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The Unknown
2 years ago

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vii E-sports

As their name implies, e-sports are competitive games played with the aid of computers, video game consoles or other electronic means. In robust markets such as South Korea, e-sports are played by well-compensated professional teams with corporate sponsors, and tournaments attract thousands of spectators. E-sports have gained traction more slowly in the United States, although they appear poised to enter mainstream consciousness. Streaming platform Twitch.tv, where players livestream their game play, ranks number four in peak internet traffic in the US (behind Apple, Google and Netflix, and ahead of Facebook).96 Las Vegas has played host to a number of e-sports tournaments in recent years. Indeed, in March 2017, a dedicated e-sports arena opened at the Neonopolis complex in downtown Las Vegas.97

But with recent prize pools reaching as high as US$20 million,98 and the staggering revenue earned from ancillary products such as advertising and streaming subscriptions (Amazon acquired Twitch in 2014 for nearly US$1 billion), e-sports may soon be on the radar of state and federal regulators. At least one recent lawsuit reveals that it is already in the crosshairs of plaintiffs' attorneys and concerned parents.99 Whether e-sports promoters, players, fans and video game makers will learn from the daily fantasy sports experience is an open question.

One issue that has already arisen is 'skin gambling'. 'Skins' do not affect game play but are collectible in-game items that affect the look and feel of the game, and can be bought, sold and traded. This transferability makes them ripe for use as virtual currency to facilitate gambling, both on e-sports tournaments and more traditional forms of online gambling such as casino games. In 2016, game developer Valve, which owns popular game Counter Strike: Global Offensive and operates the online trading platform Steam, was the subject of two civil lawsuits alleging that it facilitated an unlawful gambling market.100 Soon after, the Washington State Gambling Commission also demanded that Valve take steps to prevent skin gambling through the Steam platform or face civil or criminal repercussions.101 Valve prevailed in the civil suit102and has thus far resisted Washington regulators' demands to disable features of Steam that would prevent skins from being traded on third-party sites.103

Beyond the skin gambling issue, e-sports are susceptible to other potential hurdles, including cheating. Because the stakes involved in winning e-sports continue to rise, the consequence of cheating has grown, as have the incentives to make the attempt. The nature of most e-sports games also can make cheating more difficult to detect. Riot Games recently achieved some success in pursuing organised cheating, extracting US$10 million from a software developer whose product purportedly enabled cheating in League of Legends.104

Separately, unlike fantasy sports, where the underlying athletic competitions themselves are widely accepted as skill-based, the skill-chance ratio in the video games underlying e-sports – games like League of Legends and StarCraft – is not as well-understood or established. That creates complications for those hoping to replicate the DFS model in which observers are able to win prizes of real value based on the performance of e-sports participants and can even have ramifications for contests that limit prizes to the participants.

Because much of the revenue in e-sports comes from non-controversial streams such as advertising, sponsorships and streaming subscriptions, the e-sports industry may be able to avoid the interstices of gambling law in which DFS has been caught up, but the experience of Valve shows that it is worth monitoring developments in this space in the months and years ahead. Source: https://www.lexology.com/library/detail.aspx?g=1a7cb012-f9c6-4d5c-8438-e3e6d0cbd8c6



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