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My league, my rules - my bad

Nearly all classic sports that have been successfully commercialised for the mass market – football, basketball, cricket, baseball to name just a few – have one thing in common: they have rules which ensure minimum standards for all participants. The high growth rate in esports fan bases and audiences is naturally raising questions over the regulatory situation in this very young industry, and how this impacts its successful commercialisation and attractiveness to investors and sponsors.

Different leagues, different rules

There are a vast number of esports leagues and tournaments out there, which can be roughly divided into two groups: publisher leagues, run or fully controlled by the publishers of the respective game played in the league (e.g. the Overwatch League, operated by Blizzard Entertainment) and independent leagues, operated by third party organisers independently from the respective game publishers (e.g. ESL CS:GO Pro League, organised by ESL). Publisher league regulations are usually provided by the publisher itself, and most independent leagues are regulated by the independent organisers. To date, there are only a few independent organisations trying to establish standardised esports governance for different esports leagues and games (e.g. WESA, IeSF). 

The abundance of league providers is reflected in the large number of league-related regulations: Practically all esports leagues and tournaments have their own set of rules and conditions, covering (i.a.) the commercial conditions of participation for the teams as well as rules on transfers, doping, manipulation, gambling and compliance in general.

Why is esports governance so fragmented?

While classic sports do not belong to anyone, each esports game, more precisely each game's intellectual property, is originally owned by the respective game publisher. Based on this, each game publisher can control any commercial league activities involving their game. Many game publishers have made use of this power by organizing their leagues exclusively for the particular game or controlling any league activity by mandatory "franchise" regulations. Armed with this monopoly, the publishers can set the league’s governance basically at their sole discretion. Esports teams and players can either accept the publisher's conditions and rules or they cannot play the game in an esports league, at all. Coming from this comfortable bargaining position, for now, game publishers do not see the benefits of a unified governance framework covering different esports leagues of different organisers, even though most of the governance challenges – such as doping or cheating – are the same, whatever game in whatever league is being played.

Regulatory fragmentation also emphasises that esports is still very young, and so is its governance. As there have been no major scandals to date, the current governance structure has not yet been tested publicly. Unfortunately, this has also led the league operators (publishers as well as independent operators) to believe that they can take the league's governance lightly and do not need to submit to transparent, advanced and uniform rules established by an independent governing body like WESA or IeSF.

Why does esports governance matter?

Many independent leagues, especially less popular ones with smaller prize money, do not have an adequate legal framework. For example, many of them do not provide a detailed players’ code of conduct, which would cover anti-doping or anti-cheating rules and a transparent penalty system. These perceived weaknesses in scandal prevention, even if they are most evident in smaller leagues, opens the entire esports sector to the accusation of being unprofessional. It is no secret that this is a major reason why large investors have been reluctant to invest on a significant scale in the esports sector. In addition, the lack of uniform rules makes it difficult for the audience to compare independent leagues with each other, even though the same game is played. This makes them less interesting for the audience and, consequently, for larger investors. 

The publishers’ monopoly, on the other hand, has led to a situation where the regulations of publisher leagues are heavily one-sided. In many cases, teams and players must grant the publisher extensive media rights, even those covering activities not related to their participation in the league. Publisher power also means they sometimes reserve a unilateral right to change the league’s scope and parameters at any time. With no alternative other than to decide not to take part, teams and players agree to long binding terms and, in some cases, to high participation fees for a slot in the league.

Unlike in classic sports, esports governance does not usually stipulate the jurisdiction of a specialist arbitration court to settle disputes, specifying local courts without esports expertise instead. A notable exception is the ESL CS:GO Pro League, which has WESA as its governing body and stipulates ACES (Arbitration Court of Esports) as the applicable jurisdiction.

The future of esports regulation

It will only be a matter of time before esports follows the route taken by classic sports decades ago and unifies its governance by choosing a few legitimate governing bodies. In the long term, this will apply both to independent leagues and publisher leagues. The pressure to do so will come from the teams and the esports audience, who will come to value leagues with independent, professional and transparent esports governance. Potential large sponsors who have not yet been involved in esports will also help bring about change, by demanding the highest levels of scandal prevention across esports leagues to secure their investments.

Authors

Martin-Lukas Landmann
Martin-Lukas Landmann
Senior Associate
Cologne