In this legal-focused episode of the podcast, with special expert guest Marius Adomnica (a partner at Segev LLP), we discuss the law as it applies to esports and video games and what we can learn from current cases, a recent court ruling on loot boxes, legal battles surrounding big gaming mergers & acquisitions including Activision-Blizzard, legal considerations for esports athlete contracts, G2 fighting with a supplier, and so much more!

Welcome to the business of esports podcast, the official podcast of esports. We

explore the intersection of business and esports, one of the fastest growing industries in the world

and the future. Have fun. Please welcome your host Paul esports. Prophet Dawalibi. The business of

esports podcast begins now.

From the keyboard to the boardroom. This is the business of esports podcast. I am Paul

Dawalibi. I'm joined today by my friend and co host, The Honorable Judge Jimmy burrata. For those

of you who are new here, welcome to the official podcast of esports. What we do is we cover the

most pressing, gaming and esports topics and news of the week. We look at all of it through a

business and C suite lens, we dissect, we analyze the business implications of everything happening

in this industry. For our regular listeners. Thank you guys for tuning in every week. Thank you for

all the love the five star reviews the ratings on the podcast, sharing it with your friends, if

you've done all that, thank you so much. We really appreciate it. Jimmy, how you doing this week?

A Paul having a great, great Wednesday day we record it's always a fun day for

me. Happy to have our listeners here. Welcome back, everybody. How are you doing, Paul?

I'm good. I'm so excited. Jimmy. For this episode, I'm actually pumped. I will say

I teased this episode. So for those of you who watch our Wednesday night live stream, so that's

every Wednesday night at 8:30pm. Eastern time, if you watch that live stream last week, you would

have heard me say that we have a very special episode coming up, we were going to bring on

Marius, a Dominika who is a partner at STG LLP. They're a law firm, like specialized in esports.

And so I've teased that episode. And and that's the sweet Jimmy, which is fun, right? You won't be

the only lawyer here. You'll have one of your kind here and we're gonna we're gonna hit on all the

big legal topics.

It takes a lot of pressure off. So I definitely appreciate Marius joining us. And

we've teased this numerous times, I think, since we since we all kind of had that private meetings,

you know, off camera, and I decided to do this episode. And every time we had a legal article

come up anytime that we had anything that really touched on this realm, we we've been teasing this

and so for those long term listeners for the people that know that this was coming, it's

finally here. And we thank you for your patients. And yeah, let's get to

we've saved some good topics, right? That's the most fun part. We saved some we

said specifically, we weren't going to cover them, because we saved them to do them with Marius here.

I just want to mention before I bring Marius into the into the podcast here, say get for those for

those of you guys who don't know, and Marius has been on the podcast before. So definitely go tune

into that episode that he was on previously. But Sega has one of the biggest or most important

esports law firms esports practices in Canada, they work closely with many leading Canadian

esports companies, including Canada's first esports arena, Canada's largest esports, a gaming

company, their lawyers combined, really unique, deep understanding of the esports space, they have

a broad expertise in a number of related fields, which is really important, by the way, because

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other things. And they really provide their clients with class, and industry leading service

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they'll help with everything from company formation, employment issues, intellectual

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be working with the kind of partner you absolutely want at your side. And the best part of all of it,

they're gamers to which I think is the big plus and the old, like, you know, you know, the prophet

would not have anyone on this show who wasn't a least fond and appreciated gaming as much as I do.

And on that note, Marius, welcome to the business of esports podcast once again.

Thank you Good to be here,

Marius. So I don't want to waste too much time here, we have so much to talk about.

I want to dive into a bunch of stories that we've flagged over the last couple of months that have I

think a unique legal component to them. And and I think it you know, I would love for you to break

down and here's how we're going to do it guys. For our listeners, Marius is going to break down the

legal considerations of every story from seeing from one side and the other because there's always

two sides, right to any legal dispute. And more importantly, I want I want to try and make this as

relevant for our audience as possible. So we understand the implications, right? Like what why

should we really care about all these things? Like two companies fighting two companies debating some

contract, like, why should we care and what are the implications for the industry, I think is the

most important part of all this and what I'm hoping to tease out so on that note, I say let's

start with this article from PC Gamer and And I thought it was an interesting one, because it's

related to loot boxes and I'll put this up here. We'll call this first segment the loot box segment

because we have a few stories here on loot boxes. And and this was about the headline here

Electronic Arts gets $11 million loot box Fein overturned. So another Linds appeals court ruled

that the food packs which is the packs of you know, cards or players that they sell are not a

form of gambling and that the fines should not have been imposed. In 2018, they investigated it,

they found that, you know, FIFA basically was in violation of gambling laws in the country. So they

find EA, and then that culminated into 2020 ruling which laid down this $11 million fine, but it was

recently overturned. And the court said the packs were used for game participation, not a game of

chance. And it claims that FIFA is a game of skill, and the packs add an element of chance. And

the packs are not opened in the matches themselves.

I think that wording by the way, Paul, the element of chance is super important for

the Court's reasoning and determination and can't wait to turn it over to Marius for his

interpretation. But also, again, that really relevant here, this is a decision by the what's

called the administration jurisdiction division. This is the Netherlands highest administrative

court. So for anyone that's been involved in legal trouble, they understand simple filing appeals,

how lengthy, lengthy this process can be. And you just laid out that this has been going on since a

2018 investigation. So you know, we're starting off with some good news here for EA. And I just

wanted to jump in because one that element wording an element of chance and that it was opened

outside of the game matches themselves. Were kind of interesting highlights here. interesting

takeaways Marius for I think, for your insight as well.

Yeah, I'm honestly a little bit surprised by the reasoning the court gave there, that you

can't open the packs in game. I mean, I don't think that really has anything to do with

anything. Think the issue of, you know, generally at law for something to constitute gambling, but

sort of back of the envelope test as it should be elements, that's the consideration, I have to pay

something to get a ticket for a chance, chance rescue randomness and determining the winner. And

there has to be a prize something of value that you get. I mean, it would loot boxes, you do have

a first you do have. Sometimes, you know you pay for them in game currency or you earn for playing

the game. But most of the time you have an argument that there is some you're paying

something for them. There's definitely chance there's you know, sometimes you get good good

packs, sometimes you get bad packs. Again, it doesn't matter that you can open them during the

game or not. Again, this seems like something where somebody who doesn't understand games sort

of made this decision. I think the best argument on loot box regarding loot box is not considered

gambling, gold is sort of the value of the prize. As long as that price stays constrained to the

ecosystem, that game you can trade it in for the real world cash and has no real world value. Then

I think, you know, arguably even No, it doesn't. loot boxes are not gambling. Rock Trump speaking

that way. So I think I think the court came to the right decision, maybe through not be the best

reasoning, but they got they got to the right place at the end anyway.

Marius, what were those three? That I think that's particularly interesting for

audience what were the three tests, decide if something is gambling or not?

consideration, which is a fancy legal word versus for paying something of value to get

something so you have to pay for the loot box? Chance. So there has to be a chance to use in

determining the winner, ie not skill. And there has to be a prize that has some sort of real world

value.

That's interesting. So what you're saying here is it fails on the third. Right,

potentially, or the or where you agree with the court's decision here is the implication therefore

I'm sorry to take this on a bit of a tangent but it's everything. That's what people are talking

about these days, right about making endgame items NF Ts, right. And NF Ts, arguably, could

potentially be traded outside of the game for real dollars, right? If we start seeing more in game

items being awarded as NF Ts, does that potentially. Does that create problems with loot

boxes specifically where today because you can't take it outside of the FIFA ecosystem. That card

has no real world value.

Yeah, I think that's a very good point actually, like it's the, the saving grace right

now for a lot of these loot boxes is that, like you said the prizes are bound by the game's

ecosystem and have no value but once you know in when something and created an open Steven that

goes out the window. So that that would change things a little bit. I mean, hopefully by the time

you know, these NF T's become more prevalent in games, a lot of sort of the history around

football worldwide faded a bit. We'll see what happens with that. But yeah, that's definitely a

consideration.

Are there are there like, repercussions to a ruling like this? Like, you

know, over the last few years, we've been doing the podcast, you hear so much about loot boxes and

wins and losses kind of on all sides. And you know, and there was a moment in history, I don't

know the exact timeframe where it felt like loot boxes were going to be heavily regulated, right,

it felt like the sentiment was turning against loot boxes. And, and you know, you saw companies

like EA losing horde cases like the one they lost in 2018. What do you think has changed, right?

Like and maybe is this am I viewing it incorrectly, like, it feels a little bit like loot

boxes were the big enemy. And everyone felt like they were going to be regulated and considered

gambling and a lot of heavy handed sort of court case losses. And it seems like that hasn't

happened. And if anything we see here this is overturned.

Yeah, I mean, I think sort of the, the tail that wags the dog on this this sort of public

opinion and media coverage and all that stuff. It's not the law, I mean, loot boxes, the same

issue as existed loot box systems. You know, 1520 years ago, just nobody cared until the whole EA

Battlefront fiasco, which just kind of, you know, kind of makes me laugh lol definitely sort of like

there's expression, you strike in one place. And the head happens in a number of places, sort of

how company sort of maybe gets a bit greedy, there's a scandal announced suddenly these be

everybody turns on loot boxes is sort of a boogeyman. But it's, it's not that much about the

law. I mean, law laws are there and a lot of the time, you know, to be frank, nobody really cares

that much nobody, like another example is with a like fantasy industry in the US. You know, for a

long time they were operating and it was totally fine. As a game of skill, then suddenly we got it

started getting a bunch of bad PR. And if the State Ag started doing them a couple of weeks

later, the laws didn't change the PRG. And I think the same is true here. Though we had the initial

sort of documents, fiasco of loot boxes became the target that came out of that for whatever reason.

And you started seeing this being tested, birthing, you know, like this loss of being

brought forward. But now as sort of time passes, people sort of turned our attention somewhere

else, I think you're gonna start seeing a lot less enforcement of this stuff. And not because they're

any more or less, contrary to the laws in the world before but just because, you know, the laws,

just people, ultimately, somebody has to actually enforce the law and their priorities are different

than nothing's going to happen.

So go ahead, Jimmy. So, I mean, these are some really interesting takeaways.

Mary's specifically, I think not just the misapplication of the law here by this Court,

which you know, kind of indicated, may or may not quite get it. But what I loved was the change in

PR, not in the change of the fundamental elements of loot boxes, or their application and use in

gaming. And what we see here particularly is a foreign jurisdiction, or at least foreign to us

here in North America, and their application of a FIFA title right in a FIFA loot box. And we have

tons of listeners here that are working at startups that are popular development firms that

are at publicly traded companies, such as EA and including em shore, what, you're our legal expert

for the day. And for anyone that's listening, that's thinking about developing a game with loot

boxes. That's a marketing agency that has clients that have games with loot boxes, or even someone

that just has children that purchases those loot boxes on their credit cards. I'm kind of curious

from a PR standpoint, as well as a legal standpoint, I guess a take home, or a generic

takeaway as to what are these landmines? What are these issues that we've kind of dived into here in

detail, but what are the more generic for for someone that's going to remember two or three

things right about loot boxes, about their their business and their interaction with loot boxes?

Why I think what would what would you give them as counsel or as guidance? I should say?

Yeah, I mean, there are things you can do like this not just have or don't have good boss,

you can implement them in ways that are sort of less likely to cause scrutiny. Like I've seen some

of these class action lawsuit pleadings, these blue box cases, and it's sort of, they just throw

the kitchen sink at, at the problem plaintiffs do. It's kind of verse Competition Act violations and

marketing issues, and this and that, and a lot of the time, even if broadly speaking, gambling is

not an issue some very some issues with Yeah, could arise out about, like, for example, if you

don't disclose the odds of, you know, whatever prizes, you're going to get into loot box that

potentially might raise issues under marketing. Oh, yeah, that's one issue. If you target them

blatantly, sort of that, children under 13, that's definitely an algo. Another big one is on we

already discussed this, but you know, the value of of prizes and making sure that there's no easy way

to convert them to real world cash, that's another one. So there are ways to do it to sort of

minimize scrutiny or minimize your risk of potential issues down the road. Ultimately,

though, you know, if somebody wants to sue you, they're gonna sue you like, there's no nothing you

can only do as a company 100%, but do to mitigate, as I mentioned.

Jimmy, why don't we we have another lootbox story here. But I think it's interesting

to do them sort of back to back because I think this is a different, a different take here. And

Jimmy, maybe you want to introduce introduce this one specifically. And I'll just tee it up for you

here. It's the NBA 2k class action suit.

And I honestly I think Marius is takeaways from from the last story really lead

into this one perfectly. So I'm glad we're covering both. You know, so this is a game

industry dot biz article. The title is class action lawsuit over NBA touquet loot boxes accuses

take to have unfair, deceptive and unlawful practices, that last bit being in quotation mark.

And then the sub i These called sub headlines, I never really aced that English exam. It says

plaintiff claims monetization model from psychologic. Or excuse me, the monetization model

psychologically distances players from the real impact of their purchase. So in essence, and this

was a story from Monday, March 7, so this month, were essentially a class action filing in Illinois

against take two and specific to NBA 2k. It adds that these loot boxes are particularly attractive

to minors who may not understand the link between virtual currencies and real world spending, or

that such purchases are often non refundable. I thought that that was an interesting add in we I

know we didn't talk about that with the last story. So already questions in my mind for you,

Marius. But yeah, again, the complaint really claiming that these loot boxes are targeting these

minors who are particularly susceptible, or using their parents credit cards, and not really aware I

think of the circumstances or the implications of what they're purchasing and what it is. So perhaps

even more of a fundamental, what is a loot box? And why are these children so susceptible argument

being made here? Not too sure. And I'll just end this and pass it to Marius with saying, you know

that these that this class of plaintiffs are claiming 5 million USD in damages. So again, as

our legal expert for the day, perhaps comparing and contrasting these two issues, you know, we had

a nice win for EA and the first story in here we have take two in hot water in the state of

Illinois, at least with a bunch of angry parents, apparently, whose children were scammed into

buying those $5 2k packs and getting all the cool end game items. No, I definitely don't want to

make a mockery of the issue. Because this is, again, a rampant and prevalent thing here. But a

very interesting take where we had a regulatory foreign body deciding whether or not something

violated the country's gambling laws, versus here now a class action of an aggrieved a group of

people so curious, your thoughts, your contrast? Yeah, you know, pick it away for us, please.

Yeah, I mean, like I just said, if somebody wants to sue you, we're gonna sue you. My

initial thought and seeing this lawsuit is sort of what what exactly is the claim here and like the

kind of go back to law school on sort of like, when you sue somebody, you need a specific port.

Here, it's, I don't know negligence. I can't really think of a very clear legal basis for this.

The issue of them targeting minors, you may maybe some kind of COPPA issues, or 13, or there's kind

of advertising and advertising issues, that kind of thing. But in general, my view of this law sort

of sort of, you know, just because something is maybe a moral doesn't make it illegal. So I'm not

sure the plaintiffs are going to do it on this one. But again, I'm not an expert on I'm not sure

was filed in Massachusetts, I think Illinois. They're experts on online law. But my sort of

initial reaction to this as Yeah, I'm not sure what basis

it's interesting, because on the last one, Marius, the the sort of the test you

laid out was really simple, right? It's like, Does this qualify as gambling? And there are these

three criteria that have to be met? Here, the plaintiffs can essentially claim any damages that

they want, right? Like, they claim unfair, deceptive, unlawful practices, it, it feels a

little vague, right, it when you're on the company side, sort of what is the defense against

somewhat? What feels like a little bit of a vague accusation here?

Yeah, well, a lot of time, you can make sort of pretrial motions, just seeking to sort of

dismiss a claim on that basis that it really kind of, it's unlikely to succeed, or it doesn't

disclose a bit of a clear legal cause of action. And there's different jurisdictions and different

types of bears. Most courts have that kind of procedure. And I expect that you know, one of the

first steps and as long as it'll be 2k, basically going out there and trying to get the claim set

aside. And it's actually at this stage where you see a lot of a lot of law being made in video game

law. esports law, actually, because most cases, don't go all the way to trial and get a full

written decision. If anything, you might get a decision on the initial motion to dismiss, it

might be dismissed, that happens sometimes, or it's not. Maybe the company just wants to make it

go away. So they, they'll settle it rather than keep fighting it. But that's, if I had to guess I

would say that would be the kind of the next big step. And we might see a story in six months about

what happened at the motion to dismiss and whether it was in the case was dismissed or not.

A question I get asked a lot is, like, where do these numbers come from? Right.

Like, when we're talking about the business side? It's, you know, I have always have a good answer,

right, a merger or an investment, I can explain valuation. But like, when you see something like

this, where it says the plaintiffs are seeking, it says at least 5 million in damages. Just for

someone who's not a lawyer like me, it's it's a bit confusing, what does at least 5 million mean?

Because that that could mean a lot more than 5 million? And and where do they get that number

from?

Yeah, I mean, maybe I shouldn't say how the sausage is made. But you'd be surprised, I

don't think that much thought goes into these numbers that the pleading stage. Ultimately, you

know, he actually went to trial, and you do have to establish, although your damages are

calculated, and versus sort of a lot, a lot that goes into that. But you know, it doesn't take that

much effort to just run a notice the claim and just put 5 million 10 million there. And you kind

of figure it out later. I mean, a lot of times you don't, you know, the rules vary, but you don't

necessarily have to state the amount of damage, you're speaking, it doesn't really make a

difference to a claim, to be honest with you in a lot of places. So maybe some places have rules

where you have to state that but a lot of the time, I think partly it's for headlines, and to

sort of put pressure on the company. You know, the general idea of damages is not to put the person

who was injured in the same place as they were before. That's how the calculation would happen.

If it did. So here, it would probably be something like, you know, how much did these kids and using

our parents credit cards, we'll have to figure that out. That's how we calculate. And if it's a

class action, a lot of time, you know, the court will have to approve a settlement. And, you know,

sometimes if the damages are not uniform across whole class participants, then you can have a

process where like, you apply and you tell them, you know, I spent this much or this much happened

to me, and they determine how much you get, like an example would be like the NFL concussion

settlements, each player, you know, the NFL was found guilty, but each player had to apply

separately and show how they were affected and gross, kind of like a effect like a matrix that

have to calculate how much damage you're entitled to. That can't happen here. It will be a lot

simpler and more straightforward. Like it's just dropping like I paid this much payback. But yeah.

And then sorry, one more kind of generic question. But I think it's important to

tease out here, especially with this episode, like, how do these things come together? Right?

Like, I've bought loot boxes, and I've been upset afterwards that I didn't get anything good out of

them, right? Like, should my next call be to you to try and get my money back from, you know, take

two or like, and I'm being a little bit silly here, but like, how do these kinds of class action

lawsuits even come together in the first place?

Uh, honestly, a lot of time. It's not actually, sometimes maybe there's one angry

person, but a lot of the time, it's the lawyers that are sort of gatekeeper. And this bears class

action lawyers who this is what they do. They Sue companies in class actions, and they're always

sort of like, on the lookout for opportunities, essentially. And sometimes, if somebody comes to

them and says, Hey, you know, I might get paid for all these loot boxes. So they go and they look at

our claim here. They look, you know, how many people pay for these loot boxes? What are my

general damages? And then if they want to pursue a claim they can I mean, the rules vary. I'm not

sure how it is Illinois, but generally speaking, in Canada, you only need one plaintiffs, class

action, represented plaintiff. And a lot of jurisdictions, everybody else was part of that

classes automatically unit, they don't have to opt in or anything. So you don't need to get you know,

like 50 people to get around available and say I'm going to start this last it's going to be the

floor would be one lawyer at one plaintiff. And we're we're off to the races.

Any other before we move on from from loot boxes here, Marius? Any other final

thoughts or, or takeaways for our audience in terms of, you know, legal issues around loot

boxes? Or maybe where you see some of these issues going or developing over time? Is it sort of a? Is

it a dead kind of topic in the legal world? And most of these lawsuits you think are going to

fail? Is it? Is it constantly evolving, like maybe give us a sense of where where all of this is

going with respect to loot boxes?

I definitely don't think it's dead. I think it's ongoing. There are a lot of loot boxes,

loot box losses, still sort of working our way through the quarter that started a year or two

ago. I don't think you're gonna see that many new ones in the next few years. I think sort of the

winds going out of the sails of being sort of this issue, and people are gonna move on to the next

one. But I think like you said, once we throw NF T's into the mix, you might see sort of like a

revival problems of the blue box. Because yeah, that does take away the third. defense companies

would have that just saying that, you know, it stays in the ecosystem, there's no cash value

price. And if you do, it doesn't, then it definitely looks a bit like gambling wreck of the

issues.

Um, let's move on. Let's talk about m&a and contract sort of disputes. Obviously, we

saw this year the biggest gaming m&a we've ever seen with Microsoft and Activision Blizzard, that

unsurprisingly has led to a number of legal issues. The one I think we want to talk about

today, and there's there's a number we could have touched on, I'm sure we're going to do another

episode like this. In fact, I know we're going to do another episode like this, but the one I think

worth touching on today is this one and Jimmy, I'll throw it over to you if you want to introduce

it.

Sure. So this is a story where US probes trade by Barry Diller, David Geffen and

also Alexander von Furstenberg. Um, you know, real quick you know, this group is has a combined net

worth in the 10s of billions of dollars correct me if I'm wrong here apologist like outrageously

successful group of individuals and and what's being alleged here or what's being claimed in

what's being written about in the story. Federal prosecutors and securities regulators are

investigating large bets made on Activision just days before the Microsoft acquisition

announcement. So in essence, this group of individuals bought options to purchase Activision

shares at around $40 a share on January 14. At that time Activision shares were trading at around

$63, meaning the options were already profitable. Obviously, we now know on January 18, Activision

announced that Microsoft would be acquiring the company for $95 a share. So these three men would

have stood to gain about $60 million in profit. The Justice Department is now investigating

whether any of the options trades violated insider trading laws. And additionally and separately, the

Securities and Exchange Commission is conducting a civil insider trading investigation. These

defendants were our I don't know if they're called defendants yet, Marius. I'll pitch that to you.

But this group of men were reached for comment, though the ones that responded, maintain that it

was a lucky bet that they didn't act on any information. of any kind that it was just one of

those coincidences and particularly of note, Diller has actually served on the board of

directors of coca cola with Activision CEO Bobby Kotick, and has described him as a longtime

friend, and perhaps a relevant detail in the court of public opinion, perhaps not. I'll leave that

for Marius, his determination here on our special Sagiv LLP episode, but kicking it to you marry us,

again, as our legal expert for the day. Similar, I think, to the rundown, you offered us with loot

boxes in in in the Netherlands court. If you could kind of run run us through here. The

considerations, the elements perhaps or just how you view insider trading, and the investigation

relating to, to this issue to the story.

Yeah, so I mean, again, not an expert on insider trading issues. But my biggest sort of

reaction to this is sort of, yeah, these guys are billionaires are very wealthy. You know, why

didn't we see what happened to Martha Stewart? Why Ray, risking jail time or, you know, being

prosecuted over? You know, yes, $60 million across three of them. That's a lot of money, not that

much money. Although, if it's worth what we're going to go through right now. It's definitely, if

it's a coincidence to hell of a coincidence, definitely doesn't look like like one. I mean,

ultimately, the government's gonna have to show that they acted on sort of non public material

information. And unless there's some kind of paper trail that, that shows that or somebody actually

sort of testifies and provides evidence to that effect. I think maybe we're gonna have a tough

time, actually, you know, convicting these guys. But it certainly doesn't look good. I mean, yeah,

there's a lot of there's been a lot of actually not just this issue, I think, even like Warren

Buffett Buffett's firm that accused of insider trading a those requisition so yeah, there's a lot

of issues with that transaction, I

guess. So do we think that absent any paper documentation, that it's really just

kind of baseless accusations that should be easily? Something easy to defend against? Is that

I mean, these are serious claims. But to your point here, like how does the federal prosecution

plan on proving them absent like that? random email? Bye, bye, bye, right?

Yeah, I mean, maybe they think they have something or raking get something. I mean,

ultimately, I think they probably wouldn't be bringing this case forward, if they got purchased

and get thrown out of water and lose, I think maybe even maybe have some paper evidence, or we

hope that maybe through sort of putting pressure on people involved in the case, they can have

somebody, you know, provide evidence. Again, we'll see what happens, I guess, but uh, you know, if I

have to bet right now, I will say that these, no, it's not going to go anywhere. Or maybe it will be

some kind of settlement will go away with foreigners.

Various I want to try and make this story, like, as relevant as possible to our

audience. And I will say, you know, a lot of our audience is of the call it retail trading crowd,

right? Everyone's trading their Robin Hood account these days, and especially gaming stocks, where

maybe they have a passion or it's a hobby, right. Or they may be employees of gaming companies that

are public or soon to be public. Like, given the amount of activity that's happening in gaming and

esports. A lot of these situations may come up where, you know, something may might happen, and

could potentially profit from it. Like it would be good, if you could to lay out maybe what people

should be thinking about in terms of, you know, well, what is the in the same way, sort of the

what define gambling, like those three bullet points? Like, what should people be thinking about

in terms of insider trading, specifically, but when you have information that could potentially

lead to you making a profit unnaturally?

Yeah, so So generally speaking, you know, you can't, if you have that information, you

can't, you can't create on it again, without going into detail on an expert. That's sort of the basic

idea. Especially if you work at one of these big game companies. And you have maybe you have stock

options or something like that. A lot of them will have actually like blackout periods where you can

exercise your options or sell stocks right before an earnings announcement, as NATO says, You got to

be careful about whatever the internal policies are. And just generally speaking, you know, I

don't know what the likelihood if it's if you're a small beta, and you're taking a few $1,000, the

government coming out here thing is probably not huge, but generally speaking, like, whatever

profit you're going to make isn't worth the risk and taking a lot of time.

Let me give you a real scenario, okay? And then forgive me, because I'm trying to

make it, like I said, as real as possible for our audience, your people, everyone's in discord

servers these days, and I see tons of them related to, you know, stock picking and stock trading,

right. And someone says, you absolutely need to buy stock XYZ. I know they're gonna go up. I

talked to the CEO, and he's posting this in a public discord channel, right? And it's a gaming

company, and you like it, and it's a cool gaming company, and you buy the stock. Now, this guy, we

don't know if his information is real or not, he claims he knows the CEO. Right. But if I, if I

acted on that, am I at risk?

Again, I couldn't tell you for sure. My initial thoughts are that, again, that's not

really nonpublic information. At that point. It's out there on the internet and some guys saying it,

then you're entitled to that, based on that it's not, you know, we steal the company telling you

the earnings are going to be this much or something like that. So something like that it

honestly, I don't think it raises a lot of issues. I think the bigger risk of that is whoever that

guy is who he says he is 9% of chances he's not. But legally, I don't think there there is a huge

risk on that. Thank you, again, you're thinking risk of losing your money.

Super important distinction, right? Because it seems like you're indicating on this

hypothetical, the source of the information while relevant and potentially damaging, not necessarily

as important as how available that information is, if you can obtain it from other public sources,

correct?

Yeah, if it's public, then you know, the idea is to level the playing field. Well, you

know, some investors don't have access to more information, but it's public and everyone can

access information. If anybody can go in that discord and see the same post, then there's less

of an issue there than it was actual nothing, generally only a few people know that. It's not

because I want to move on because I think the the next story is really, maybe the

biggest theme see around, you know, public outcry and legal issues around esports these days is just

player contracts. Right. And it probably has been for the last few years, starting with the whole T

foo, you know, FaZe Clan kerfuffle. Jimmy, let me hand it over to you to introduce this next one

here.

Sure. So, again, not just relevant, I think for today in terms of player and esports

contracts, but contracts in contractual negotiation in general, which we all come across

in our day to day lives, whether it's negotiating for a car or your lease, or a business. So

hopefully, there's some great takeaways on this story. And I'm looking forward to Mary's insight

here. So this is an article on the Washington Post. It's titled inside contract hell esports.

Players say predatory contracts run rampant, and even as esports blossoms into a billion dollar

industry, player contract negotiations are in a wild west so to speak. So um, you know, this

article seems to be an expose a piece, it does cover the T foo, as Paul called it kerfuffle. I

love that word. You gotta use that more. But you know, it starts basically with and also by the

way, there's a ton of legend esports players here that wanted to remain anonymous that came out

basically in support of this article, kind of shining a negative light on their experiences and

on their contract negotiation. With you know, with various teams and in various games and leagues. It

does put the spotlight on Jeff blase saying a former player on cloud nine to Overwatch League

team, the London Spitfire, saying who's now 22 claims that when he was 16, was really when

Overwatch kind of exploded. Overnight, he was getting all these emails to join Overwatch teams

heavily courted basically in a lot of pressure to sign contracts. Particularly he claimed that these

contracts would have very stressful windows where if it wasn't signed within a very short time

period, the contract offer would be pulled in rescinded, adding that these were 30 to 40 page

contracts, perhaps not enough time to find a lawyer, have them review and offer you counsel.

And also particular to these contracts. There were alleged unfair termination clauses that would

leave the player without pay contracts that could trade the player to a foreign country. The drop of

a dime. allegations that once the player sign these contracts that the teams would go and then

flip them Other teams for a quick profit. So really just a nasty Expo ze a nasty nasty

rendition of a lot of players experiences being approached with contracts from various orgs and

and how unprepared I suppose they were. There are comparisons in the article to the NFL, the NBA in

traditional meet sports that do have players unions that can kind of protect them. There was a

notation that for example, Activision Blizzard has a minimum salary has health insurance as a 401 K

and access to mental health services. Again, reference to T Foos experience with Faze clan in

the unfair distribution of sponsorship revenue. And other players that supported that those same

allegations that they were just used to drive ad dollars or sponsor dollars, but would only see a

small amount of that of what they brought in. But again, in essence, an article claiming or with

claims from dozens of players supporting or one another in their allegations, numerous denying to

release their identity for obvious reasons, but kind of focusing on terms of duress. And I suppose

unconscionability thrown thrown here and there throughout the article, a really great read, by

the way, if any of our listeners have the interest in getting into some of these issues on a deeper

level, but to tell us what it all means. contracts in general, of course, as well as the issue facing

players facing teams facing esports leagues, and publishers and developers facing orgs, something

that really touches I think, in almost every business in esports. Let's take it to Marius, to

get your thoughts on this.

Yeah, I mean, it's sort of more of a same or like, it seems like this story comes out every

six months, but sort of the direct contracts and all that. And every time people say, Oh, it's

going to get better, and maybe it is a little bit, the interesting one more professional. But yeah,

there's definitely still a lot of stuff going on out there. Especially the issue of sort of this,

like you have 24 hours to sign and we're pulling the offer, I would tell any player that sort of

deals with that, you know, call their bluff a little bit like they spent all this time and just

sort of recruiting you and figuring out if you're a fit for a team and putting the contract together

and trying to sign you like, do you think they're really just going to pull the deal? Because they

didn't even meet bear this arbitrary deadline? A lot of the time they're not. Especially if you get

a lawyer, you know, I haven't really seen them very often where somebody gets a lawyer and the

Lord speaks to the team, the team knows, because now you have both hours, you don't have time to

review, generally one, get a lot of time. The clock stops ticking so so fast. But yeah, it is

definitely it's not a good look on the industry to sort of try these high pressure tactics on on

people, especially when a lot of them are very young, like they're in this bunker. This boy, I

think, was 16. He said when he first got in got offered his contract. So you know, there's

definitely a lot of room there for sort of, you know, people are going to talk about unionizing,

or some kind of, you know, some way to protect players more than one and what's going on right

now. Because it's still it's still not a great situation for players. And the bigger teams have

are definitely I would say better than than the smaller teams. But there's still a lot of like,

small you know, not as well established organizations out there that are variable did

more. But yeah, it's definitely not not fun to see that stuff. And I think you know, the more stories

you see about this, the more pressure versus going to be for some kind of unionization or some kind

of governing body or some kind of way to clarify that. I think there's, there's definitely a need

for that, especially because then again, a lot of them are still young, we're not really

experienced.

Marisa, do you think part of the problem is just not enough players. And I'll

extend this to not just esports players signing player contracts. Like I feel like I could extend

this to esports companies signing any kind of long term contract in general, you think not enough,

retain a lawyer to go over this and understand the implications of every sentence like, you know,

when you get a 30 page document like this that's usually filled with quite a bit of legalese.

usually take someone like you to translate and make sense of it. And understand what are those

implications? Do you think the problem goes away if every player every company retained legal

counsel when they got something like this that had long term implications?

Yeah, I don't think it goes away fully. I still think you know, There's a lot more supply

than demand out of every players, a lot of the general situation is the players just happy to

sign on a team, a lot of times it's their first contract, or just like, I don't care, I'll sign

anywhere, give me the jersey. So even if you get a lawyer, I mean, getting a lawyer helps, it can

definitely iron out, it sounds a little more unfair terms. And you know, that you a little bit.

But the other issue is, a lot of the time teams will just like, stick to their guns, a lot of

these issues, they take it or leave it. And a lot of the time that players just goes, you know, take

it I've been in a situation players where I was like, Oh, this isn't really fair, but they're just

not willing to move. You can go try to find another offer. Or you can take it or not, you

know, the vast majority of the time, they'll just like, let me sign I'll take it. I especially have

an issue of sort of these sort of clauses were like that let a team terminate the contract. And

anytime you see this, a lot of other big teams, there's a few sort of, there's a few law firms

that kind of do contracts for a lot of these teams that have like, there's like a standard precedent

that goes around. And a lot of these have that initial termination, that just let you terminate

the contract at any time. And that's really unfair to the player, because you know, it doesn't matter

what else you negotiate in there, it doesn't matter what salary you get, or anything like that.

If you can just terminate your contract in two weeks notice, then it doesn't really matter. And a

lot of the time teams will sort of stick to their guns very much on the on those kind of provisions.

And, yeah, ultimately, very good.

No, I'm sorry to interrupt you. But that was a super important call out. And I think

that there's probably a handful of others that you would caution people to look for in their current,

I mean, obviously any contract probably grounds to find an expert to find an attorney to help you

navigate through something when it gets to that stage, but specifically certain clauses or

provisions that you would advise us like the termination provision, that I'm curious, your

thoughts, you know, hey, if you're, you know, based in California, make sure that the venues in

California, right, or if you know, other things that I think that you would draw a layman's

attention to, for any of us here that have experience in contracts, or that are going to sign

contracts at some point in our careers and in our lives, maybe a couple other provisions, clauses,

whatever you'd like to call them, that you say make sure to keep an eye out for those because

those are really the red flags, or those are really the you know, the important ones.

Yeah, so what termination provision would be the biggest one, there's sort of like, fence,

there's all that kind of stuff. The ability to move you and you get traded. And if you get

consent to that is another issue. But term, that's more of a business issue than like a contract

issue. But that's often a an interesting one as well. You know, sometimes if you're a player, like

you want to maybe have a shorter term, they can increase your value and move on to a better

contract. But sometimes maybe you want the security in the longer term. That's important as

well. And a lot of it is just kind of understanding what the contract says and what your

obligations are. Because a lot of easy are there. 3040 page contract burden, legalese, like, I, if I

was a lawyer, I would, it would take me like 10 hours to be approved. So even if you know what

you're getting into, if you don't like it, at least you'll know what it is going. Yeah. So

that's another reason just sort of get represented and sort of have somebody go through and help.

There's, I want to I want to finish with one last contract story here. And I think

this is maybe I'll say it's maybe the most sensational of, of all the stories we covered

today. And that is Jeetu esports. And Jimmy, I'll let you, you know, let you talk about this, but

it's another contract dispute involving one of the biggest esports teams in the world here. Let me

you're muted.

Thanks, Paul. I was gonna say I couldn't think of a better time to talk about this

issue. Cuz this week in Los Angeles is NFT LA. And this is a lawsuit between GTA esports and an NFT.

Provider Bottomly filed in the Los Angeles Superior Court. So a lot of overlap there a lot of

relevance to any of our regular listeners that are in Los Angeles for that convention. You know, we'd

love to hear back from you on how how the conference is going how these are interlab are

overlapping with one another what themes and things that you hear are going on because this is

an emerging industry and a lot of activity is going on here. So back to the story at hand to

Paul's point or references This is a Washington Post article Jeetu has filed a lawsuit against NFT

provider bond li again filed this month in the Los Angeles Superior Court. Essentially, G two and

bond li signed an exclusive partnership on June or in June of last year 2021. They were essentially

contracting by they I mean G to contracting with bond li to utilize G twos unique IP in resources

to launch an NF T program or vertical to their business. Bomb Lee was essentially tasked with

developing an acting as the sales agent for a G two NF T brand and NF T line. It's a little vague

in terms of what they were going to bring to light. However, if you go to the bond li website,

they do describe themselves as a company that executes essentially every step of the NFT

process. Something that I think we see often with a lot of NF T agencies that are particularly

coming or rising with with the rise of NF T's as well, of course. So in the lawsuit, G two

speculates anticipated profits and damages, exceeding $5 million. There seems to be some

speculation there again. But basically Jeetu alleging that they couldn't come to an agreement

over who was in charge of the responsibilities outlined in the contract. That Bodley essentially

stated they couldn't deliver that they sought to pause the agreement that GE to refuse and

thereafter sued. So I'm super interesting issue, I think, unfortunately, something that we see often

with NF T's today with with a lot of speculation, I think and criticism of others kind of joining in

on that train. But a legal contract in nature, applied here to an emerging industry, as well as

an ESA competitive esports organization seeking to really expand what they can do and how they

interact with their community. So I'm really interested in Marius and your insight, legal

arguments, I suppose, and supportive Jeetu and their expectations for bonding to develop this NFT

with their IP, perhaps, considerations and supportive bond Lee, who, again, is claiming that

the roles outlined in the contract were uncertain, and how perhaps how you reconcile that with what

they're claiming on their website, and perhaps what G TOS reasonable assumptions are, or what we

can reasonably expect from a conversation between the two of them and what that look like. And, of

course, some similar takeaways, more generic to contracts in general.

Yeah, I mean, without knowing exactly, you know, what the contract said, and what was

supposed to happen and didn't happen? A, you know, I, it's tough to say, who, who's right here, or

who's going to prevail? I mean, generally speaking, but like you said, it seems like a

pretty straightforward case, as you know, Jeetu wanted to get product on they sign a contract for

it. And Bondi couldn't deliver on Sure, if there was some kind of wiggle room, there was some kind

of damage to the contract, if Bonnie could still deliver, they would much rather have done that,

then, you know, risk of lawsuit and risk, the bad PR, that's going to come out of it. Because now if

I'm a company, and I'm looking to hire blindly, and, you know, to deliver what it says on their

website, and apparently they can't, because we just got sued like GQ, because for that specific

issue, so, you know, if I had to guess I'd say that, you know, Bonnie actually couldn't deliver

and probably maybe over promised something in the contract. Yeah, it's, it's kind of unfortunate to

see. Again, not sure there's been much in the way of third gen egolessness, for general lessons for

sort of esports and contracts in general step sort of the usual contract thing of buy to be as

specific as possible. The only real vagueness is, you know, I always kind of think about when I'm

drafting contracts, I think only due to like 15 minutes spent, like, carefully wording something

can save, you know, like hundreds of 1000s of legal fees down the road. It's kind of it's a

little bit ridiculous. But yeah, I don't know how much of the issue here was the contract being

vague or how much of the issue was finally not being able to deliver probably the latter. Yeah,

it's unfortunate to see it. I will note how shocked I am again, that various sort of lawsuits

and allegations going on or something rolling but at least there's definitely a lot of definitely

controversial topic I'd say. Even what's going on. I guess, this is more more of that.

Various what how does it How does something reach this point and I guess You know,

what would be the advice for if you're, you're in G two shoes, or you're in bond li shoes sort of

leading up until this point, right? Like, at what point if you're a supplier? Do you? Do you worry

about getting sued? At what point do you hire a lawyer? Right? At what point do you and if you're

on the other side, you're on the Jeetu side and someone you've hired, it hasn't delivered? Right?

What steps do you take? and in what order? Right? At what point does it get to the lawsuit? And what

do you think should happen before that?

In terms of worrying about getting sued, I think you should be worried from the beginning.

But uh, in my experience, a lot of people aren't a lot of the time, you will need to deal with people

just go and have good intentions and think, you know, it's all going to work out and it's just

kind of like, fine. We know, these guys sometimes are like, no, we'll figure it out that kind of. So

a lot of times, people don't spend a lot of time on papering stuff. Very specifically, they just

will put some vague lounger bear and like, tell them like, look, you know, this could be an issue,

they'll say, Oh, it's fine, it's fine. It's sort of that an ounce of prevention is worth a pound of

cure. Because, you know, when stuff goes wrong, you know, you look back and go like, Oh, maybe we

should have sort of paper that more clearly. But in terms of how it gets to this point, you know, a

lawsuit is almost never I would say, if you're in GQ excuse it's not first step. Just because you're

not going to it's not really going to get you anywhere. Yeah, you know, you're going to spend

all this money on legal fees. And unless the damages, you know, are really worth it, you're

going to you might pay more for lawyers, when you have to get that damages, or you're gonna have to

deal with the hassle of this lawsuit for years and years, if it doesn't settle. So I'm sure that, you

know, Jeetu didn't just say you didn't perform to them. The next day, there's usually a negotiation,

there's, you know, there's meetings, there's, you know, meetings and angry emails, there may be

angry, angry, formal letters. And if nothing happens, then then it goes to last, but it's not

the first, not the first.

And what's like, What's the timeframe on something like this? Because I think

a lot of people sometimes are, are or underestimate the, the timeframes involved here,

like, assuming GPUs in the right, and it's a slam dunk case. And, you know, that we know, we can see

the future and they're gonna win it. How like, how many months years like what is the timeframe for

GE to to ever see any money in something like

this? It in terms of like pursuing the lawsuit? Yes. Again, it really varies by like

jurisdiction, and how backed up the courts are and all that stuff. But assuming it goes all the way

to trial, at least a few years, to four years will be my guess. You know, the vast majority of

lawsuits, I think that's one thing people don't really get as they they don't go to trial. I think

like 99% of wealth builder fell natural get what the official status, but it's something like that,

just because the trial is so expensive, and there's so much risk. So they always, almost

always settled beforehand. But litigation process is just kind of a way to exert pressure on the

other side settlement more than a way to employee the draft. So well, that insight. So I mean, yeah,

if this goes to trial, yeah, years, but it might settle shortly before that. There might be some

kind of, you know, pretrial motion. I'm not sure you'd have a motion dismiss in this case, because

it seems like pretty straightforward case. You know, there's a contract how to interpret it, but

it's not like a blatant frivolous claim or anything like that. But yeah, it's, it's not going

to be a short time. And it's, it's not. I don't think GT is going to be happy at Munich, and this

process or whatever happens, even if they win, even if it goes to trial. And the other issue is,

even if you win, actually enforcing that judgment and collecting from the defendant is a whole other

ball of wax the entire courses in law school that you know, various remedies, and how you how you,

that's that's a whole other thing, not only if they don't have the money to pay, then you're out

of luck anyway, spend all this money and time in a lawsuit that didn't didn't go anywhere.

I'm sure there'll be long gone by then. That's such a funny, funny addition, I think

to your commentary, I just wanted to add in support of what you said Mary is, you know, I, I

practiced in California, I probably had over 100 cases venued in Los Angeles and in LA Superior

Court, right on point I think about two years minimum before this ever even sees anything. As

far as courtrooms are concerned, obviously there's procedural hearings and things of that nature. But

I just wanted to mention la in particular, is so backed up that they have an expedited system for

certain cases. And all you have to do is As a defendant or as a party that that case is file,

enough motions to get kicked out to a different circuit in Southern California. And then you kind

of restart the clock again. So it's a tactic that some of the less ethical lawyers used where they

would just file random motions, the court would say, Oh, this isn't on our Fast Track, because

it's becoming complicated. Let's put you in Torrance, let's put you in Norwalk or you know,

somewhere outside of LA. And essentially, you go in front of a new judge a new courthouse, and you

kind of start over again. And it extends the life cycle of this case from, you know, two years to

sometimes three or four. And like you said, that's one consideration. The other consideration is, is

this bonding company? Good for it? Right? Are they even going to pay? So I just think you hit every

relevant angle of this, of this case on it right on its head? Yeah, of course. Go ahead.

The courts being backed up as an issue here as well, here in British Columbia where I am,

if you want to book a trial date, its minimum 18 months ahead of time. And there are at least a

court dates every month. And basically what happens is every law firm in the city has all

versus falling at 8:30am On the day up and hoping they get through so they can look at its predict

why random tangent?

You mentioned, I think something also that was an important consideration here,

like the reputational damage, right? Of the lawsuit here to like, Bond li may be in the rights

here we like right, we haven't seen the contract. And as you said, right, without having seen it was

hard to sort of say, very specifically who was in the right or who's in the wrong. But there's

reputational damage in the lawsuit to bond Lee. Sort of takeaway for people listening in general

who may be entering contracts in the esports space? Like, how long does a lawsuit like this

stay out in the public? Washington Post article aside? Right, like, is it something that exists

forever? And is this sort of a stain on their brain forever? whether they win or lose? Or? Or is

it like, is it like a driver's license? Where every seven years, you know, it gets ya, I don't

know, you know, what I mean? Like, is there some long term ramification of entering in being a

party to a lawsuit like this?

Yeah, I mean, it does, it does stay out there. I mean, the articles are obviously gonna be

there, Barbara, longer girl from the States. But most courts systems have like, you can read their

public, and you can research or search for filings and see who was sued when and people pleadings and

all that stuff. So a lot of the time, when you're buying a company, one of the things you'll do is

you'll do a litigation search and see if they've been sued anywhere and if they be sued was so you

know, bodily ever gets acquired. And if something like that happens, everybody's anybody's gonna

even without these articles being out there, somebody's going to do a search and devious

lawsuit and ask them about it. And, you know, if it's 10 years down the line, they might not care,

but it is. It is something that sort of stays out there. And that's, yeah, that's one of the reasons

where, if you're, you're wanting this case, you want to avoid getting sued separately from the

actual lawsuit itself. Just reputational damage can be significant. A lot of the time, you know, I

like to say that the threat of a lawsuit is actually more effective with the lawsuit itself.

If Jeetu told them, Look, we're going to follow this if you don't do XYZ, they actually have more

leverage before they thought because once they follow then it's out there. Then it's gone. Vani

doesn't care as much, but they want to avoid a PR hit, then we're going to be more likely to sell

that's interesting.

To me, did you have anything to add before we wrap up here?

Yeah, I just wanted to mention you know, you had a shout it out and we love having

you back. Marius. I just wanted to call our listeners to their attention. Marius was on

episode 158 That was October 29th of last year. Please go take a listen to that one as well it's a

little bit more about himself more about Sagiv but but Mary's I loved having you here for this we

really appreciate your insight. And yeah Paul Coco for it.

No Marisa just wanted to throw it over to you like you know, we're obviously want to

bring you back and cover more of these stories. And I know our listeners at least on the live show

when we teased it last week we're really excited for this so I hope I hope everyone who listened

enjoyed it let us know obviously but how you know how can people find Sega of Marius like how can

they reach out to you how can they find you other than coming through us right they're more than

welcome to ask me or Jimmy more than welcome to reach out to us directly and we can connect you

but I can they reach out to you directly.

Easiest way probably my twitter at Marissa started Annika it's also got my Discord on

there. I'm on Discord all the time. And also yeah if you look me up if you just Google me nervous

dominance lawyers at my site and our firm site and as my email all my contact information very,

very cool. And obviously, you know, like I said, feel free have too many listeners.

You know how to reach myself. You know how to reach Jimmy, you? Hopefully listen every week tune

in every week, we're more than happy to connect you if you're looking or really, really smart

legal advice in the gaming and esports world, you absolutely need to be talking to the guys that say

give the best in the business. So on that note, guys, I That wraps up this week's episode. There

will be this will be an extra episode this week. So stay tuned for both our live stream and our

normal podcast episode. Let us know how you like this. We're going to come back for a second

episode on other legal topics. There's so many to cover. And as always guys, don't forget the future

is fun. We will see you next week.

Thanks for listening to the business of esports podcast. Check us out at the business of