5 million
concurrent Internet viewers. For some
context, the 2014 World Series averaged 13.8
million TV viewers per game.
But what is the future of something like
this from a gaming regulatory perspective?
Inevitably, when people start playing
games against each other for money,
the questions get asked about whether
the activity is gambling and should be
regulated (and taxed). This arises from a
number of perspectives. First, there are
sites that allow people to bet on eSports

10 | iGamingBusiness North America | Issue 20 | August/September 2015

games – in other words, people are betting
on the performance of others in video game
competitions. At this point, it is probably
not seriously debatable that this would be
gambling in violation of state and federal
laws in the US unless done under the
auspices of a regulatory body where sports
betting is permitted. One could see fairly
quickly how this activity in an unregulated
environment could lead to a number of
undesirable consequences such as match
fixing and problem gaming issues. At
this point in time, it does not appear that
any state is moving in the direction of
authorizing wagering on eSports under its
gaming regulatory auspices.
But what about those who are simply
playing against each other? What about
sites popping up offering fantasy eSports
contests? Insofar as much of the comfort
surrounding fantasy sports in the US comes
from the UIGEA exemption, eSports are
starting with a much greater handicap
when compared to your “typical” fantasy
sports site.
Of course, the traditional definition of
gambling in the US revolves around three
required elements: consideration, prize,
and chance. Is “chance” really an element
of video game tournaments such that it
would meet the definition of gambling?
Obviously the skill of the player in a
video game tournament will have a very
significant impact on the result. But might
this be something that “looks” too much