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Yearly Wrap Up & 5 Trending Esports Legal Topics For 2024

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A digital collage representing five trending esports legal topics for 2024. 1) A video game controller with a legal gavel superimposed on it, symbolizing player and team name disputes. 2) A pile of gold coins and a contract, depicting franchise fee payment disputes. 3) A salary cap with esports logos, representing additional player salary caps. 4) A passport and a visa stamp with an esports theme, illustrating immigration hurdles for foreign players. 5) A document titled 'Community Tournament Guidelines', with a licensing stamp, signifying licensing changes.

Yearly Wrap Up

As 2022 continued into 2023 and the “esports winter” in the United States arrived, there was a myriad of shifts in the business and legal landscape including esports organization FaZe Clan famously going public at a nine-figure valuation, receiving a Nasdaq delisting warning; and eventually being purchased at a fraction of its initial listing price by the owners of the esports organization Complexity, GameSquare. This purchase was in addition to other esports organizations and event operators being acquired including NRG Esports buying Counter Logic Gaming, Shopify purchasing a League of Legends spot from TeamSoloMid (TSM), and the Savvy Gaming Group acquiring Electronic Sports League (ESL), Dreamhack, FACE-IT, and Vindex including Esports Engine. There was also a highly publicized franchise fee payment arbitration dispute, disclosed and undisclosed salary “caps” as well as an esports players’ association initiated “walkout.” Finally, Microsoft received approval for its purchase of Activision-Blizzard which is set to shift the entire esports space in ways yet to be seen. Accordingly, while there are many legal topics that are currently trending, here are five ones to monitor as the esports global industry continues to grow and evolve in 2024.

I. Continued player (gamer-tag) and esports team name disputes

Riot Squad Esports sued by Riot Games, Valorant team Squirtle Squad changing its team name, and streamer and content creator Digitalprincxss agreed upon rebrand from “Pokeprincxss” are just some of the recent examples of improper brand building and legal due diligence causing individuals to have to alter their entire established gamer-tag and associated personal “brand” as well as companies being involved in a trademark infringement lawsuits and other costly name disputes.

II. Franchise fee payment disputes

After a highly publicized compelled arbitration and eventual settlement, the Overwatch League eliminated all the outstanding fees owed by the participating franchise teams as well as agreed to absolve the esports organizations of any future franchise league payments. While the exact specifics and reasoning for the settlement are undisclosed, the Overwatch League did not seem to live up to expectations after nearly two dozen teams spent several million dollars in franchise fee buy-ins paid to the league operator Activision-Blizzard as well as expended additional substantial sums on player and personnel salaries, training, and other related team operational costs. While the Overwatch League seems to have disbanded, it will be interesting to see if any other esports franchise leagues that previously required and collected a buy-in payment will be subject to a similar fate with compelled alternative dispute resolution (ADR) by disgruntled franchisees. If so, this additional quarrel will be an interesting situation to monitor to see if it is resolved in a similar fashion or if litigation is necessary to effectuate a resolution.

III. Additional player salary “caps”

This past year, Activision-Blizzard settled a Department of Justice (DOJ) lawsuit for unlawfully implementing an undisclosed salary “cap” described as a “competitive balance tax” in its two franchise leagues. This undisclosed tax “penali[zed] teams that spent more on player salaries than an amount decided by Activision Blizzard.” Accordingly, the DOJ sued Activision-Blizzard for “suppress[ing] the wages of esports players” in both the Overwatch and Call of Duty leagues “in violation of the Sherman Act.” Conversely, league operator Riot Games instituted agreed upon player salary “caps” in both the LCKand LECfranchiseleagues for League of Legends esports, including capping an organization’s total player salaries to “70 percent” of the team’s annual revenue. Additionally, the franchise league also imposed a “‘luxury tax’” payable by any team that spends “over the maximum” amount. After the North American League of Legends Championship Series Players’ Association’s (NALCSPA) successful stance, it will be interesting to see if a salary “cap” and “luxury tax” implementation is on the horizon for the North American league. If so, this action may be ripe for dispute and discussion by the NALCPA and other interested parties including potentially the DOJ as a potential restraint of trade or other anti-trust violation. While each country has its own labor and employment laws, implementing a concerted effort to impair esports professional players’ wages could be a similar DOJ violation as the one that Activision-Blizzard encountered (U.S. v. Activision Blizzard, Inc., No. 1:23-cv-00895 (D.D.C. Apr. 3, 2023)).

IV. Continued immigration hurdles for foreign esports players and teams

In the United States, there has been a series of highly publicized esports players and teams missing competitions, league matches, and other events as the result of failing to timely obtain proper work authorization in the form of a “visa” to enter the country. As noted, a visa is required for any foreign citizen wishing to come to the United States to earn some form of income, including receiving a salary from a U.S.-based esports team or earning prize money from a U.S.-based esports tournament organizer. This year has been no different, as the currently existing visa classifications and corresponding application criteria act as continued hurdles to the seamless issuance of visas for professional esports players, coaches, casters, and other personnel. While some independent organizations, such as the Esports Trade Association (ESTA) created services to assist in fulfilling some of the visa requirements, the currently existing legislation and statutory framework does not seem to adequately address and account for the unique needs specific to the competitive video game industry. As a result, similar to Germany, it might be appropriate for the federal legislature to create and carve-out a unique visa category classification for esports and competitive gaming in an effort to streamline the application process for the government officials handling the cases as well as for the individuals and businesses applying for work authorization. If not, there is sure to be a continued trend of players, coaches, and other individuals missing lucrative competitive opportunities as well as more large-scale esports events occurring outside the United States due to these hurdles.

V. Continued “community” tournament guidelines licensing changes

Since a game publisher or developer owns the exclusive copyright in the game, the company determines all usages of a title, including any commercial ones. However, many game entities have created “community” events or tournament guidelines that permit the hosting of certain commercial events without obtaining a license and paying a licensing fee to the game publisher or developer. While each company issued its own criteria, some companies have recently enacted stricter guidelines than others companies, including Nintendo and Capcom. Accordingly, these stringent procedures might potentially negatively impact some existing event operators whose current events might not fit into the revised and potentially arbitrarily determined criteria causing them to cease operations due to the lack of potential profitability. As a result, the unfettered discretion by the game developers and publishers in implementing the prize pools limitations, imposing branding and event marketing guidelines, and other articulated restrictions could potentially be challenged. As a result, similar to other entertainment industries such as music, it could be argued that there might be a need for a third-party royalty board or other similar tribunal to weigh in and potentially establish a uniform statutory rate or compulsory license system as it relates to third-party event operations. While this might not necessarily be a legal battle on the horizon or one that may ever exist, there are many business ventures that are impacted by game publisher and developers’ community tournament guidelines as these rules can be changed at a company’s leisure. For instance, these alterations impact the establishments that these events occur at, the players competing in them, the casters commentating for them, as well as the companies involved in the production, marketing, and other aspects of the events.

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VI. Conclusion

As evident by the above and by the many other potential legal matters that may spring up in the coming year, it is clear that there will be many new issues and disputes for esport legal practitioners to engage with and learn from. It will be interesting to see if existing players’ associations continue to grow in power and influence as Rocket League launched its own association which added to the growing list of independently created player advocacy associations. Accordingly, the sustained growth of these organizations will be especially important and applicable to the esports legal field in light of the potential restructuring of franchise leagues as well as due to the agreed upon player compensation limitations enacted in esports leagues outside the United States. In addition to potential anti-trust issues related to a game publisher or developers’ ownership and unfettered discretion as it relates to third parties utilizing their protected works, there are immigration and intellectual property law matters that require ample attention and focus in order to ensure that all the individuals and companies in the esports industry are operating in the most efficient and economical fashion to grow the entire field. Overall, it will be interesting to see if there are additional mergers and acquisitions with many existing gaming companies exploring their potential long-term viability along with what the best course of action is going forward.

Disclaimer: This article is not intended as legal advice, as an attorney specializing in the field should be consulted.

Image: DallE

Author

  • Justin M. Jacobson

    Justin M. Jacobson, Esq. is an entertainment and esports attorney located in New York City. For the last decade, he has worked with professional athletes, musicians, producers, DJs, record labels, fashion designers, as well as professional gamers, streamers, coaches, on-air talent, and esports organizations. He assists these creative individuals with their contract, copyright, trademark, immigration, tax, and related business, marketing, and legal issues. He is a frequent contributor to many industry publications and has been featured on a variety of entertainment, music, and esports publications and podcasts, including Business Insider, The Esports Observer, Esports Insider, Tunecore, and Sport Techie. Justin has positioned himself as a top esports business professional working with talent in a variety of franchise leagues including the Overwatch League, Overwatch Contenders, and Call of Duty Pro League as well as in many popular competitive titles such as Fortnite, CS:GO, Gears of War, Halo, Super Smash Brothers, Rainbow 6, PUBG, Madden, and FIFA and mobile games such as Brawlhalla, Clash of Clans, and Call of Duty mobile. Previously, he worked with various esports talent agencies as well as in an official capacity on behalf of several esports teams and brands. He currently is an Adjunct Professor of Esports at University of North Carolina Wilmington, a member of the industry board for the International Journal of Esports and has authored “The Essential Guide to the Business & Law of Esports & Professional Video Gaming.”

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Takaze’s Take: Free the Agents – Sexism and Misogyny in the Esports Business

This new format of an article (Takaze’s Take) explains how an eathlete can file a discrimination lawsuit in the USA. This article also discusses women in sports.

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Takaze's Take: Free the Agents

On 28 February 2024, Josefine Jensen, a member of Astralis’ Women’s Counter-Strike team, took a stand. She Xed a letter to Valve Corporation, demanding a change in their business practices. Specifically, she urged them to make female agent skins free to use in Counter-Strike. This issue, she believes, is not just about Skins but about the deep-rooted sexism and misogyny that pervades the esports industry. 

The esports world has a rich history of mistreating women.[1] However, women in America do have a way to counterattack. For example, suppose the misandrist is someone you work with. In that case, you can file a Charge of Discrimination with the Equal Employment Opportunity Commission (EEOC).[2] 

The EEOC enforces “federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex, national origin, age, disability, or genetic information.”[3] If you sign and file a Charge of Discrimination, you are “asserting that an employer, union or labor organization engaged in employment discrimination.”[4] You must file a Charge of Discrimination with the EEOC before you can sue your employer for discrimination.

Takaze’s Take

Filing a Charge of Discrimination is not your only option. In fact, as the war against Diversity, Equity, and Inclusion (DEI) intensifies, the EEOC may be unable to protect you. Unfortunately, your enemies intend to compel the EEOC to enforce the status quo.[5] If DEI is important to you, then a showdown with your adversaries may be inevitable. 

Mr. Monopoly’s Wisdom

Your opponents view DEI as a zero-sum game. Fear and insecurities are at the center of the conflict.[6] We ought to celebrate your accomplishments.[7] Instead, your adversaries recognize that these fears and insecurities make their followers susceptible to viewing your success as a threat.[8] Mr. Monopoly can help you understand the schism. Until recently, your enemies owned the entire board. Their rule was ruthless and absolute. Over time, your foes’ forefathers were forced to make half-hearted concessions. Your forebears were given Mediterranean Avenue—Connecticut Avenue. Their adversaries expected them to be content. 

Those whose shoulders you stand upon continued to press the issue. You landed on Atlantic Avenue, and your sights are set on Boardwalk. The last seven to eight years in American politics should have clarified one thing for you: Your enemies consider your desire to own Boardwalk wholly unacceptable. 

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Their Strategy

Your enemies are clever.[9] They copied the tactics of Civil Rights activists.[10] Now, your opponents are erasing them from your history books.[11] Their recent legislative and judicial victories show that your adversaries are reaping the rewards of their efforts.[12] Your enemies likely believe their victory will be absolute if they can expunge the history of your forebears.

The Counter-Strike

The sports and entertainment worlds have not acquiesced to your enemies’ demands.[13] As we enter the next phase of the streaming wars, alienating marginalized groups is a surefire way to lose.[14] You can leverage the pursuit of profits to your advantage. For example, working at the FDIC was a never-ending party until the Wall Street Journal arrived.[15]The author hopes that soon, every woman will feel safe in the workplace. Perhaps your enemies feel secure because the esports world is not mainstream. The author hopes you show them that they are misreading the tea leaves.

The spotlight is shining brightly upon the women’s sports universe. The WNBA and ESPN plan to capitalize on Caitlin Clark and Angel Reese’s fame.[16] The NWSL is expanding.[17] Private equity firms are investing heavily in the sports world.[18] The NFL is arriving fashionably late to the dance, but their dance card is undoubtedly full.[19] The esports world claims to be unhappy with its dependence upon the Saudis, and the business model needs to be tweaked.[20]Investors not chosen by the major sports leagues will need a date. If DEI is important to you, now may be the time to press the issue. 

Advance your token to Boardwalk.

Image source: Netcompany

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[1] Ajay Rose, Inside the World of Female esports: “It’s a Scary Space for Women’, The Athletic (Jul. 23, 2023), https://theathletic.com/4635621/2023/07/23/inside-the-world-of-female-esports/.

[2] Filing a Charge of Discrimination with the EEOChttps://www.eeoc.gov/filing-charge-discrimination (last visited Apr. 7, 2024).  

[3] Overviewhttps://www.eeoc.gov/overview (last visited Apr. 7, 2024). 

[4] Id.

[5] Robert Draper, America First Legal, a Trump-Aligned Group, Is Spoiling for a Fight, N.Y. Times (Mar. 21, 2024), https://www.nytimes.com/2024/03/21/us/politics/stephen-miller-america-first-legal.html?smid=nytcore-ios-share&referringSource=articleShare&ugrp=c&pvid=E1F42499-3ECC-4095-9233-0DA8057CA02A&sgrp=c-cb.

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[6] Why Young Men and Women Are Drifting Apart, The Economist (Mar. 13, 2024), https://www.economist.com/international/2024/03/13/why-the-growing-gulf-between-young-men-and-womenMaking Sense of the Gulf Between Young Men and Women, The Economist (Mar. 14, 2024), https://www.economist.com/leaders/2024/03/14/making-sense-of-the-gulf-between-young-men-and-women.

[7] Aparna Rae, White Men’s Role in Advancing Equity and Inclusion, Forbes (Mar. 14, 2024), https://www.forbes.com/sites/aparnarae/2024/03/14/white-mens-role-in-advancing-equity-and-inclusion/?sh=6f4d22b85b5f.

[8] Nicquel Terry Ellis & Catherine Thorbecke, DEI Efforts are Under Siege. Here’s What Experts Say is at Stake, CNN (Jan. 11, 2024), https://www.cnn.com/2024/01/07/us/dei-attacks-experts-warn-of-consequences-reaj/index.html.

[9] Nicholas Confessore, ‘America is Under Attack’: Inside the Anti-D.E.I. Crusade, N.Y. Times (Jan. 20, 2024), https://www.nytimes.com/interactive/2024/01/20/us/dei-woke-claremont-institute.html; Meg Little Reilly, Anti-DEI Bills Rely on Vague Language and Self-Censorship, Forbes (Mar. 5, 2024), https://www.forbes.com/sites/meglittlereilly/2024/03/05/anti-dei-bills-rely-on-vague-language-and-self-censorship/?sh=75b5535b1742.

[10] James Devitt, Bayard Rustin’s Blueprint for Activism—and Perhaps Progresshttps://www.nyu.edu/about/news-publications/news/2023/august/bayard-rustin-s-blueprint-for-activism-and-perhaps-progress.html (last visited Apr. 7, 2024); Adam Gopnik, Eclipsed in His Era, Bayard Rustin Gets to Shine in Ours, The New Yorker (Nov. 6, 2023), https://www.newyorker.com/magazine/2023/11/13/eclipsed-in-his-era-bayard-rustin-gets-to-shine-in-ours.

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[11] Taifa Natalee Alexander, Tracking the Attack on Critical Race Theory in Education, U.S. News (Apr. 11, 2023), https://www.usnews.com/opinion/articles/2023-04-11/tracking-the-attack-on-critical-race-theory-in-education;  Daniel Golden, Muzzled by DeSantis, Critical Race Theory Professors Cancel Courses or Modify Their Teaching, ProPublica (Jan. 3, 2023), https://www.propublica.org/article/desantis-critical-race-theory-florida-college-professors; Myles Hollingsworth, AP African American Studies and Critical Race Theory Ban in Florida, The Crisis (July 24, 2023), https://naacp.org/articles/ap-african-american-studies-and-critical-race-theory-ban-florida;  David Bernstein, Is Opposition to Critical Race Theory Correlated With Ignorance of Critical Race Theory?, Reason (Apr. 2, 2024), https://apple.news/AQmeDx-k2Te6xfEP5a69ndg.

[12] Jeff Green & Simone Foxman, Why Corporate America Has a Diversity Problem, Bloomberg (Mar. 14, 2024), https://www.bloomberg.com/news/articles/2024-03-14/video-why-corporate-america-has-a-diversity-problem.

[13] Bill King, The Pushback on DEI, Sports Business Journal (Mar. 11, 2024), https://www.sportsbusinessjournal.com/Articles/2024/03/11/dei-pushback; Jeremy W. Peters & Brooks Barnes, The Oscars Now Have D.E.I. Rules, But Some Say It’s Just a Performance, N.Y. Times (Mar. 10, 2024), https://www.nytimes.com/2024/03/08/us/oscars-oppenheimer-dei-diversity.html.

[14] Dr. Darnell Hunt & Dr. Ana-Christina Ramon, Diverse Audiences Prop Up A Struggling Theatrical Industry and Demand Diversity on Screen, Forbes (Mar. 7, 2024), https://www.forbes.com/sites/drdarnellhuntanddranachristinaramon/2024/03/07/diverse-audiences-prop-up-a-struggling-theatrical-industry-and-demand-diversity-on-screen/?sh=3ff2cb78742d.

[15] Rebecca Ballhaus, ‘What the Hell is Going on at the FDIC?’, The Wall Street Journal (Jan. 10, 2024), https://www.wsj.com/articles/fdic-6d9e8bf1.

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[16] Jacob Feldman, WNBA Has Big Plans to Ride Women’s Basketball Momentum, Sportico (Apr. 4, 2024), https://www.sportico.com/leagues/basketball/2024/caitlin-clark-wnba-momentum-popularity-draft-marketing-1234773879/; Tom Friend, Engelbert: Clark-Reese Could be the New Bird-Magic, Sports Business Journal (Mar. 3, 2024), https://www.sportsbusinessjournal.com/Articles/2024/03/03/wnba-cathy-engelbert-caitlin-clark-angel-reese.

[17] Cleveland Soccer Group Announces 12k Season-Ticket Pledges for Possible NWSL Expansion Franchise, Sports Business Journal (Apr. 4, 2024), https://www.sportsbusinessjournal.com/Articles/2024/04/04/cleveland-ohio-nwsl-expansion-team-bid?hl=NWSL&sc=0&publicationSource=searchNWSL Enters 2024 Campaign with Renewed Hope Amid Offseason Growth, Sports Business Journal (Mar. 15, 2024), https://www.sportsbusinessjournal.com/Articles/2024/03/15/nwsl-2024-season-preview?hl=NWSL&sc=0&publicationSource=search.

[18] Arctos Partners Raises $4.1B for Investments in Sports, Sports Business Journal (Apr. 2, 2024), https://www.sportsbusinessjournal.com/Articles/2024/04/02/arctos-partners-deals?hl=private+equity&sc=0&publicationSource=search; Abby Schultz, The Wealthy are Turning to Sports for Diversification, Barron’s (Jan. 2, 2024), https://www.barrons.com/articles/the-wealthy-are-turning-to-sports-for-diversification-9726aaac.

[19] Ben Fischer, Explaining the Caution on Private Equity, Sports Business Journal (Mar. 28, 2024),https://www.sportsbusinessjournal.com/Articles/2024/03/28/explaining-nfl-private-equity-caution?hl=private+equity&sc=0&publicationSource=search.  

[20] Asli Pelit, In Fading Esports Business, Saudi Money Still Flows, Sportico (Mar. 15, 2024), https://www.sportico.com/business/sponsorship/2024/esports-investment-saudi-arabia-1234770868/.

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Author

  • Takaze Turner

    Takaze A. Turner, a distinguished figure at the intersection of entertainment and law, showcases a profound passion for anime, cinema, and gaming. His academic journey commenced at the Ohio State University, where he excelled in English, earning his degree with cum laude honors. Furthering his legal education, Takaze achieved his Juris Doctor from the University of Missouri School of Law, before embarking on specialized legal studies. He has since attained an LL.M. in Business Law from Florida State University College of Law and an LL.M. in Entertainment Law from the University of Miami School of Law. Currently, he is enhancing his expertise by pursuing an LL.M. in Taxation Law at the same institution. Takaze’s multifaceted legal education, coupled with his deep-rooted interests in entertainment, positions him uniquely within the legal landscape. His academic accomplishments reflect a dedicated pursuit of knowledge across various sectors of law, particularly those intersecting with the business and entertainment industries. At the core of his professional journey is a commitment to understanding and navigating the complex legalities surrounding entertainment and media, ensuring he remains a pivotal figure in legal discussions related to these dynamic fields. His ongoing pursuit of an LL.M. in Taxation Law further exemplifies his dedication to broadening his legal acumen, underscoring his role as a key contributor to the legal community, especially in areas where law meets entertainment and technology.

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Launch of Deviant Legal: A Law Firm for the Video Game Industry in the Netherlands

Founded by René Otto, a seasoned lawyer with an impressive track record and a deep passion for video games, Deviant Legal emerges as the first full-service law firm in the Netherlands, dedicated exclusively to serving the legal needs of the video game, esports, and content creation sectors.

With its official launch on 10 April 2024, Deviant Legal introduces a new paradigm in legal services, characterized by accessibility, inclusivity, and a profound understanding of the video games industry. Otto’s vision for the firm stems from his belief in the necessity of legal services that are not only of high quality but also personalized to the nuances of the international games and esports ecosystem.

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Rene Otto - Deviant Legal

A Remote-First Approach

Perhaps the most distinctive feature of Deviant Legal is its remote-first structure. By embracing remote operations, the firm not only aligns itself with the global nature of the video game industry but also ensures that its services are more accessible and cost-effective for clients. This innovative approach enables Deviant Legal to connect seamlessly with clients and team members around the world, offering flexibility and scalability that traditional law firms struggle to match.

“With Deviant Legal, I believe the legal services provided can be better tailored to the international nature of the games and esports ecosystem. Because of our remote set-up, we are able to connect with clients and team members worldwide. Next to our core team, we work with a network of carefully selected remote (freelance) lawyers, which allows us to scale when needed. While we primarily focus on Dutch & European law first, we will be seriously researching international expansion opportunities.René Otto

Emphasizing Accessibility and Inclusion

Accessibility is at the core of Deviant Legal’s mission. Otto and his team are committed to making legal services approachable for everyone, regardless of their background or financial situation. This commitment extends beyond mere words, as Deviant Legal plans to roll out initiatives aimed at promoting legal access and reducing the intimidation factor often associated with seeking legal counsel.

The firm also places a high value on diversity and inclusion, fostering an environment where lawyers can be their authentic selves. This philosophy not only enriches the firm’s culture but also positions it as a desirable destination for talented legal professionals who may feel out of place in more traditional settings. René Otto states:

“One of the core values of Deviant Legal is accessibility and inclusion. I believe that everyone should have access to a lawyer. We will announce some initiatives to promote that relatively soon. Additionally, accessibility means that lawyers should be way more approachable than they are currently. As a result, we work with authentic lawyers which are ‘down-to-earth’ and who ‘come as they are’. This does not only provide value for clients, but also for the legal profession itself. On a daily basis, I meet lawyers who love their work as a lawyer, but do not feel at home at the culture of the legal profession. This is a shame as it leads to an ongoing and unneeded brain drain. By giving these lawyers who do not adhere to the norm a place to call home, I believe Deviant Legal will win the war on talent”.

A Firm to Watch

The unique approach and specialized focus of Deviant Legal have not gone unnoticed. The firm has been highlighted by the prestigious international ranking LEGAL 500 as a “firm to watch,” and its founder, René Otto, has been named a “Next Generation Partner.”

René Otto’s journey from Van Iersel Luchtman advocaten to establishing Deviant Legal showcases that there is need for a dedicated full service boutique servicing the video game industry. René Otto also holds roles as a board member of Breda Game City and an ambassador for Women in Games.

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Author

  • Leonid Shmatenko

    Leonid Shmatenko is part of Eversheds Sutherlands’ data protection and technology law team. He has vast experience in regulatory and general issues in the areas of eSports and Blockchain. He advises eSports associations and clubs on all legal issues, advises and supports crypto startups in all matters from planning, preparation to execution of private and public token offerings (so-called Initial Coin Offerings or ICOs). Furthermore, Leonid Shmatenko specializes in international arbitration and has participated in several arbitration proceedings (SAC, ICC, DIS, UNCITRAL, ICSID, ad hoc) as a party representative and secretary of the tribunal. Leonid Shmatenko studied at the Heinrich Heine University in Düsseldorf and is currently pursuing a PhD in international law. After his successful first state examination (2011), he completed his legal clerkship, inter alia, at the German Embassy in Lima and within international law firms in Düsseldorf and Paris. He passed the second state examination in 2015. He is an external lecturer at the National Law University of Ukraine “Yaroslav Mudryi”, where he teaches International Investment Law. He is admitted to the Bar in Switzerland and Germany. Before joining Eversheds Sutherland, Leonid Shmatenko worked as an attorney at leading law firms in Geneva, Munich and Paris.

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The Twisty Turnaround of F1 Esports 2023 – What Went Down and How It’s Getting Back on Track

In November 2023, the F1 Esports 2023 season embarked on what was anticipated to be a groundbreaking journey, only to encounter an unforeseen hiatus post its inaugural race. This article endeavors to dissect the multifaceted reasons behind the season’s temporary derailment, the legal intricacies involved, and the strategic maneuvers adopted for its resumption.

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F1 Esports 2023

The Preliminary Checkered Flag

The commencement of the F1 Esports 2023 season was met with considerable enthusiasm, underscored by Thomas Ronhaar‘s triumph in the initial race. However, the expected continuation in mid-December 2023 failed to materialize, leading to a period of unsettling silence from the organizing entities. This pause raised numerous questions regarding the sustainability and governance of esports tournaments.

The Core of the Controversy

Central to the cessation was a disagreement between Formula 1, the participating teams, and the mandated sponsorship conditions by Fanatec. The stipulation necessitated the display of Fanatec’s equipment in all team-related content, a directive that did not sit well with various stakeholders. The resultant financial discontent, primarily around the non-reimbursement of travel expenses, showed the underlying contractual and sponsorship dilemmas plaguing the esports domain.

This legal scenario shows the critical importance of robust, transparent contractual agreements in esports. It highlights the potential pitfalls of sponsorship agreements that may not fully align with the interests or expectations of all involved parties. Furthermore, it underscores the necessity for clear communication channels and dispute resolution mechanisms within the contractual framework to preemptively address and mitigate such impasses.

Strategies for Resurgence

In response to the hiatus, a restructured calendar was unveiled in April 2024, signaling a strategic pivot aimed at cost optimization and operational efficiency. This adaptive approach not only facilitated the season’s continuation but also prompted a broader reflection on the operational and legal frameworks governing esports tournaments.

The F1 Esports 2023 episode should be a case study for the esports industry, emphasizing the need for:

  • Comprehensive and flexible legal agreements that account for the dynamic nature of esports.
  • Enhanced clarity in sponsorship deals to ensure mutual understanding and expectations.
  • Proactive engagement with regulatory challenges and the adoption of best practices for dispute resolution.

Conclusion

The suspension of the F1 Esports 2023 season highlights the complex legal and operational obstacles found within the esports industry. As the field progresses, stakeholders must create a legal and regulatory framework that promotes sustainable growth, encourages innovation, and upholds the integrity of competitive esports.

Image source: Racefans.net

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Author

  • Leonid Shmatenko

    Leonid Shmatenko is part of Eversheds Sutherlands’ data protection and technology law team. He has vast experience in regulatory and general issues in the areas of eSports and Blockchain. He advises eSports associations and clubs on all legal issues, advises and supports crypto startups in all matters from planning, preparation to execution of private and public token offerings (so-called Initial Coin Offerings or ICOs). Furthermore, Leonid Shmatenko specializes in international arbitration and has participated in several arbitration proceedings (SAC, ICC, DIS, UNCITRAL, ICSID, ad hoc) as a party representative and secretary of the tribunal. Leonid Shmatenko studied at the Heinrich Heine University in Düsseldorf and is currently pursuing a PhD in international law. After his successful first state examination (2011), he completed his legal clerkship, inter alia, at the German Embassy in Lima and within international law firms in Düsseldorf and Paris. He passed the second state examination in 2015. He is an external lecturer at the National Law University of Ukraine “Yaroslav Mudryi”, where he teaches International Investment Law. He is admitted to the Bar in Switzerland and Germany. Before joining Eversheds Sutherland, Leonid Shmatenko worked as an attorney at leading law firms in Geneva, Munich and Paris.

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