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Three key legal issues currently facing the Esports industry: A

perspective from Asia
Published 16 May 2018 By: Richard Wee

LawInSport has published a range of articles to try to help demystify the esports ecosystem and unpick the core legal issues.1

Continuing in this theme, this piece discusses what the authors, with their Malaysian perspective, believe are three of the most
important legal issues that the Esports industry currently has to grapple with, namely:

Greater clarity on contractual obligations

“E-doping”, and

Intellectual property and broadcasting rights

Greater clarity on contractual obligations

Contracts in esports are used in a very similar manner to mainstream sports. There are contracts between tournament organisers and
participants during events. Teams enter contracts to protect their investments, and players sign contracts to protect their rights.

The first demographic requiring greater clarity on contractual obligations are the esports players. Esports athletes are often young,
especially those first entering the scene, often at the age of 15 or 16. The danger is that their relative inexperience combined with the
excitement of finally having a shot at being a professional athlete clouds their understanding of the true implications of any contract that
they sign.

An example of this is the recent case of Counter-Strike: Global Offensive (“CS:GO”) professional player, Owen “smooya” Butterfield,
who detailed his contractual problems on his Twitter account in November 2017.2 Butterfield explained that he was benched only
months after joining esports team Epsilon. This resulted in his salary being reduced from $2,000 per month to only $700. To add salt to
the wound, he lost access to social benefits despite his mother being disabled because he was technically still earning a salary. This
decision to bench Butterfield effectively ended his career as he will unlikely play any tournaments throughout the duration of his contract
which will affect his reputation as well as his value.3 Butterfield also revealed that although his contract was only worth $36,000, the
buyout clause was basically 3 times more.4 5 He commented that although he understood that he was bound by the contract, it was
signed when he was 17 years of age aiming to be a professional player.6 7 This example is not alone, and demonstrates that there is a
need for greater awareness among players of the consequences of signing a contract. In the authors’ view, there needs to be more
protection and advice given to players, and this should be a cornerstone for the industry as it moves towards greater professionalism.

The second area relates to the obligations between tournament organisers and players and/or teams. There have been occasions in
which organisers have not had written contracts with the participating teams (or the staff that works at the event), and have allegedly
made promises that they have failed to deliver on. An example of this was the Red Bull Coliseum Season 28 held in Malaysia, in which
it was reported that there were issues over costs for players’ flights and accommodation as well as low-grade laptops used. There have
also been instances in which tournament organisers fail to pay out the prize money, especially in Asia. For example, the ASEAN Games
for Esports (AGES) held in Malaysia in 2016, in which it was reported that despite more than a year after the tournament, the winners
still had not received their winnings.9 The absence of contracts makes it difficult for players to prove and claim what may be rightfully
owing to them; and there is also an imbalance of power, with young players often unable to afford legal representation to enforce their
rights. While some game publishers exert some form of governance over third party tournament organisations, the current problems
remain largely unresolved.

The problems above are often exacerbated by the international nature of esports. It is not uncommon for a German organisation to sign
a team comprising of Malaysians, Koreans and Lebanese, for the team is based in North America and competing in a tournaments
organised by an organisation based in Peru. If there is a dispute in such a scenario, questions arise over jurisdiction, applicable law,
where to bring a claim, and whether it is even economically viable to do so (given the time and money costs). This makes it all the more
important for contracts to clearly define the applicable law(s) and jurisdiction.

Realising that contractual issues are a problem between players and organisations as well as with tournament organisers, some game
publishers have made efforts to better regulate the issue. One such company is Blizzard – publisher of the game, Overwatch. Blizzard
has initiated an Overwatch League (OWL) with the view of implementing sports league systems, such as in football, into esports. The
OWL is a season long affair where teams play both home and away games. There is a transfer window in which players can be signed
or dropped. In terms of contracts, the OWL has set the minimum standard of terms for player contracts.10 In fact, it was reported that for
a player to be part of the OWL, the League office must both receive and approve a contract for a given player.11 The hope is that this
will ensure better player protection as well as assist to smooth out contractual issues and disputes should they arise. It also provides
greater transparency should OWL be required to take disciplinary actions or issue sanctions.12

Edoping
Esports events boast millions of dollars in prize money. Competition between players is fierce, and marginal gains can make the
difference between winning and losing. It is an environment ripe for cheating. One such method employment by esports players is
“edoping”, which is essentially the manipulation of software or hardware to give a player an advantage over the opponent.

The industry has seen a wide variety of edoping methods. Game software has been modified, and settings of the keyboard or mouse
have been altered to perform a series of actions with a single click. There are also those that do not require any form of modification, for
example "stream sniping" where the player watches the live broadcast of the match in which he/she is currently playing to get an insight
into their opponent. There have even been Distributed Denial of Service (DDoS) attacks in which a network is so overwhelmed that it is
forced to slow down or shut down (which can also be a criminal offence in countries like Australia and the United States13).

Just like in traditional sports, integrity and fair play stand are foundational elements without which everything crumbles. Game
publishers and tournament organisations have implemented various ways to detect and prevent edoping as well as to punish those who
employ such means. However, with technology constantly advancing, it’s a never-ending battle.

The other major issue in edoping is enforcement of sanctions across different events and tournaments. One scenario is where players
banned from competing for edoping in one tournament are still participating in other tournaments. For example, in 2014, Arrow Gaming
players were handed lifetime bans by Valve, publisher and developer of the popular game, Dota 2, for match-fixing.14 However, some
tournament organisers still allowed the banned players to compete, with some players going on to become tournament champions.15

Another scenario is where a player could be banned by one game publisher but goes on to compete in a different game. For example,
former CS:GO professional player, Kevin “AZK” Lariviere, was handed a lifetime ban by Valve, also the publisher and developer of
CS:GO for match-fixing.16 He then played competitively in a different game, Overwatch.17 AZK later returned to CS:GO after his ban
was partially lifted by tournament organisers ESL18 for their tournaments only. This raises the question of whether a tournament
organiser can lift a ban from a game publisher, which is the de facto governing and regulating authority for the game as it is their
intellectual property.

While the examples given involve players banned for match-fixing instead of edoping, the same principles apply. It is difficult to ensure
consistency in the enforcement of sanctions. One has to remember that in esports, the proprietary rights to the game belong to the
publishers and so, more often than not, they become the regulators of esports for their game. They have the power to fine or ban
players.19 One possible solution to this is for other publishers to recognise sanctions imposed on a player and prevent the player from
participating in their tournaments. This would appear to be the more ethical approach as it otherwise they risk bringing the game into
disrepute and undermining the integrity of the broader esports ecosystem.
For more information on edoping, please see this LawInSport article by Ian Smith: The continued rise of eSport – Efforts to combat
match fixing and improve integrity.

Intellectual property and broadcasting rights

The broadcasting rights model in esports is still somewhat haphazard. Game publishers own the copyright to the game, but often don’t
have a direct relationship with a tournament looking to broadcast its competition. Game publishers seem generally to not have a
problem with this, seeing it as form of marketing that can translate into new users.

One perhaps concerning upshot, however, is that some tournament organisers have managed to get “streamers” on online platforms
banned from the platform for broadcasting their tournament (despite not owning the intellectual property to the game and even when
their own broadcast was free to viewi). One recent occurrence of this was the ESL One Genting 2018 Dota 2 tournament in Malaysia, in
which the tournament organisers issued DMCA Takedown Notices (pursuant to America’s Digital Millennium Copyright Act 1998) to a
number of streamers on the Twitch platform, resulting in their channels being banned by Twitch.20 The game publishers eventually
clarified that no other party except the publishers themselves should be issuing DMCA Takedown Notices.21 While this cements the fact
that the intellectual property rights belong to the game publishers, it does not resolve the issue of protecting the rights of the tournament
organisers and their sponsors.

To understand the issues from the perspective of the tournament organisers, we first need some background. First, no tournament can
run without sponsors. For esports, in which broadcasting is predominantly online, tournament organisers will usually have obligations to
protect their broadcasters and sponsors. Whether it is exclusive broadcasting rights or the brand having screen time, the tournament
organisers need to ensure they fulfil their end of the bargain. When other streamers broadcast the tournaments, especially if they are
social influencers and well-known in the community, their streams will take away viewers from the official broadcast. This raises
questions relating to rights, such as: can a tournament organiser sell broadcast rights to their tournament when they do not own the
intellectual property in game?22 How do tournament organisers protect their interests and that of their sponsors? What about the rights
of those who get donations and subscription fees from broadcasting the tournament through the free in-game feature?23

Intellectual property is a major subject that the esports industry is currently trying to grapple with. The underlying issue is that third
parties are ostensibly making money from rights that they do not own (i.e. the game). There are a multitude of rights and interests of
various parties to balance when it comes to intellectual property. The difficulty is in protecting these rights but at the same time
catalysing the growth of the industry. ESL One Genting will definitely not be the last in which intellectual property issues come to the
spotlight.

Perhaps a solution to this is for publishers to enter into exclusive broadcasting agreements with tournament organisers thereby granting
exclusive licence to them to broadcast the tournament. However, this might only work for some games. For example, Activision Blizzard
entered into a exclusive two-year broadcasting agreement with Twitch for the latter to serve as the exclusive third-party streaming
partner for the Overwatch League’s regular season, playoffs and championships for English, Korean and French.24 This is made
possible because Overwatch does not have any in-game spectating function that viewers can watch and therefore stream the
tournament matches through the game client. The only way to watch the tournament is through Twitch. Compare this with games like
Dota 2 that have an in-game spectating function. The only way these publishers can enter into exclusive broadcasting agreements with
tournament organisers will be to turn off the in-game spectating functions to these tournaments. However, the feasibility and likelyhood
of that happening is low given it’s intrinsic importance to the gaming concept.

Comments
Although esports is still in its infancy, "esports law" has definitely started to pick up. Awareness of industry’s bespoke legal and
regulatory requirements is growing, and will continue to mature in tandem with the market. Given the many difference to traditional
sports, lawyers in the space will need to familiarise themselves with the industry practices, the digital ecosystem, and the unique and
ever evolving technological aspects of the space.

While it is exciting that esports law is beginning to take shape and establish itself, there is still a myriad of unexplored areas that the
industry will have to tackle in the coming years. From governance issues to advertising and merchandising, we foresee an increase in
awareness, intriguing developments and exciting times ahead.

References
1† See for example: Andrew Nixon, Daniel Geey et al ‘Esports uncovered series’, lawinsport.com, 4 April 2017, last accessed 16 May
2018, https://www.lawinsport.com/topics/sports/esports/item/esports-uncovered-part-1-an-overview-of-the-ecosystem

2† O Butterfield in Twitlonger, published 7 November 2017, viewed 12 February 2018, https://www.twitlonger.com/show/n_1sqad6h.

Also see D Sacco, ‘Smooya Situation Outlines Need for Better Esports Contract Clarity & Advice’ in Esports News UK, published 12
November 2017, viewed 12 February 2018, https://www.esports-news.co.uk/2017/11/12/smooya-contract-situation-epsilon/

3 † L Mira, ‘Smooya Announces Break’ in HLTV.org, published 7 November 2017, viewed 12 February 2018,
https://www.hltv.org/news/21970/smooya-announces-break
4† Ibid

5† For more discussion on the legality of buyout clauses, see L Thomas, ‘The Neymar Transfer: An Analysis of Buy-Out Clauses – Part
1’ in Squire Patton Boggs, published 3 August 2017, viewed 4 May 2018, https://www.sports.legal/2017/08/the-neymar-transfer-an-
analysis-of-buy-out-clauses-part-1/; L Thomas, ‘Young and in demand: The legality of buy-out clauses in Spanish football contracts’ in
LawInSport, published 27 October 2017, viewed 8 May 2018, https://www.lawinsport.com/topics/articles/item/young-and-in-demand-the-
legality-of-buy-out-clauses-in-spanish-football-contracts. In both articles, it was argued that a buyout clause is a form of penalty clause
that was valid under Spanish laws. However, consideration must be given to the governing laws as stipulated in the contract. As an
example in comparison to Spanish laws, in Malaysia, it has been held by the courts that a penalty clause would not be enforced. On the
flip side, it has also been argued that buyout clauses do not sit well with the laws on contract and challenges the very integrity of the
sport itself. See M Giancaspro, ‘Buy-out clauses in professional football player contracts: questions of legality and integrity’ in The
International Sports Law Journal (2016) 16:22, published 19 February 2016, viewed 4 May 2018, https://doi.org/10.1007/s40318-016-
0088-x. While these discussions revolve around buyout clauses in Football, the discussions are still relevant to esports in its own right
as well as the correlation with contract and international laws.

6† Butterfield (n 2).

7† Although the exact circumstances surrounding the execution of the contract was not made known e.g. was the contract signed by
himself or was it a guardian/parent who executed the contract, it must be noted that contracts with minors in sports is not uncommon.
The same principles with regards to the validity and legitimacy of such contracts in sports apply as well to esports. For a discussion on
the legality of sports contracts with minors, see T Barnard, ‘Legal and Regulatory Considerations of Minors in Sports’ in LawInSport,
published 30 March 2015, viewed 4 May 2018, https://www.lawinsport.com/topics/articles/item/legal-and-regulatory-considerations-of-
minors-in-sport. For a commentary and discussion of US laws pertaining to minors contracting in sports, see JH Shannon & RJ Hunter
Jr, ‘Principles of Contract Law Applied to
Entertainment and Sports Contracts: A Model for Balancing the Rights of the Industry with Protecting the Interests of Minors’ in (2015)
48 Loy. L.A. L. Rev. 1171, published January 2015, viewed 8 May 2018, https://digitalcommons.lmu.edu/cgi/viewcontent.cgi?
article=2944&context=llr. Also see R Gopalakrishna, ‘Minors’ Agreements in Sports’ in SLPC Blog: Cases & Materials on the Regulation
of Sports in India, published 20 July 2011, viewed 8 May 2018, https://lawnk.wordpress.com/2011/07/20/minors-agreements-in-sports/
for a topographical view comparing the position of US, UK and Indian laws pertaining to contracting with minors in sports.

8† As reported by esports team Mineski. See CJ Favie III, ‘Fallout Gaming In Hot Water Over Red Bull Coliseum Fiasco’ in Mineski.net,
published 2 November 2017, viewed 12 February 2018, https://www.mineski.net/news/fallout-gaming-in-hot-water-over-red-bull-
coliseum-fiasco

9† C Ramadani, ‘One year later AGES 2016 unpaid; Tournament payment woes litter the Dota 2 landscape’ in GosuGamers.net,
published 6 June 2017, viewed 12 February 2018, https://www.gosugamers.net/dota2/features/44653-one-year-later-ages-2016-unpaid-
tournament-payment-woes-litter-the-dota-2-landscape

10 †Blizzard Entertainment, ‘Player Signing, Salaries, and more in The Overwatch League’ in Overwatch League, published 26 July
2017, viewed 12 February 2018, https://overwatchleague.com/en-us/news/20937016/player-signings-salaries-and-more-in-the-
overwatch-league

11 † N Grayson, ‘Report: Geguri Will Be The First Woman Signed To An Overwatch League Team’ in Compete Kotaku, published 6
February 2018, viewed 12 February 2018, https://compete.kotaku.com/report-geguri-will-be-the-first-woman-signed-to-an-ove-
1822781818

12 †One other example to look at is Riot Games who not only imposes minimum contractual terms but also has announced efforts in
establishing a Players’ Association that will represent the players in tri-party negotiations as well as legal advice. See Riot Games,
‘Evolution of the NA LCS’ in League of Legends Championship Series, published 1 June 2017, viewed 11 April 2018,
https://www.lolesports.com/en_US/articles/evolution-of-the-na-lcs

13 † D Kostadinov, ’Legality of DDoS: Criminal Deed vs. Act of Civil Disobedience’ in Infosec Institute, published 12 December 2013,
viewed 12 February 2018, https://resources.infosecinstitute.com/legality-ddos-criminal-deed-vs-act-civil-disobedience/#gref

14 †J Gavino, ‘DDZ admits involvement in matchfixing, says evidence faked by Arrow’s manager’ in GosuGamers.net, published 20
October 2014, viewed 12 February 2018, https://www.gosugamers.net/dota2/news/28858-ddz-admits-involvement-in-matchfixing-says-
evidence-faked-by-arrow-s-manager

15† C Mohan, ‘High Ground walks away with RM20,000 after Dota 2 triumph at 2018 Malaysia Cyber Games’ in The Malay Mail Online,
published 14 January 2018, viewed 12 February 2018 https://www.themalaymailonline.com/malaysia/article/high-ground-walks-away-
with-rm20000-after-dota2-triumph-at-2018-malaysia-cy#qW3W9KERR9bvJrLT.97

16† A Chalk, ‘Valve bans seven CS:GO players from tournament play for match fixing’ in PCGamer, published 26 January 2015, viewed
12 February 2018, https://www.pcgamer.com/valve-suspends-seven-csgo-pro-players-for-match-fixing/
17 † JP Bago, ‘Banned CSGO Player AKZ Finds New Life in Overwatch’ in Esports Inquirer, published 10 April 2016, viewed 12
February 2018, https://esports.inquirer.net/14669/banned-csgo-player-azk-finds-new-life-in-overwatch

18 † M Kent, ‘ESL Announce Bans Lifted on ex-iBuyPower Match Fixing CS:GO Players’ in Dextero, viewed 12 Februuary 2018,
https://www.dexerto.com/news/esl-announce-bans-lifted-ex-ibuypower-match-fixing-players/33110

19 † For example, see Z Camaron, ‘Pro League of Legends Players That Met the Ban Hammer’ in TwinGalaxies, last modified on 9
February 2018, viewed 23 February 2018, https://www.twingalaxies.com/feed_details.php/188/lol-pros-behaving-badly; A Chaik, ‘Valve
bans seven CS:GO pro players from tournament play for match fixing’ in PCGamer, last modified 26 January 2015, viewed 23 February
2018, https://www.pcgamer.com/valve-suspends-seven-csgo-pro-players-for-match-fixing/

20† Twitch is a free online streaming platform in which anyone can create a channel and stream games. They are however bound by the
terms of use and Twitch, being based in America, has to take down the content pursuant to a DMCA Takedown Notice. For more
information about Twitch’s policy on DMCA Notifications, see ‘Digital Millennium Copyright Act Notification Guidelines’ in Twitch, last
modified on 21 August 2017, viewed 21 February 2018, https://www.twitch.tv/p/legal/dmca-guidelines/

21 † J Alexander, ‘Dota 2 players plan boycott of ESL pro games on Facebook after Twitch bans (update)’ in Polygon, published 25
January 2018, viewed 12 February 2018, https://www.polygon.com/2018/1/25/16932086/dota-2-esl-facebook-twitch-ban

22 †
One example is the agreement between ESL and Facebook for the latter to be the exclusive broadcaster for their esports content.
See ‘ESL to broadcast two of its top global esports competitions exclusively on Facebook: CS:GO & ESL One’ in ESL, published 18
January 2018, viewed 12 February 2018, https://www.eslgaming.com/press/esl-broadcast-two-its-top-global-esports-competitions-
exclusively-facebook-csgo-esl-one

23 † It is not uncommon to find streamers that stream full-time. In other words, the money from donations and subscriptions is their
income. Having their channels banned would result in a loss of their source of income. It must also be noted that more often than not
game publishers allow broadcast through the free in-game feature as it is free advertisement for the game and thereby creating more
interest. The question is then can a streamer be banned and his source of income denied for streaming a tournament when in actual
fact he/she has not run foul of the terms of use by the owner of the intellectual property? For more information about DMCA and how it
affects game publishers, tournament organisers and streamers, see article by B Blum ‘Legal Analysis of the ESL Genting Situation &
DMCA’ in Reddit, published 25 January 2018, viewed 21 February 2018,
https://www.reddit.com/r/DotA2/comments/7sp4wq/legal_analysis_of_the_esl_genting_situation_dmca/

24 † J Wolf, ‘Overwatch League to be streamed on Twitch.tv in two-year, $90 million deal’ in ESPN, published 13 January 2018, viewed
19 April 2018, https://www.espn.com/esports/story/_/id/22015103/overwatch-league-broadcast-twitchtv-two-year-90-million-deal

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Tags: Edoping | ESL | Esports | Malaysia | Overwatch | Twitch

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Author

Richard Wee
Richard is a Partner at Richard Wee Chambers
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