The difference in a letter: Is eSport “Sport”? The legal complexities of a booming industry

The eSports market is booming. Global revenue estimates for 2019 were already at USD 1.5 billion, with turnover in Europe alone expected to triple in the coming years. The upwards trend has only been further enhanced by Covid-19, as sports promoters, broadcasters and fans have turned their attention to digital alternatives in the absence of traditional sports. This economic boom is accompanied by a growing number of legal issues in a variety of fields, including employment law, competition law and even criminal law.

A number of these legal queries turn on the question of whether eSport can be accurately classified as “sport”. For now, German law is silent and does not provide a legal definition of eSport.

The legal classification – why does it matter?

Under German law, the classification of eSport as a sport would have an impact in many respects including the availability of state subsidies and the legality of bets as well as the applicability of doping rules. In addition, it would affect the tax status of sports organisations as well as the legal setup for underaged players committed to eSport activities.

  • Tax status: Charitable corporations, i.e. those that pursue non-profit purposes, are privileged under German tax laws. According to the German Fiscal Code (Abgabenordnung or GFC, § 52 sec. 2 no. 21), sport falls under the definition of a non-profit purpose. The recognition of eSport as a sport would therefore lead to advantageous tax positions for many organisations.
  • Employment rights: The classification of eSport as a sport is also relevant in the context of permitted working time, particularly with regard to underage players to whom youth protection legislation applies. For example, the German Youth Employment Protection Act (Jugendarbeitsschutzgesetz, §§ 16, 17) stipulates that young people aged 15 to 18 may only work at weekends in exceptional cases. However, the legislation (§ 16 sec. 2 no. 9 and § 17 sec. 2 no. 6) again provides for exceptions for "sport".
Defining eSports: a fully-fledged sport or ‘just’ a hobby?

There is no widespread agreement between politicians, legal scholars and sports scientists as to whether eSport constitutes a sport in the legal sense. In 2019, the German Olympic Sports Confederation (Deutscher Olympischer Sportbund or DOSB), a non-governmental organisation with more than 27 million members, commissioned an expert opinion, which concluded that eSport is not a sport, inter alia, due to lack of physical activity.

The legal definition

The legal definition of "sport" is a constituent element of various laws. However, its meaning depends on the content and purpose of the relevant legal context, which goes some way to explaining why there is no unified definition. In practice, a definition developed by the German Federal Fiscal Court (Bundesfinanzhof or GFFC) in 1997 is frequently used to describe the legal term irrespective of the context.

According to the GFFC, sport is a physical activity going beyond the usual activity level. While such a definition has some obvious shortcomings, what is evident is that its application would deem it unlikely that eSport would count as a ‘sport’ in a legal sense.

On the other hand, studies have shown that e-athletes make up to 400 hand movements per minute and that their cortisol levels are comparable to those of a racing driver. Nevertheless, a group of 81 German sport scientists and sport physicians concluded that the type and intensity of such movements are not sufficient to fulfil the GFFC criteria. The experts opined that these movements are not caused by a movement “determining a specific type of sport”; solely watching an e-athlete making hand movements (e.g. clicking a mouse or moving a controller) makes no sense to an onlooker. Rather, these movements need to be included in a virtual environment by moving an avatar and, as such, such movements are not those determining a specific type of sport. However, this position is quite perplexing when one considers the judgements of the GFFC, according to which typical sports movements in the form of physical exercise are not absolutely necessary.

Compliance with conditions

While the DOSB does not have the power to define sport in a legal sense, it does have considerable influence over the general/public understanding of the definition. The DOSB has specified certain conditions which need to be met in order to classify an activity as sport. One such condition states that sport must ensure compliance with ethical values such as fair play, equal opportunities, inviolability of the person and partnership through rules and/or a system of competition and classification. Many of the most popular and commercially successful video and computer games are those that simulate killing, destruction and conquest and which are therefore incompatible with the ethical values referred to in the DOSB admission rules.

With regard to tax law (in particular § 52 GFC), the dangers of addiction and the economic interests behind eSport – aspects seemingly incompatible with charitable corporation status – are factors pointing against the classification of eSport as a sport. On the other hand, the GFFC has stated that the addictive potential of video games is not relevant for the evaluation of a corporation as a charitable corporation where such ‘dangers’ occur unintentionally.

What is clear is that the picture remains unclear.

Comment

The proper definition and classification of eSport has a multitude of knock-on effects under German law. Despite this, its legal definition remains open. A change in legislation may go some way to addressing the problem and filling the current gap. One option might be for the legislator to put eSport on an equal footing with sport (as it has done with chess (§ 52 sec. 2 no. 21 of the GFC) or by adding a new no. 26 in § 52 sec. 2 named “eSport”).

Meanwhile, the economic significance of the eSports market continues to grow, as does the number of legal issues arising, many of which are yet unexplored by case law and specific legislation. As long as the legal status of eSports is unsettled, questions will remain unanswered.

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