E-sports — aka electronic sports, aka competitive/professional video gaming — offers a novel and burgeoning form of  competition,  frequently with teams and often viewed by large audiences, now including in-person, paying crowds. Some e-tournaments have won huge responses, such as a 2014 event that attracted an estimated 90 million viewers. As this new entertainment form rises, what might be some of its legal hurdles? Victoria G. Carthorn, a Biederman Blog editor, discussed some of these in a recent question-and-answer exchange with Zachary Levine, Esq., a partner in the law office of Wolk & Levine in Glendale and an adjunct professor at Southwestern Law School who teaches courses on video game law. This discussion is particularly timely with the recent opening of the Blizzard Arena for e-sports in Burbank.

Question — Based on your expert knowledge, can e-sports be classified as skill contests, akin to more traditional and familiar past times like football and baseball? Which way are courts leaning on this issue, which may have some key legal effects, and do you see eye-to-eye with with current holdings?

Answer — E-sports absolutely can be classified as contests of skill, but there is no federal classification; each state goes through its own analysis. For states that apply the majority rule, or the dominant factor test, a game is a contest of skill when skill predominates over chance in determining a winner.

Four elements of this test were outlined in Morrow v. State, 511 P.2d 127, 129 (Alaska 1973): (1) participants must have a distinct possibility of exercising skill and have sufficient data upon which to calculate an informed judgment; (2) participants must have the opportunity to exercise the skill, and the general class of participants must possess the skill; (3) the skill must sufficiently govern the result; and (4) the standard of skill must be known to participants, and this standard must govern the result.

The application of these factors is incredibly subjective — one state determined that a golf hole-in-one contest was a game of skill, another that it was a game of chance; some states determine that three-card Monty is skill, others that it is an illegal game of chance. Recent decisions, though, suggest that video games in general will be classified as contests of skill, the same as traditional sports. This is so, even though some courts have commented on the presence of random-number generation and random-chance elements in video games. I agree with these rulings — despite the existence of chance in video games, skill really does determine the outcome of most games. Although it is possible that chance may take over in some cases, chance plays a role in real-world and traditional sports as  well.

For states that apply the minority rule, or the pure chance test, a game is one of chance only when a person’s judgment plays no part whatsoever in the selection and award of the prize. I don’t think anyone would argue that video games fall into that category.

Q. — If e-sports are determined to be a sport, important legal issues may follow, including whether action should be taken against states regulating betting on them via the Professional and Amateur Sports Protection Act. Other issues might arise with the potential application of sport-specific statutes. Some of these that might apply to aspects of e-sports might affect its broadcasting, gender equity, and participant representation. How do you see sports regulations possibly affecting e-sports’ growth?

A. — I believe the industry is best-served by aligning e-sports with traditional sports, and removing the prefixes so all sports are treated and regulated the same. In my opinion, current laws against sports betting already apply to e-sports and they should. As colleges recruit e-athletes, the same laws and rules that protect student competitors should also apply to e-athletes. These regulations don’t inhibit the growth of a sport, they merely protect the participants.

Q. — In your experience, how do misconceptions in the industry — specifically whether e-sports athletes are employees or independent contractors for their teams — affect this entertainment’s growth?

A. — Most of the agreements I have encountered so far for e-sports teams and athletes attempt to categorize e-sports athletes as independent contractors; this is a misclassification in most cases, I believe. Even under normal employment analysis, a contract that requires an e-sports athlete to live in a house with teammates, practice full-time, participate in competitions, and travel to events at the whim of the team owner would constitute an employment agreement, regardless of what it is labeled. However, when dealing with a contract for a sports team, many states have already issued overarching rulings on classification. For example, in California, the Labor Board determined that athletes on teams with owners, managers, trainers, coaches, or captains with the right to direct and control the details of a player’s activity are employees, and individuals participating in contests as individuals, without teammates, are generally independent contractors.

Q. — In addition to sport-specific regulations that may be applied to e-sports, potential challenges also may occur with consumer protection statutes, securities laws, and intellectual property rights. Is it an issue that a game, created for individual use, gets broadcast to large audiences? Will game makers have standing in their products’ broadened uses? Many of them have seen their games played in public before, such as in shopping mall events. But what do you make of the heightened level of continuous competition that will occur, say, at the new Blizzard Arena?

A. — Broadcast and streaming of games without a license will be a problem, and organizing tournaments in general may be, as well. The copyright holders for video games have the right to control the public performance of their works. Although a board game tournament was once declared not to be a public performance, video games are significantly different in terms of their audiovisual content. They would be more analogous to a movie — and a tournament might be akin to a public showing of a copyrighted film. Video games are also licensed, not sold, and most of their terms prevent the use of the games in commercial enterprises without permission. For any tournament that tries to organize without the consent of the owners of the games being played, I expect to see a swift cease-and-desist letter from the games’ copyright owners. Nintendo in particular, has already issued these letters to tournament producers, sometimes preventing the entire event and sometimes just preventing an online stream of the action.

Zachary Levine earned his bachelor’s degree at the University of California, San Diego, and his juris doctor degree at Southwestern Law School. Through the Moot Court Honors program at Southwestern he participated in the John Marshall Information Technology and Privacy competition where he was the 2nd Place Oralist. He is a partner at Wolk & Levine LLP in Glendale. He is an adjunct professor at Southwestern, and has a strong legal background in licensing agreements, intellectual property, domain disputes, e-commerce, and gaming. He is the author of the “Litigation” and “Cloud Law” columns for the monthly newsletters E-Commerce Law Report and Cyberspace Lawyer and is a contributing author to Scott on Multimedia Law, Scott on Information Technology Law, the IT Law Wiki, FindLaw, and Superhero Law, as well as the former author of the “FAQ” column in the E-Commerce Law Report. He also shares a regular column on real estate issues in the Business News section of the Sunday Los Angeles Times. He has been admitted to practice law in all California state courts, the United States District Court for the Central District of California, the Ninth Circuit Court of Appeals, the Court of Appeals for the Federal Circuit, and the United States District Court for the District of Colorado.