Law of the Game on Joystiq: Tournamentality
by Mark Methenitis 
{ Sep 12th 2008 at 8:00PM }
Each week Mark Methenitis contributes Law of the Game on Joystiq, a column on legal issues as they relate to video games:
I get a surprising number of questions about video game tournaments and whether those constitute gambling. So today I'm going to discuss the matter specifically. I want to state up front that because this varies from state to state, please consult an attorney before attempting to set up a tournament. If you can't figure out what the laws in your state are, check with the state's Attorney General. Even if you have seen other tournaments in your area, you need to know what rules you have to play by to host your own. It's far better to be cautious than to be in jail. You've been warned. Now, back to our discussion...
Professional sports are legal and gambling (in general) is not in the United States. Video games, however, seem to be consistently stuck between the two. Part of this is due to video games being, in relative terms, the new kid on the block. And part of this comes from the structure of the tournaments themselves. The last bit comes from the skill-chance continuum that games are placed on. But let's take each of these issues one at a time.
In an ideal world, we'd have a true gaming league and none of this would be an issue. However, since games are relatively new, no such league has risen to the level of the sports leagues that exist. The league model has many issues, largely with anti-trust, but it doesn't face a gambling issue. The potential gambling issue comes from the typical tournament model that works well for a "new" sport: pay to play.
That's not to say there aren't other models. Free tournaments with donated prizes would likely be governed like giveaways and sweepstakes rather than gambling, and those are legal most everywhere. Pay-to-play charity events with token prizes are governed under an entirely different set of rules, and while more allowable, have to follow those rules to avoid being accidentally labeled gambling. Charity poker tournaments and charity casino nights face a similar problem.
But it's this pay-to-play model, where the winnings are based on the actual entry fees, that can become problematic. Let's be clear: If there's outside wagering on the tournament, there's no question that's illegal in most places, just like betting on sporting events or horse races. It all has to do with what are considered the three elements of gambling: consideration, chance, and prize. Consideration means you're giving up something of value. Your consideration is for a chance to win a prize. The American attitude toward wagering in this way tends to be: it's better to be able to bet on your own performance (but only that you'll win) than on someone else's performance; and it's better to be able to bet on something involving skill than on chance.
So, this typically comes down to the local opinion on video games. There are very few pure skill games in the video game arena, as even the concept of random re-spawns can introduce an element of chance. However, by and large video games have more skill elements than they do chance ones. I have yet to see a district draw any lines within the "video game" realm, making tournaments of one game type legal and another not legal, but it's entirely possible.
Again, the first rule is to check with local authorities before hosting a tournament. Depending on the type of tournament you want to hold, different rules may apply. I should also mention that online tournaments can also bring federal law in the US into play, and international law into play if you aren't thoroughly screening the players. Until the point that there's some sort of uniform federal gambling regulation (other than an outright ban), I would use far more caution in organizing an online tournament for a prize than I would with a local one.
However, this isn't always the case. The most analogous sport to professional gaming is, in my mind, golf. In fact, in solo games or team games, it would be pretty easy to create a professional league that mirrors the PGA. (For the unfamiliar, the PGA in a nutshell: each player is an "independent contractor" subject to a series of restrictions, but also eligible for some group benefits, such as the pension fund. Your ability to participate is largely governed by your performance. You either play in or out. Open events allow outsiders to play too, but there is a registration fee. The PGA pays out winners based on its revenues.) The difficulty is a game league has to rise to the level of having enough revenue to support this model. After all, the PGA pays a hefty sum to tournament winners. If someone can find a marketable model for televising gaming matches that draws in viewers, then gaming would certainly graduate to the "major leagues." In fact, it seems to be more of a matter of when than if.
So, what is the downside of tournament violating laws? Well, fines and jail time are the typical result of illegal gambling. It varies from state to state whether the organizers or the organizers and players can be held liable for the activity. If you frequently play in pay-to-play tournaments, it might be in your best interest to check your local laws on player liability for gambling. Ideally, someday someone will make an online resource that simplifies researching this issue in your state, but for now, just play it safe.
Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.
The content of this blog article is not legal advice. It only constitutes commentary on legal issues, and is for educational and informational purposes only. Reading this blog, replying to its posts, or any other interaction on this site does not create an attorney-client privilege between you and the author. The opinions expressed on this site are not the opinions of AOL LLC., Weblogs, Inc., Joystiq.com, or The Vernon Law Group, PLLC. As with any legal issue that may confront you in a particular situation, you should always consult a qualified attorney familiar with the laws in your state.
Professional sports are legal and gambling (in general) is not in the United States. Video games, however, seem to be consistently stuck between the two. Part of this is due to video games being, in relative terms, the new kid on the block. And part of this comes from the structure of the tournaments themselves. The last bit comes from the skill-chance continuum that games are placed on. But let's take each of these issues one at a time.
In an ideal world, we'd have a true gaming league and none of this would be an issue. However, since games are relatively new, no such league has risen to the level of the sports leagues that exist. The league model has many issues, largely with anti-trust, but it doesn't face a gambling issue. The potential gambling issue comes from the typical tournament model that works well for a "new" sport: pay to play.
That's not to say there aren't other models. Free tournaments with donated prizes would likely be governed like giveaways and sweepstakes rather than gambling, and those are legal most everywhere. Pay-to-play charity events with token prizes are governed under an entirely different set of rules, and while more allowable, have to follow those rules to avoid being accidentally labeled gambling. Charity poker tournaments and charity casino nights face a similar problem.
"The American attitude is it's better to be able to bet on something involving skill than on chance." |
But it's this pay-to-play model, where the winnings are based on the actual entry fees, that can become problematic. Let's be clear: If there's outside wagering on the tournament, there's no question that's illegal in most places, just like betting on sporting events or horse races. It all has to do with what are considered the three elements of gambling: consideration, chance, and prize. Consideration means you're giving up something of value. Your consideration is for a chance to win a prize. The American attitude toward wagering in this way tends to be: it's better to be able to bet on your own performance (but only that you'll win) than on someone else's performance; and it's better to be able to bet on something involving skill than on chance.
So, this typically comes down to the local opinion on video games. There are very few pure skill games in the video game arena, as even the concept of random re-spawns can introduce an element of chance. However, by and large video games have more skill elements than they do chance ones. I have yet to see a district draw any lines within the "video game" realm, making tournaments of one game type legal and another not legal, but it's entirely possible.
Again, the first rule is to check with local authorities before hosting a tournament. Depending on the type of tournament you want to hold, different rules may apply. I should also mention that online tournaments can also bring federal law in the US into play, and international law into play if you aren't thoroughly screening the players. Until the point that there's some sort of uniform federal gambling regulation (other than an outright ban), I would use far more caution in organizing an online tournament for a prize than I would with a local one.
However, this isn't always the case. The most analogous sport to professional gaming is, in my mind, golf. In fact, in solo games or team games, it would be pretty easy to create a professional league that mirrors the PGA. (For the unfamiliar, the PGA in a nutshell: each player is an "independent contractor" subject to a series of restrictions, but also eligible for some group benefits, such as the pension fund. Your ability to participate is largely governed by your performance. You either play in or out. Open events allow outsiders to play too, but there is a registration fee. The PGA pays out winners based on its revenues.) The difficulty is a game league has to rise to the level of having enough revenue to support this model. After all, the PGA pays a hefty sum to tournament winners. If someone can find a marketable model for televising gaming matches that draws in viewers, then gaming would certainly graduate to the "major leagues." In fact, it seems to be more of a matter of when than if.
So, what is the downside of tournament violating laws? Well, fines and jail time are the typical result of illegal gambling. It varies from state to state whether the organizers or the organizers and players can be held liable for the activity. If you frequently play in pay-to-play tournaments, it might be in your best interest to check your local laws on player liability for gambling. Ideally, someday someone will make an online resource that simplifies researching this issue in your state, but for now, just play it safe.
Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.
The content of this blog article is not legal advice. It only constitutes commentary on legal issues, and is for educational and informational purposes only. Reading this blog, replying to its posts, or any other interaction on this site does not create an attorney-client privilege between you and the author. The opinions expressed on this site are not the opinions of AOL LLC., Weblogs, Inc., Joystiq.com, or The Vernon Law Group, PLLC. As with any legal issue that may confront you in a particular situation, you should always consult a qualified attorney familiar with the laws in your state.
Reader Comments (Page 1 of 1)
Wiinterfang @ Sep 12th 2008 10:10PM
That was well written Joystiq, I wish I was smart enough to discuss it.
Mr Khan @ Sep 12th 2008 10:29PM
The departed Mr ESC (even his Ghost is dead) would have found something good to say here
dj_xero @ Sep 12th 2008 10:32PM
I used to hold DDR tournaments all the time. I guess it does come down to the type of game players are competing in.
FSK405K @ Sep 13th 2008 4:49AM
Freakin' American puritan dickholes. I want to be able to put in my five dollars, win or lose based on my skill and luck, and earn an outcome based on my final ranked position in a ladder. Why do people feel this is an appropriate thing for the government to regulate? Watch out, someone might actually take the time to become skilled at something.
There was an FPS a while back that had a pay model; deduct money from your balance whenever you die, and reward you money whenever you fragged someone. As interested in it as I was, because back then I was pretty good at FPSs, from what I hear, the actual gameplay was not terribly good. I wonder if it's still around.
P!ke @ Sep 13th 2008 10:38AM
The only reason gambling is illegal in American is the same reason Weed and Hooking is. It is hard to tax no one reports the income, if America can't get it's grubby hands on a cut of our Money they don't want it legal.
Carlk @ Sep 13th 2008 11:22AM
Well, sometimes Id wish game tournaments were ilegal in my country too.
That would definetly end with these annoyance they are.
Thumbs up america.
bobartig @ Sep 13th 2008 2:48PM
Gaming tournaments are hardly new. Magic the Gathering has been hosting tournaments for over a decade now in every major metropolitan area with thousands of dollars worth of prizes to be had (ok, now its millions, but so what?).
Gaming (in the legal sense) usually refers to gambling, that is, games of chance where skill does not play a significant factor in the outcome. So, "games" like the lottery and slot machines, fall into this category, and are considered gambling. There's sort of a state sponsored "grey area" with games like Bingo and carnival games, where they are basically gambling, but state sanctioned for whatever reason.
Games of skill, such as video games, and Magic, are competitive activities, like sports. Skill and individual talents contribute significantly to the outcome, and it can be demonstrated that an experienced player will beat a novice with enough regularity that the game is not 'random'.
Recently, poker has been trying to get recognized as a game of skill, since skill plays an important factor in determining the outcome, and experienced players will consistently beat novices. A lot of the opposition has basically been the fact that it uses playing cards, and is mainly present in casinos.
I owned a gaming store in Maine, so before opening I was somewhat concerned with the prospect of gaming events being considered 'gambling'. Initially, I was concerned because I misread some and it looked like game tournaments could be considered carnival games. After some 'back of napkin' estimations and additional research into the local statutes (IANAL, but I'd like to be some day), I was convinced that I could demonstrate that a the video games and card games for which I was holding tournaments were indeed games of skill, and as long as I didn't have prizes over ~$1500 in value, it would not cause problems. That is, unless I was holding a Yu-Gi-Oh tournament, where, even though I'm familiar with the game, the outcome seems pretty damned random to me most of the time.
bobartig @ Sep 13th 2008 2:51PM
I should say that video games and Magic "should" be games of skill in paragraph 3 there, since someone might debate that at some point, and this may not be properly established.