ESL’s new sponsor rules matter

Yesterday, on July 7th, ESL changed its rulebook.

This is pretty standard; things get changed ahead of new seasons all the time. Usually, it’s reactive to something that happened in the last season. For instance, after some controversy at the Major, they’ve banned hate speech and discriminatory language in team communications during matches.

But that’s not the rule that’s stood out to us here.

Article 2.8, 2.10.3 and 2.10.4 of ESL’s rulebook are what we’re interested in. These go into sponsorships, branding, and, most importantly, which sponsorships are off-limits. Most important right now is this line in 2.8: “Sponsors that violate Valve’s IP, including companies that interact with players’ Valve game inventories, are also prohibited.”

That means teams are now banned from having skin-gambling sponsors at ESL events.

These platforms have always been a lucrative market for teams; they rake in an outrageous amount of cash by skirting gambling regulation. Deposits, being skins rather than money, have long been a loophole for avoiding licensing and, more importantly, IDing customers. There is a history of stories around these websites, culminating with the famous Copenhagen Major incident caused by two rival skin gambling websites feuding.

After the heat this incident caused and some legal questions regarding Valve, there has been a reduction in the number of proper skin casinos sponsoring teams. In their place, real gambling websites and case websites have taken over Counter-Strike.

Case websites, for those unaware, are platforms where you can pay to open “cases” like the ones in Counter-Strike. Except these have “transparent” odds, usually cost more, and have less structure. Custom cases are also often a feature on these websites, allowing you to pick your own poison.

These types of websites have been around forever and seemed to be the only platforms exempt from regulatory creep, until now.

Maybe it’s because they have become less of the focus of Esports, with crypto gambling, prediction markets, and bookmakers taking the limelight. But that’s not to say these websites aren’t still influental. Vitality have one on their new jersey; MOUZ have one as well.

If the rule is applied broadly, Vitality might even have two prohibited sponsors, since skin markets also fit this description. Just buying and selling skins falls under interacting with players’ Valve game inventories after all.

These rules represent a major shift in attitudes from ESL, which has previously accepted advertisements from these types of companies.

Counter-Strike as an Esports is already quite reliant on traditional gambling, which isn’t necessarily a problem. It will become a problem, however, if teams start losing their additional sponsors. There is already a profitability crisis in Esports, and these Case websites and skin markets pay good money.

Morally, it can be argued this is a good thing. From a sustainability perspective, this is wildly concerning.

Smaller organizations especially are more likely to rely on these types of websites; unlike Vitality, they can’t attract a brand like Magnum to work with them. Look at Gentle Mates; they had to leave CS because they refused to take gambling sponsors. That made spending between €800,000 and €1,000,000 per year (according to their CEO) unsustainable.

That budget isn’t even particularly high; remember that thanks to gambling money, BC.Game spent $2.500.000 on a core that achieved nothing.

There haven’t been any notable statements or responses from organizations regarding this rule change. Maybe because, in a realistic world, there is always a workaround. Yet, with the addition of the other gambling-related rules, it does feel like there’s an attempt to create distance.

Valve itself has started steering away from its classic case model, opting for the terminals we see now.

It feels as if governments are finally catching up, and rapid change is underway to accommodate the extra scrutiny. How CS and the Esports scene will develop as a consequence is hard to estimate. But if traditional gambling sponsors also eventually bite the bullet like they are doing at Chinese events right now, it could spell the end of CS Esports as we know it.

For now, all we can do is wait and see what this will affect; just don’t be surprised if Vitality have tape on their shoulders at ESL events in the near future.