A Short Treatise on Esports and the Law: How America Regulates Its Next National Pastime
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A SHORT TREATISE ON ESPORTS AND THE LAW: HOW AMERICA REGULATES ITS NEXT NATIONAL PASTIME John T. Holden* Marc Edelman** Thomas A. Baker III*** With its tremendous popularity among Millennials and Generation Z, esports represents one of the fastest growing segments of the U.S. sports and entertainment market. It is the source of massive amounts of venture capital inflow, unprecedented marketing and media dollars, and altogether new forms of social networks and fan engagement. Nevertheless, the indus- try of esports is still in its infancy and faces legal challenges that have not yet been fully studied by either legal academics or practitioners. This Arti- cle provides an in-depth analysis of the primary legal issues that face the esports industry as it pursues its path toward becoming America’s next ma- jor national pastime. TABLE OF CONTENTS I. INTRODUCTION ........................................................................................ 511 II. HISTORY OF ESPORTS .............................................................................. 513 A. Before the Video Game .................................................................... 513 B. The Rise of the Arcade ..................................................................... 514 C. The Arcade at Home ........................................................................ 515 D. The Rise of Organized Gaming Competitions ................................. 517 E. The Billionaires Enter the Marketplace .......................................... 519 III. THE ESPORTS INDUSTRY TODAY ............................................................. 521 A. Market Overview ............................................................................. 521 1. Industry Growth ....................................................................... 521 * John T. Holden is an Assistant Professor in the Department of Management at the Spears School of Business at Oklahoma State University. Holden received his Ph.D. from Florida State University and his J.D. from Michigan State University. ** Marc Edelman is a tenured Professor of Law at the Zicklin School of Business, Baruch College, City University of New York. He is also an adjunct professor at Fordham University School of Law. Professor Edel- man may be reached at [email protected]. *** Thomas A. Baker III is a tenured Professor of Sports Law in the Sport Management Program at the University of Georgia. Dr. Baker received his Ph.D. from the University of Florida and his J.D. from Loyola University of New Orleans. 509 510 UNIVERSITY OF ILLINOIS LAW REVIEW [Vol. 2020 2. Esports Investors ...................................................................... 522 B. Types of Games ............................................................................... 524 1. Fighting Games ........................................................................ 524 2. First-Person and Third-Person Shooter Games (Including Battle Royale) ......................................................... 525 3. Real-Time Strategy (“RTS”) Games ........................................ 526 4. Sports Games ........................................................................... 526 5. Multiplayer Online Battle Arena Games .................................. 527 6. Other ........................................................................................ 528 C. The Stakeholders ............................................................................. 528 1. Players ...................................................................................... 528 2. Teams, Sponsors and Investors ................................................ 530 3. Leagues and Game-Makers ...................................................... 531 4. Streamers .................................................................................. 533 IV. LEGAL ISSUES FOR THE LEAGUES AND GAME-MAKERS .......................... 533 A. Rules Pertaining to Determining Contest Competitors and Winners ..................................................................................... 534 B. Rules Pertaining to Paying Prizes ................................................... 535 C. Intellectual Property Ownership ..................................................... 536 1. Copyright Law and Esports Leagues and Tournaments .......... 538 2. Streaming ................................................................................. 540 3. Fair Use ................................................................................... 542 4. Player PuBlicity Rights ............................................................ 543 D. Antitrust Law Consideration ........................................................... 548 E. Labor Law Considerations .............................................................. 550 V. LEGAL ISSUES FOR TEAMS, SPONSORS, AND INVESTORS ........................ 553 A. Labor Issues .................................................................................... 554 B. Employment Law ............................................................................. 556 C. Ownership structure of teams .......................................................... 557 D. ExploitaBility of Team Value ........................................................... 558 E. Legal Responsibility for Violent Actions ......................................... 558 F. Team sponsor considerations .......................................................... 559 1. Sponsorship Issues ................................................................... 560 VI. BROADCASTING ....................................................................................... 561 A. Digital Millennium Copyright Act ................................................... 561 B. Competition from Traditional Broadcasting Deals ........................ 563 1. ESPN ........................................................................................ 566 2. TBS ELEAGUE ........................................................................ 567 VII. ANCILLARY ISSUES IN ESPORTS ............................................................... 568 A. Legal Issues for Esports Betting and Fantasy Sports Providers ..... 568 B. Doping ............................................................................................. 570 C. Collegiate Esports ........................................................................... 572 No. 2] A SHORT TREATISE ON ESPORTS AND THE LAW 511 1. Regulating Collegiate Esports ................................................. 573 2. Amateurism and Collegiate Esports ......................................... 576 3. Title IX and Esports ................................................................. 577 4. Closing Thoughts on Collegiate Esports .................................. 578 D. International Issues ......................................................................... 579 VIII. CONCLUSION .......................................................................................... 580 I. INTRODUCTION In May 2018, more than 127 million Fans From around the world tuned in to watch the China-based Royal Never Give Up defeat Korea’s Kingzone Drag- onX 3–1 to win the 2018 Midseason Invitational in League of Legends—a vide- ogame created by Riot Games.1 This unprecedented Fan support For contestants who play a videogame For a living represents an important tipping point in terms of how, as a society, we regard both organized competition and how, more spe- ciFically, we define the term of “sport.” Whereas until recently fan support for organized sports represented exclusively competitions in physical activities, the emergence of electronic sports today is changing all that and Forcing society to revisit who is conceived as a “competitive athlete,” and why. Electronic sports (or, as they are more colloquially called, “Esports”) in- clude a wide range of competitive video game tournaments that are rapidly grow- ing in popularity throughout both the United States and the world.2 By 2021, esports globally are expected to have about 250 million enthusiasts and produce upwards of $1.6 billion in revenue.3 If esports were considered to be a sport, it would represent the Fastest growing segment oF the commercial sports industry.4 1. Nicholas Barth, The 2018 MSI Grand Finale Was the Most Watched Esports Event in History, TWIN GALAXIES (May 22, 2018, 1:56 PM), https://www.twingalaxies.com/feed_details.php/1564/the-2018-msi-final- was-the-most-watched-esports-event-in-history/6. 2. While there are a variety of different spellings of ‘esports’, the Associated Press made the determina- tion in 2017 to utilize this spelling. The decision was made following a previous change to the word ‘email’ that removed a hyphen as the word became commonly used. The use of ‘esports’ was precipitated by a review of Google Trends results, which showed that a vast majority of individuals searched for esports, as opposed to e- sports, by a margin of 30 to 1. See Kieran Darcy, Why the Associated Press Stylebook went with esports, not eSports, ESPN (July 6, 2017), http://www.espn.com/esports/story/_/id/19860473/why-associated-press-style- book-went-esports-not-esports. 3. Dean Takahashi, Newzoo: Esports could hit 380 million fans and $906 million in revenues in 2018, VENTURE BEAT (Feb. 21, 2018), https://venturebeat.com/2018/02/21/newzoo-esports-could-hit-380-million- fans-and-906-million-in-revenues-in-2018/; see also Matt Perez, Report: Esports To Grow Substantially At Near Billion-Dollar Revenues In