Regulation has been a matter of considerable debate in the E-Sports industry over the last couple of years. The issues pertaining to regulation largely stem from the difficulties involved in devising standard rules for such a fragmented industry,[1] with the label ‘E-Sports’ primarily used as an umbrella term to describe various games on the basis of which competitive tournaments are conducted. As a result, rules framed for one game may not be applicable to another, and this makes it difficult to arrive at a consensus for what rules, if any, should be passed and promulgated.
The E-Sports industry has done exceedingly well without any regulation being imposed,[2] but the need for rules arises when one looks at the broader challenges to the industry’s legitimacy and the concerns that its stakeholders have voiced in recent times. Issues like gambling and match-fixing adversely affect the reputation of the E-Sports enterprise, which makes the passing of laws to govern the activity a necessary exercise. However, this process cannot take place without also addressing the major concerns of the industry’s stakeholders, and any proposed regulation will have to walk a tightrope to address their apprehensions while also working to protect their essential freedom.
Consequently, this post will first justify the need for regulation by highlighting some of the key problems facing the industry, which will be followed by an overview of how other countries have tackled the challenge of E-Sports regulation. Finally, a solution will be proposed from the perspective of the Indian market, which can be replicated in other jurisdictions.
Need for Regulation in E-Sports
Combating Challenges to Legitimacy
E-Sports faces serious challenges in the current climate, and these are primarily issues of integrity such as gambling, doping and match-fixing that threaten the legitimacy of the industry. This was witnessed most prominently in 2015 when twelve people were arrested in South Korea for fixing the outcome of five StarCraft II games, an incident which shook the industry because of the scale of the crime.[3] A similar incident took place in 2016 when prominent gamer Life, considered one of the greatest ever, was prosecuted for agreeing to ‘throw’ two matches, which resulted in him being banned for life from E-Sports and sentenced to 18 months in prison.[4] The spectre of match fixing also affects other games and in particular the prominent title DOTA 2, where one of the tournaments – the ProDota Cup – attracts 100 to 150 gamers on average almost all of whom are gamblers.[5]
Gambling has also become a major enterprise as witnessed by the popularity of the ‘skins gambling’ industry that has developed around Valve’s popular Counter Strike: Global Offensive (CS:GO) title,[6] which arose as a result of the company’s ‘Arms Deal Update’. This allowed users to obtain crates that could only be unlocked by purchasing a key from a company operated store, inside which were ‘weapons skins’ that could be sold, traded and gambled by players who obtained them. Such has been its popularity that it has become a phenomenon on its own, being valued at a staggering $7.4 billion dollars in 2016.[7]
Doping is yet another issue that challenges the legitimacy of the industry, which began after professional CS:GO player Kory Friesen was quoted in 2015 as saying “we are all on Adderall”.[8] The most commonly used drugs are those that are commonly prescribed to treat ADHD, which give users higher levels of concentration, alertness, and energy.[9] It can also keep a person from developing an appetite during the time the drug is in effect, which helps gamers sustain themselves through drawn out strategy games like LoL. In response to these concerns prominent tournament organiser ESL began implementing random drug screening of competitors across a variety of events, and doping has since begun to be equated with more prominent offences such as hacking and match-fixing.
Addressing Stakeholders’ Concerns
The challenges to integrity that E-Sports is currently facing provide the major justification for regulation in this industry, however laws are also needed to address the concerns of the primary stakeholders who make up the E-Sports ecosystem. These participants comprise of players, game developers and tournament organisers, each of whom have varied but equally significant concerns.
One of the major issues currently gripping the E-Sports industry concerns the contracts that professional players are made to sign, with Riot Games’ terms in particular causing major controversy in this regard. This is due to the heavy bias that the contracts exhibit in favour of the company, with restrictions on livestreaming (a major source of revenue for professional gamers)[10] and a complete handover of image rights attracting much of the criticism on the part of players and teams.[11]
The company has taken steps to amend these contracts but only for those involved in the League of Legends North American and European Championship Series, with players in other jurisdictions forced to put up with the old terms and conditions that significantly cripple their earning potential. This is a major issue as professional gamers tend to burnout and retire from the competitive gaming scene in their mid-twenties,[12] and laws are urgently required in this area to ensure fair compensation and better working conditions for professional players.
From the perspective of developers and organisers, any regulation that is passed must preserve the freedoms that they have enjoyed so far, as it is the ability to innovate that has been most significant in getting the industry to the position it is in today. E-Sports owes much of its success to the efforts of these two actors in bringing the industry into the mainstream, and at least in the early years it was the organisers who were the driving force behind the expansion of the E-Sports market.[13]
As developers now look for ways to make better use of their titles the freedom to innovate and take risks is an indispensable requirement, making free rein for such organisations a priority for any regulatory regime looking to impose rules on the industry.[14] On the other hand, tournament organisers are wary of potential conflicts that may arise with developers over intellectual property concerns which is certain to become a major topic in E-Sports over the coming years.[15]
E-Sports has benefited tremendously due to the policy of self-regulation that has held sway so far, but the need to preserve the legitimacy of the industry and address the concerns of stakeholders means that laws are now the prime requirement for the enterprise going forward. Regulation will represent a step forward for an industry that has slowly but surely made its way into the mainstream, and uniform rules will ensure that the enterprise clamps down on activities that threaten its claim of being a legitimate sporting activity.
Overview of Regulatory Regimes in Other Jurisdictions
It is one thing to say that the E-Sports industry ought to be regulated, but quite another to say how it must be done. This uncertainty is reflected in the varying approaches that have been adopted by the South Korean, French and British governments.
The country with the most developed E-Sports infrastructure is South Korea, whose government formed the Korean E-Sports Association (KESPA) as part of the Ministry of Culture, Sports and Tourism in 2000. This body licenses and regulates pro-gamers and eSports teams in addition to controlling the broadcasting rights, and KESPA’s policies and actions have gone a long way in enhancing the legitimacy of E-Sports.[16] The government also maintains tight control on online gambling, with E-Sports excluded from the purview of games on which gambling can take place.
In comparison to South Korea France has a less developed E-Sports infrastructure, but its move towards regulation by classifying it as a sport and setting up a Federation to oversee its growth means that it is a model for Western countries looking to pass laws for the industry. Rules promulgated recently limit player contracts to a minimum period of 12 months and a maximum period of five years, and prohibit players under the age of 12 from competing in monetized tournaments.[17] These are important regulations when keeping in mind players’ interest as stakeholders in the industry, and is reflective of the growing acceptance of E-Sports in the Western world.
E-Sports has yet to truly emerge in the United Kingdom, which explains why there have been no concerted efforts yet to regulate the industry. The British E-Sports Association serves as the national body in this area, and was set up in 2016 after receiving authority from the UK government to represent competitive gaming at all levels. However, it does not seem to have any powers to actually impose rules on the industry, with the betting aspects of E-Sports falling within the domain of the UK Gambling Commission.[18]
Further, there is a line of thinking which postulates the need for a single overarching international organisation, with the proponents of this idea arguing that it would lead to uniformity of standards across wider E-Sports industry.[19] However, implementing this idea is easier said than done given the fragmented nature of the industry and the lack of enforceability on the part of these international bodies, and as a result there is greater focus on setting up regulatory entities in individual jurisdictions.[20]
Statutory Regulation – The Way Forward for India
The unique nature of the E-Sports industry makes it clear that any regulation must mimic the manner in which the enterprise itself has grown, and this implies that rules must be implemented in a bottom-up manner. Efforts to institute a pan-governmental organisation were bound to fail given the disparate nature of the E-Sports market, and what is required now is for individual countries to take steps to regulate the E-Sports industry.
An Indian E-Sports Authority must necessarily be established by a statute so as to ensure its legitimacy, and must also have clearly defined powers and functions. Following the model laid down by KESPA an Indian E-Sports Authority needs to have the power to license professional gamers and sports teams throughout the country, which can be achieved by imposing a rule that all players have to acquire a license to compete in gaming tournaments with financial rewards. This enables the government to maintain a traceable link between a real person and his/her in-game avatar,[21] which will ensure that the Authority will be able clamp down on offences like match-fixing and doping which threaten the legitimacy of the industry.
Strict enforcement of the licensing system can also help in protecting minors from the excesses of the competitive gaming industry, who can apply for a license once they come of age. Further, KESPA’s success in negotiating with Riot Games for minimum wages[22] shows that developers are amenable to negotiating with government-backed bodies, and one of the major tasks of the Indian E-Sports Authority will be to ensure reasonable compensation and decent working conditions for the country’s professional gamers.
The KESPA also regulates broadcast of E-Sports by determining which channels get to air the live tournaments, however it is better for the Indian Authority to steer clear of such attempts. Much of E-Sports broadcasting happens online and it is better to allow it to grow organically, rather than disrupt the growth of the industry which is still very much in its infancy.
No Indian laws exist at the moment that govern online gambling, though a Bill was introduced recently by MP Shashi Tharoor with a view to regulate this enterprise.[23] According to this, websites offering gambling services would have to obtain a license from the Online Betting Commission, and a breach of conditions would lead to the revocation of the gambling license.[24] Entrusting a separate body set up exclusively to manage online sports fraud might be a good way to allow the Indian Authority to focus on implementing the licensing system and lobby to raise awareness of the industry and its opportunities; while suspected instances of wrongdoing can be handed over to the Online Commission for investigation and eventual prosecution.
Conclusion
E-Sports has so far enjoyed immense success by following a policy of self-regulation, but the industry is fast approaching a point of inflection that makes it necessary to impose laws to direct its future growth. Taking into the account the governance models existing in other jurisdictions, an Indian system for E-Sports governance should ideally comprise of a body set up with the express purpose of licensing gamers and lobbying for favourable rules and increasing awareness, and the division of labour as outlined above might be the best way to accomplish this goal.
[1] Robert Elder, Esports is far from fulfilling its revenue potential, but growing steadily, Business Insider (May 10, 2017, 11:11 AM), https://www.businessinsider.com/esports-is-nascent-but-growing-steadily-2017-5?IR=T.
[2] Christopher Ingraham, The massive popularity of esports, in charts, The Washington Post (Aug. 27, 2018), https://www.washingtonpost.com/business/2018/08/27/massive-popularity-esports-charts/?noredirect=on&utm_term=.cb6d662db4d8.
[3] John T. Holden; Ryan M. Rodenberg; Anastasios Kaburakis, Esports Corruption: Gambling, Doping, and Global Governance, 32 MD. J. INT’L L. 236 (2017).
[4] Rob Zacny, Top StarCraft Player ‘Life’ Arrested In South Korea, Kotaku (Jan. 30, 2016, 3:30 PM), https://www.kotaku.com.au/2016/01/top-starcraft-player-life-arrested-in-south-korea/.
[5] Chris Godfrey, ‘It’s incredibly widespread’: why eSports has a match-fixing problem, The Guardian (Jul. 31, 2018, 08:00 BST), https://www.theguardian.com/games/2018/jul/31/its-incredibly-widespread-why-esports-has-a-match-fixing-problem.
[6] Evan Lahti, CS:GO’s controversial skin gambling, explained, PC Gamer (Jul. 06,2016), https://www.pcgamer.com/csgo-skin-gambling/.
[7] Robert Silverman, Video Game Gambling Just Took A Huge Hit, VOCATIV (Jul. 14, 2016, 12:23 PM), https://www.vocativ.com/340492/video-game-gambling-just-took-a-huge-hit/index.html.
[8] Matt Kamen, IeSF: Doping is ‘definitely’ a problem in eSports, WIRED UK (Jul. 23, 2015), https://www.wired.co.uk/article/iesf-responds-doping-esports.
[9] Nick Stockton, Professional Videogaming Has Doping Scandals, Too, WIRED (Jul. 29, 2015, 07:00 AM), https://www.wired.com/2015/07/professional-videogaming-doping-scandals/.
[10] Adamya Sharma, Here’s how Indian PUBG gamers are streaming their way to the bank, Digit (Feb. 6, 2019), https://www.digit.in/features/gaming/heres-how-indian-pubg-gamers-are-streaming-there-way-to-the-bank-46277.html.
[11] Richard Lewis, How fair is an LCS contract? We asked a lawyer, Dot Esports (Sep. 22, 2014, 06:51 GMT), https://dotesports.com/league-of-legends/news/lcs-contract-analysis-league-of-legends-riot-games-682.
[12] Aisha Hassan, Esports players are burning out in their 20s, Quartz (Dec. 27, 2018), https://qz.com/work/1509134/esports-players-are-burning-out-in-their-20s-because-of-stress/.
[13] Stakeholders in the eSports Industry, in eSports is Business 43-99 (Tobias M. Scholz 2019), https://link.springer.com/chapter/10.1007%2F978-3-030-11199-1_3#citeas (last visited Jun. 29, 2019).
[14] Ben Kuchera, Reminder: Developers will always have the freedom to create whatever they like, Polygon (Oct. 24, 2014, 4:00 PM), https://www.polygon.com/2014/10/24/7062267/creative-freedom-artists.
[15] Isaac Rabicoff & Kenneth Matuszewski, The rise of eSports creates a complicated relationship with IP, IP Watchdog (Mar. 25, 2017), https://www.ipwatchdog.com/2017/03/25/rise-esports-complicated-ip/id=79418/.
[16] Daniel Rosen, Esports Meets Mainstream: The role of governments in esports, The Score Esports (Jul. 11, 2017), https://www.thescoreesports.com/news/14730-esports-meets-mainstream-the-role-of-governments-in-esports.
[17] Gabriel Ionica, French government pass legislation to regulate esports player contracts, Esports Insider, May 13, 2017), https://esportsinsider.com/2017/05/5659/.
[18] Joss Wood, Esports Developers Are Playing A Dangerous Game On Gambling, According To UK Regulators, The Lines (Jan. 22, 2018), https://www.thelines.com/esports-games-risks-uk-gambling/.
[19] Jacqueline Martinelli, The Challenges of Implementing a Governing Body for Regulating Esports, 26 U. Miami INT’L & COMP. L. Rev. 499 (2019).
[20] Jas Purewal and Isabel Davies, The eSports Explosion: Legal Challenges and Opportunities, Landslide, Nov.-Dec. 2016, https://www.americanbar.org/groups/intellectual_property_law/publications/landslide/2016-17/november-december/esports-explosion-legal-challenges-opportunities/.
[21] Emin Ozkurt, Esports in South Korea – a short overview of the legal ecosystem, Law in Sport (Apr. 19, 2019), https://www.lawinsport.com/topics/articles/item/esports-in-south-korea-a-short-overview-of-the-legal-ecosystem.
[22] Youngbo Sim & David Jang, Salaries and Ages in the Korean Esports Industry — LCK Average Salary at 175M Won (≒155K USD), INVEN Global (Feb. 17, 2019), https://www.invenglobal.com/articles/7583/salaries-and-ages-in-the-korean-esports-industry-lck-average-salary-at-175m-won-155k-usd.
[23] Bhumika Khatri, Shashi Tharoor Introduces Bill To Regulate Online Gaming, Inc42 (Jan. 15, 2019), https://inc42.com/buzz/shashi-tharoor-introduces-bill-to-regulate-online-gaming/.
[24] Jay Sayta, Shashi Tharoor’s Bill to regulate online sports gaming deserves consideration by the government, GLAWS (Jan. 10, 2019), https://glaws.in/2019/01/10/shashi-tharoors-bill-regulate-online-sports-gaming-deserves-consideration-government/.
This blog is a part of the RSRR Blog Series on E-Sports in association with Ikigai Law. By Manasvin Andra, IIIrd year, NALSAR University of Law, Hyderabad.