Dallas Texas Esports Law Presentation September 2022

Contents

  1. Overview of the Industry & Local Impact
  2. Areas of Law
  3. Litigation Update
  4. Recent M&A Activity
  5. Resources

1. Overview of Esports Industry

What is Esports?

Esports is competitive video gaming.

While it is not “new,” its rise in popularity has exploded in the last decade
and was an area in the entertainment industry that thrived during the
pandemic.

This is largely because competitions are live-streamed on platforms like Twitch and YouTube that are easily accessible and free to viewers.

In the US, The Esports Industry is quickly approaching

$2 billion in revenue
29.6 million viewers

Categories of Games

  • Fighting: Street Fighter/Smash Bros
  • Shooter:
    • FPS (First-Person Shooter): Counterstrike-Global Offense (CS_GO), Overwatch, Call of Duty
    • Battle Royale & Third-Person Shooter: Fortnite, PUBG
  • RTS (Real Time Strategy): These are like the OG of esports StarCraft II
  • Sports: NBA2K, Madden (NFL), FIFA, Rocket League
  • MOBA (Multiplayer Online Battle Arenas): Warcraft III, League of Legends, DOTA 2 (Defense of the Ancients 2); Valorant

The Esports Eco System

  • Players
  • Teams
  • Sponsors/Investors
  • Game Development – publishers and developers
  • Events/Competitions
  • Talent Management
  • Tournament and League organizations
  • Streaming Platforms
  • Influencers, Shoutcasters
  • Retail & Merch
  • Crypto & NFTS

Local Impact

Texas is #2 in U.S.
&
DFW is a bright spot

Local Esports Companies & Stadiums

2 Stadiums

  • Esports Stadium
    in Arlington (now owned by OP-Tic)
  • Belong Gaming Stadium in Grapevine

Esports teams/franchise

  • OP-Tic (and Envy Gaming)
  • Complexity Gaming (backed by Jerry Jones)
  • Mavs Gaming (backed by Mark Cuban)

Local Game Development & Events

Game Developers

There are over 100 games studios, app developers and digital tech firms in the region

  • ID (creator of DOOM)
  • Gearbox (creator of Boarderlands)
  • City of Richardson was recently named a hotspot for game developer companies.

Branding & Marketing

  • Egency Global
  • Ngage Esports

Events

  • DreamHack
  • Esports Awards Ceremony 2021

Business, Education, Municipalities

Entertainment Venues

  • Arcades & Gaming Rooms
  • Restaurant & Bars with gaming themes and tournaments

Education

  • Ed Tech
  • School District – MS & HS teams & programs
  • College level teams and scholarships

Municipalities

  • City of Dallas Parks & Rec center esports programs

2. The Law & Esports

The Web of Laws Impacting Esports

  • Sports & Entertainment
  • Gaming/Anti-Gambling
  • Intellectual Property
  • Labor and Employment
  • Advertising
  • Data Protection/Privacy
  • Antitrust/Anti-Competition/M&A
  • Landlord-Tenant

Sports & Entertainment

Currently there are no specific laws for Esports

    • laws that regulate other sports will be used in cases involving Esports

Professional Player contracts

    • Similar considerations as other athletes; however
    • May consider other provisions for entertainers vs. athletes
    • Also consider issue of young age of players (avg. 21.5)

NCAA failed to designate Esports as a college sport,

    • thus no regulation authority over Esports in colleges in U.S.
    • several colleges have esports teams & offer scholarships

Entertainment Software Rating Board (“ESRB”)

    • self-regulatory group

California Talent Agency Act (Cal. Lab. Code §1700 et seq.)

Gaming/Anti-Gambling: Texas

Esports competitions must be structured properly to avoid implicating the myriad of anti-gambling laws.

  • Texas Constitution, Article III, Section 47(a) of the Texas Constitution requires the Legislature to pass laws prohibiting “lotteries and gift enterprises.”
  • Texas Penal Code Title 10, Chapter 47
  • Anti-Gambling Statute
  • Consideration: Game of Chance vs. Game of Skill

Anti-Gambling – Federal Statutes

If State gambling laws are implicated, then several
Federal criminal statutes may be triggered, including

  • Illegal Gambling Business Under The Organized Crime Control Act (“OCCA”), 18 U.S.C. §1955.
  • The Travel Act, 18 U.S.C. §1952..
  • Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §1961 et seq.
  • Federal Lottery Statutes,
  • The Unlawful Internet Gambling Enforcement Act of 2006 (the “UIGEA”),;
  • The Wire Act, 18 U.S.C. § 1084.

Intellectual Property

Trademarks

  • The Lanham Act (15 U.S.C. §§ 1051 et seq
  • Games
  • Players
  • Influencers

Copyright

  • The Copyright Act, 17 U.S.C. §§101 et seq
  • Digital Millennium Copyright Act 17 U.S.C. §§1201 et seq
  • Music
  • Game creative content

Name Image Likeness issues abound as well

Labor & Employment Issues

Labor

  • Employee v. Independent contractor

Cali law workers are presumed to be employees unless proven otherwise (standard of proof?)

  • Unions & Collective Bargaining

No unions, just player associations often created and funded by Developers who run their own leagues

  • Minors

Employment

  • Discrimination
  • Accessibility
  • Immigration

Advertising

  • FTC ACT – Section 5 – Unfair & Deceptive Practices
  • FTC Guide Use of Testimonials and
    Endorsements in Advertisements
  • COPPA
  • FCC Rule limiting the amount of advertising
    allowed in children’s TV programming

Data Protection & Privacy

Cybersecurity issues with games that have in-app purchases

U.S. Laws

    • The Children’s Online Privacy Protection Act of 1998
      (15 U.S.C. 6501–6505)
    • The Children’s Online Privacy Protection Rule
      (16 CFR Part 312)
    • State Privacy Laws: CCPA, VDPA, CDPA, CTDPA, UDPA

International laws

    • China
    • Europe
    • Asia: Korea, Japan, Indonesia, Phillipines, etc.
    • South America: Brazil

3. Esports Litigation

Employment Litigation

Tfue v. FaZE

Earnings/Oppressive player contract dispute – lawsuit claimed that FaZE withheld Tfue’s share of brand deal revenue and undercut his earnings from streaming and tournaments.

Riot Games (California)

Class-action lawsuit alleging pay disparity, gender discrimination
and sexual harassment

Activision Blizzard (California)

Allegations included that the company fostered a “frat boy”
culture in which female employees were subjected to unequal
pay and sexual harassment

Other Litigation

NFT/Crypto issues arising – G2 Sports vs. Bondly

G2 alleges that Bondly misled leadership at the gaming and
entertainment company about its capabilities and failed to meet
deadlines for deliverables — including payments to G2 — resulting in
damages of over $5,250,000

Data Breach

Class action against Epic Games alleging company failed to have proper safe guards to protect consumers and failed to notify
consumers of the breach in a timely fashion.

Anti-trust

Epic games vs. Apple & Google – App store anti-competition claims

Copyright & TM infringement

too many to list!!

4. M&A Activity

Deals In The Last Year

Microsoft – Activision Blizzard acquisition

Sony – Bungie acquisition

OP-Tic –  Envy Games  acquisition

5. Resources

Resources

Thank You!

Shereen El Domeiri

Shereen@domeiri.com

www.Domeiri.com

469-485-2500

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