Esports: Caution, Kids at Play

Esports –competitive video gaming– is a fast-growing entertainment and sports industry in the U.S. and around the world.

DFW is a major hub for Esports in the U.S. and is home to two Esports stadiums, as well as a myriad of company headquarters that are part of the Esports ecosystem, including professional teams, game developers and publishers, and talent agencies. At this stage, Esports is still a young industry, much like the demographic that engages and participates in it.

While the areas of law that Esports and the related video gaming industry touches is expansive, this article focuses on the

legal issues as they relate to the younger demographic involved in Esports.

The average professional Esports athlete is 21.5 years old.

The games that are played on a professional level are also available to anyone who has the appropriate equipment (a computer, video game console, or smartphone) and the ability to purchase the games. Before they become professional gamers, Esports athletes learn at an early age how to play at home and engage with the games and other players via the metaverse.

Privacy and Consumer Protection Considerations

During and post-pandemic, children spent more time online than ever before, which included an increase of children engaging in gaming and socializing with peers via online platforms. According to a report prepared by Global Web Index (GWI), a marketing analytics provider, gaming is part of daily life activity for over 70% of children aged 8 to 15, and approximately 50% of those children socialize via online gaming.

The Federal Trade Commission (“FTC”) took notice of this trend and made clear in 2022 that protecting children online and children’s privacy was a top priority of the agency. The primary regulation in the United States that regulates online services for children is the Children’s Online Privacy Protection Act (COPPA), 15 U.S.C. §6501-6506.

Under COPPA, a child is anyone under the age of 13; however, in the past few years, regulators have turned their focus to teens. Both the United Kingdom and the state of California enacted Age-Appropriate Design Code acts which apply to businesses that provide online services or products likely to be access by children under the age of 18. Similarly, during the last legislative session, two bills were introduced in Congress (H.R. 4801 and H.R. 1781) to protect children engaging online, both of which considered raising the age of a child to be more in line with the above regulations passed in California and the UK.

In December 2022, the FTC announced a settlement with Epic Games, developer and creator of the highly popular game and Esports title “Fortnite,” for violations of the FTC Act and the Children’s Online Privacy Protection Rule (“COPPA Rule”), 16 C.F.R. pt 312. The $275 million settlement for violation of the COPPA rule is the largest penalty ever obtained for an FTC rule violation. In the Epic case, however, the FTC also indicated that not only is it focused on protecting children under the age of 13, but more broadly to also protect teenagers, as they increasingly engage with businesses and consume products and services online.

In the complaint, the FTC alleged that Epic was aware that many children were playing Fortnite and that their data was collected without obtaining verifiable parental consent as required by COPPA. Additionally, the FTC also alleged that Epic engaged in unfair and deceptive practices by failing to institute appropriate privacy settings for display of player names and its chat feature that was on-by-default and such practices were harmful to children and teens.

This settlement, along with new privacy and consumer protection regulations, is instructive to those involved in the Esports industry to ensure they are considering the appropriate controls in the design of their products and services, particularly considering the large demographic of teens and children that play, view, and interact with Esports in the metaverse.

Contract and Agreement Considerations

Another area of concern, particularly for teens, is the imbalance of power in contract and agreement negotiations due to the lack of regulations and support ecosystem of talent agents, managers, attorneys, or labor unions for Esports. While some countries have instituted formal Esports regulations, it is currently self-regulated in the U.S. with only a few independent regulatory organizations that primarily focus on doping, cheating, or gambling concerns. Additionally, at the college level, the NCAA failed to designate Esports as a college sport, further adding to the lack of regulatory oversight and guidance for Esports athletes.

In the pro-gamer contract scenario, young adults and teenagers are negotiating with teams that are typically owned and managed by game developers and distributors. Prior litigation, such as Tfue v. FaZe Clan, has highlighted this contracting imbalance with terms that were allegedly considerably more favorable to the team than the young player, among other issues. Additionally, there are a myriad of employment and labor issues, such as child labor and employee misclassification, and players intellectual property rights, including Name Image and Likeness, to be considered and crafted carefully to ensure fair dealings with young Esports athletes.

As the Esports industry continues to grow, there are multiple facets for lawyers to provide guidance to help it through its growing pains and level up.

Shereen El Domeiri is a certified privacy professional and founding attorney of Domeiri PLLC. She may be reached at shereen@domeiri.com

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