Month: May 2019

Washington state a long way from gambling regulation

Will Washington State have legal sports betting?  We’re probably years away from that happening despite the fact that other states across the nation have been proactive in drafting legislation to legalize gambling in their state.

Last year, the United States Supreme Court struck down the federal law that banned sports gambling in all but a handful of states.  The U.S. Supreme Court left it to the individual states to decide whether or not they allowed gambling.  Currently, there are 8 states that have passed laws to allow legal betting in pro and college sports.

In the 2019 legislation session, Olympia had three bills on gambling on pro and college sports.  But none of those bills came close to passage.

HB 1975, as outlined by the Tacoma News Tribune, was the most notable as it would have allowed Vegas-style gambling only at tribal casinos.  As you might expect, there was opposition by trade groups representing card rooms, sports bars and restaurants.

This doesn’t even consider the possibility of mobile sports betting.  HB 1975 would have allowed bets to occur over one’s phone only if the individual is in a tribal casino.  But first, the stakeholders must decide on a platform.

HB 1975 received the most attention because of the strong backing by the tribal casinos.  But this was offset by other potential venues for gambling including the Emerald Downs racetrack in Auburn, Washington.  Emerald Downs, which also houses a casino on its premises, voted against the measure despite the fact the track is run by the Muckleshoot Indian Tribe.

Since this is a new issue for lawmakers to grasp, there are a lot of questions and concerns.  One of the major issues is the possibility of the rise of gambling addiction.  In addition, the economic impact of regulating sports gambling is an interesting proposition for the state which is always is always looking for ways to generate revenue.  According to the American Gaming Association, there is an estimated $58 billion bet on the NFL and college football each year.  But, most of that is illegal.  If the state can realize on a fraction of the amount of money through regulated sports betting, it would certainly be a boon.  HB 1975 which would allow sports betting on tribal lands would mean that state and local governments would not receive tax revenue but only through a trickle-down affect from consumer spending.

If, or maybe when, sports betting is legalized in the state, one would have to think that the Washington State Gambling Commission would be a part of overseeing regulation.

Other states including Montana and Oregon have moved forward in legalizing sports gambling.

Esports gets its first big contract lawsuit

Esports has its first big contractual lawsuit as Turner Tenney, also known as “Tfue” sued Faze Clan Inc. (“Faze Clan”) earlier this month in the Superior Court of the State of California.  The lawsuit underscores an issue in the nascent sport.

The Complaint states that Tfue is a 21 year old professional gamer and content creator/streamer.  His videos are viewed by millions, sponsors are willing to pay for Tfue to perform in and create videos that will, at least in part, promote their goods, services and brands.

Gaze Clan is an esports entertainment company according to Tfue.  He signed a “Gamer Agreement” with Faze Clan when he was 20 and describes the contract as “grossly oppressive, onerous and one-sided.  Notably, Tfue underscores that Faze Clan was to receive up to 80% of the revenue paid by third-parties for his services.

Tfue also claims that they violate California’s Talent Agency Act as he claims that it protects artists and Faze Clan is an unlicensed talent agency operating within the state.

In addition to the alleged illegal contract and illegal procurement of employment, Tfue claims that it has diverted money owed to him for themselves.

Tfue claims that the Gamer Agreement had an initial term of six months and would automatically be extended for an additional thirty-six months if certain conditions were met.  As part of the lawsuit, he is requesting termination of his Gamer Agreement.

Despite letters from his attorney regarding a breach of the Gamer Agreement, Faze Clan, denied that it had breached the agreement.

In addition, Tfue claimed certain sections of the contract were in violation of state law including an exclusive “Matching Right” section

He also claims that Faze Clan passed up on a sponsorship deal for him due to a conflict the company had with one of its competitors.

This lawsuit is unique in esports as there has been few, if any, contractual disputes that have gone this far.  FazeClan claimed that it would release the full contract so that the public can see the terms.  This seems like a very good PR move but bad litigation strategy.

Faze Clan recently released this video which responds to allegations in the lawsuit and give some context to the situation.  In it, they state that Tfue had previously signed a Gamer Agreement with another organization and had attorney to look over his contract.  Moreover, they believe that he was set on starting his own organization and was looking for a way out.

This will certainly a lawsuit to watch.  Esports is evolving and contractual disputes are bound to occur as players become more savvy about what they are signing.

“Skins” lawsuit filed by owners of Tribal Casino go after Valve

A “skins gambling” lawsuit was filed in Washington State last month by a Native American Tribe that owns the Quinault Beach Resort and Casino citing that Valve’s CS:GO use of skins is illegal gambling. The Quinault Nation argues that Valve’s video game, Counter Strike: Global Offensive, did not have a license to operate, facilitate or otherwise engage in any form of gambling. The lawsuit was filed in Grays Harbor County, Washington.

Quinault Nation is a federally recognized sovereign Indian Nation consisting of Quinault and Queets tribes and descendants of five other coastal tribes. It owns and operates and Indian gaming casino licensed by Washington state and regulated by the Washington Gaming Commission.

Valve is a Bellevue-based video game and online content platform company. “Skins,” as defined by the lawsuit are primary currency used “by illegal, unregulated, and unlicensed online gambling website.” They are “add-ons” to enhance the video game experience. They can be bigger guns, different outfits and more. These “skins” must be purchased with money and are not included as part of buying the video game.

According to the lawsuit, Valve was complicit with the “skins” economy as it offered a “key” for $2.50 to access virtual items that were worth much more than the value of the token. It also “allowed gambling websites to use Valve accounts on Valve’s servers and Valve’s computers to effectuate gambling transactions.”

Below is an example that was embedded in the lawsuit.

The Quinault Nation is requesting a court order requiring Valve to stop offering crate opening online slot machine gaming until a time in which the Washington Gaming Commission can examine it to determine if it requires a license.

The lawsuit builds on previous litigation which included an attempt to bring a class-action lawsuit against Valve but those lawsuits were sent to arbitration as individual cases pursuant to a class action wavier and arbitration clause in Valve’s Subscriber Agreement.

Here, The Quinault Nation has an interest in Valve’s alleged “skins” gaming as they believe it takes away from its own legal and licensed gambling enterprise. They believe that Valve is engaging in unfair competition with the legally licensed, regulated gambling. Notably, it explains that this is due to neither Valve or internet gambling sites using Valve’s virtual items having to abide by gaming laws and regulations, and consumers and the plaintiffs being harmed as a result. It cites a consumer protection component as well since there are scammers out there that are not regulated that may sell fraudulent items on web sites.