What are the laws for online esports tournaments?
Legal notice: This information is legal information only and we do not guarantee the completeness or accuracy of any legal information provided. If you have any questions as they relate to your company, you should consult an attorney.
In my previous article, I provided an overview of how state lottery and gambling laws can restrict esports tournaments. In this article, I will overview how state laws can affect online tournaments.
Keep in mind that esports competitions represent a rather novel, and largely untested field of law. Depending on a state’s internal dynamics and public views toward a given esport event and gambling in general, a state may take a more “lax” approach despite its stated laws, or a more aggressive one. The following is only meant to be an introduction to potential pitfalls in select states.
Online Tournaments
Which laws govern online business activities is not always obvious, other than the state that the business itself operates in. The ability of states to extend their laws beyond their natural boundaries and “reach” into the business activities in other states is subject to much contention, change, and political posturing. However, when it comes to online tournaments, there are certain best practices that should be kept in mind.
Assume the gambling laws of the state of each participant apply.
While it is not always the case that other states’ laws will apply to your online tournament, as a general rule, states have broad power to protect their residents from activities that knowingly target their residents or intentionally and meaningfully operate in those states.
You may inadvertently open your company to such out-of-state regulations. For example, if any of your employees become aware that out-of-state residents are participating, for example through registration information (mailing address, IP address, etc.) or simple communication with the players. This becomes increasingly problematic if you repeatedly engage in such activities over a period of time.
Determine which states you will allow participants from.
You will need to determine, ideally in conjunction with your legal counsel, which state laws you are comfortable operating your tournament within and, as a result, from which states you will allow participants from.
Implement internal procedures for online entrants.
Your online tournaments should have set procedures and safeguards for determining which states your participants reside in to ensure no participants are playing from within a prohibited state, thus potentially subjecting you to state laws that you may not be prepared to follow. Consider implementing IP address-based geo-location restrictions, address verification, or requiring proof of identification before issuing prizes. Your legal counsel can assist you with preparing appropriate safeguards.
In my next article, I will cover relevant esports laws in Arizona, California, and Colorado.
Andre J. Castillo and his law firm, Castillo Corporate Counsel, PLLC, provide business law services to tech start-ups and small- and medium-sized businesses. In this capacity, he has represented companies in deals with the world’s largest video game publishers, Fortune 500 companies, and government agencies. An avid esports fan himself, Andre can carry his own against top players in the Street Fighter, Marvel vs. Capcom, and Samurai Showdown series. He graduated magna cum laude from the University of San Diego School of Law and holds an M.A. from the Johns Hopkins University-SAIS. He can be reached via email at info@cccp.llc.
