The Importance of Legal Compliance in Gaming and eSports
Gaming is one of the fastest-growing industries globally, attracting significant attention and rapidly expanding in recent years. In Japan, various businesses related to gaming and eSports, such as event organization and live streaming, have emerged. The COVID-19 pandemic has further accelerated the shift to online eSports tournaments, resulting in numerous cross-border streaming and international business opportunities.
To conduct gaming and eSports-related businesses smoothly and safely, it is essential to proactively identify and mitigate potential legal risks. Legal regulations surrounding gaming and eSports are diverse and multifaceted (for more details, please see our Areas of Practice). Below are some key examples of legal considerations:
- Compliance for eSports Tournament Organizers
Event organizers need to design and operate tournaments in a way that complies with regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Entertainment Business Act, and the Penal Code, which prohibits gambling-related offenses. Properly drafting tournament rules and regulations that reflect these legal requirements is also crucial. - Prepaid Payment Instruments for Game Items
If a game publisher distributes a game that involves the issuance of paid in-game items where players are expected to consume those items to play, the in-game items may qualify as prepaid payment instruments under the Payment Services Act. In such cases, the publisher must submit a “Notification for the Issuance of Prepaid Payment Instruments” to the local Finance Bureau (this requirement applies to foreign publishers distributing games targeting the Japanese market as well). - Asset Preservation for Prepaid Payment Instruments Issuers
Game publishers that qualify as prepaid payment instrument issuers must preserve assets equivalent to at least half of the unused balance as of the end of March and September each year. Additionally, they are required to provide information to users, submit periodic reports to the Finance Bureau, properly supervise outsourcing contractors, and implement measures for handling complaints. - Obligations Under the Act on Specified Commercial Transactions
If a player purchases items within a game, the game publisher must display certain information as required under the Act on Specified Commercial Transactions. - Telecommunications Business Registration
If a business provides a game that enables users to communicate with each other within the game, registration or notification under the Telecommunications Business Act may be required.
As shown above, gaming and eSports are governed by a variety of legal regulations, and failure to confirm compliance in advance may not only jeopardize the legality of ongoing business operations but may also expose companies, teams, and players to reputational risks that could damage their public image. To mitigate or prevent such legal risks, it is essential to seek precise legal advice from specialized advisors in the field.
Moreover, in the relationship between eSports players and their affiliated teams, if there is no clear agreement on key issues such as revenue sharing, payment methods, expense allocation, and ownership of various intellectual property rights, disagreements may arise post-facto, leading to potential disputes. Therefore, it is advisable for eSports players and teams to enter into management agreements (or player contracts) in advance to minimize the risk of such disputes.
By doing so, eSports stakeholders can ensure smooth operations and focus on growth and development in the rapidly evolving world of eSports.
Services Provided by Mori & Partners
Mori & Partners has been providing legal services to various stakeholders in the gaming industries for many years, addressing a range of legal issues unique to these sectors. Below are examples of the services we offer to our clients:
- Advising clients on gaming-related M&A transactions
- Due Diligence on Compliance with Gaming Laws and Regulations
- Legal Advice and Drafting of Tournament Regulations for Tournaments with Prizes
- Filing Notifications to the Financial Services Agency on Behalf of Prepaid Payment Instruments Issuers under the Payment Services Act
- Review and Legal Advice on Player Contracts and Management Agreements
- Legal Advice on Various Laws Related to Gaming (Act against Unjustifiable Premiums and Misleading Representations, Act on Specified Commercial Transactions, Entertainment Business Act, Penal Code, etc.)
- Intellectual Property Strategy
- Japan Market Entry Support for Foreign Gaming Businesses
M&P’s Recent Gaming-Related Projects:
- Served as legal counsel for the acquisition of a game publisher by a U.S. company.
- Conducted due diligence on compliance with gaming regulations for a European game publisher distributing games in Japan.
- Filed a notification with the Financial Services Agency as a prepaid payment instrument issuer on behalf of a European game publisher under the Payment Services Act.
- Deposited issuance guarantees for self-issued prepaid payment instruments on behalf of a European game publisher. (Note: Under the Payment Services Act, if the unused balance of in-app currency exceeds JPY 10 million on the reference date (March 31st and September 30th), it is necessary to secure the issuance guarantee deposit (equivalent to half of the unused balance) with the Legal Affairs Bureau.)
- Filed a notification under Article 16, Paragraph 1 of the Telecommunications Business Act with the Ministry of Internal Affairs and Communications on behalf of a European game publisher, and acted as a domestic representative for subsequent procedures.
- Drafted and provided legal advice on a Sourcing Agreement for the Japanese market for a European game publisher.
- Provided legal advice on the formation of an eSports league from the perspective of the Act against Unjustifiable Premiums and Misleading Representations to a domestic eSports business.
- Provided legal advice and created necessary display information under the Act on Specified Commercial Transactions regarding in-app currency sales for a game publisher.
- Negotiated on behalf of a game publisher in a case involving the sale of counterfeit goods infringing on the publisher’s trademark rights on an e-commerce platform.
- Represented a professional team in a dispute concerning the termination of a contract with a player.
- Provided legal advice on TV and OOH (Out-of-Home) advertisements from the perspective of the Act against Unjustifiable Premiums and Misleading Representations, Trademark Act, and Advertising Ordinances for a European game publisher.
- Drafted sponsorship agreements and provided legal advice for gaming and eSports-related events for a European game publisher.
- Drafted agreements and provided legal advice regarding the use of VTubers in game marketing for a European game publisher.
- Provided legal advice from the perspective of Japanese law on the creation of a global rulebook for tournaments organized by a European game publisher.
- Provided legal advice on a fan art contest organized by a European game publisher from the perspective of Japanese law.
- Provided legal advice on eSports tournament organization from the perspective of the Act against Unjustifiable Premiums and Misleading Representations and gambling regulations.
If you are facing legal issues related to gaming, please feel free to consult with us. We are dedicated to providing the best legal advice to help resolve your challenges.