Esports and prize money

Although the e-sports industry is experiencing an unprecedented boom, this rapid growth is also accompanied by numerous challenges and problems. A recent ruling by the Kiel District Court highlights just one of many serious issues: Managers keeping prize money for themselves instead of passing it on to the players. This case is exemplary of a number of difficulties that the industry is currently facing.

In addition to the misappropriation of prize money, e-sports is facing other pressing problems. These include insecure contractual relationships, a lack of protection for minors, cases of game manipulation and e-doping as well as unethical behavior on the part of some players. The professionalization of the industry often fails to keep pace with its rapid growth, leading to legal grey areas and unfair practices.

In addition, e-sports struggles with challenges such as its strong dependence on game manufacturers, who can make changes at any time that render entire competitive structures obsolete. The often short contract terms and lack of long-term prospects for players also contribute to instability, and this multitude of problems underlines how urgently e-sports needs professional structures, legal safeguards and ethical standards in order to establish itself as a serious and sustainable industry. The case from Kiel is just the tip of the iceberg and shows that there is still a long way to go before e-sports has really shed its children’s shoes.

The case in detail

In the summer of 2020, four talented e-athletes joined forces to form a promising PUBG team. Their skills and team spirit quickly paid off: Within a few weeks, they achieved considerable success and won prize money of around €20,000. They also generated five-figure revenues from merchandise sales – an impressive start for a young team. In order to be able to take part in even more lucrative tournaments, the players sought cooperation with a manager. The manager founded an entrepreneurial company (UG), a legal form that can be set up with minimal effort and meets the requirements of tournament organizers for a registered company. At first glance, this appeared to be a win-win situation for everyone involved.

The problem escalates

After the initial successes, however, the dark side of this collaboration became apparent. The manager did not pay out the hard-won prize money to the team members. Instead, he put them off with flimsy excuses and promises. The players, who were dependent on this income, found themselves in an increasingly precarious situation. At the end of 2023, when the statute of limitations was about to expire, one of the team members felt compelled to take legal action. He obtained a court order for payment – a bold move that got the ball rolling.

The landmark ruling

The Kiel Regional Court ultimately handed down a verdict that caused a stir in the e-sports scene: the manager’s UG was ordered to pay over €30,000 plus legal costs (case no. 6 O 42/24). The particular challenge in this case lay in structuring the complex facts of the case and making them provable – a task that would have been almost impossible to accomplish without professional legal support.

Far-reaching implications for the e-sports industry

This case highlights some of the central problems in German e-sports:

1. Frequency of breaches of contract: Such incidents are unfortunately not uncommon, but are often not made public. This undermines trust in the industry.
2. Lack of legal awareness: Many players in e-sports underestimate the need for legal advice and protection.
3. Reputational damage: The unreliability of individual players can damage the reputation of the entire industry and deter potential investors.
4. Lack of standardization: There is a lack of uniform contractual standards and codes of conduct in the industry.
5. Power imbalance: Young, inexperienced players are often in a weak negotiating position with managers or organizations.

Essential tips for e-athletes and teams

To protect themselves from similar situations, e-athletes and teams should take the following measures:

1. Early legal advice: For amounts over € 1,000, it is advisable to consult a lawyer. Many fundamental questions can be clarified in an initial consultation for a maximum of €250 – an investment that pays off in the long term.
2. Thorough background check: Comprehensive information about potential business partners should be obtained before any collaboration. Official documents from the commercial register are particularly important, but experience reports from other teams can also be valuable.
3. Transparent financial structures: Prize money should be paid into a joint account to which at least one trusted team member has access. Ideally, two signatures are required for transfers to prevent misuse.
4. Clear contractual regulations: All agreements should be recorded in writing. This includes the distribution of prize money, responsibilities and notice periods.
5. Regular communication: An open dialog within the team and with management can nip many problems in the bud.
6. Professional support: Working with a reputable agent or an established e-sports organization can provide additional security.

Conclusion and outlook

The case impressively shows how important a minimum level of professionalism is in e-sports. Players in the industry should take precautions in good time and protect themselves legally. This is the only way to prevent individual black sheep from damaging the reputation and development of e-sports. For the sustainable development of the e-sports industry, it is essential that all those involved – players, teams, managers and organizers – act professionally and responsibly. Legal advice and clear contractual regulations are the key to success. The e-sports industry is at a turning point. With increasing professionalization and growing investment, it is becoming more and more important to create solid legal and ethical foundations. Associations and organizations are called upon to develop standard contracts and codes of conduct. At the same time, educational initiatives must be launched to raise the legal awareness of all those involved.

Ultimately, this case can be seen as a wake-up call – an opportunity for the e-sports industry to learn from its mistakes and move into the future stronger. With the right mix of professionalism, transparency and legal protection, e-sports can develop its full potential and establish itself as a respected sport.

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.