Riot Games has issued a fine to esports organization Cloud9 for violating player equity rules regarding their League of Legends Championship Series team. The rule in question prohibits LCS players from owning equity in the organization they play under. Seven current and former Cloud9 players were granted equity in the organization while playing in the LCS. The organization has been fined a total of $175,000.
In June of 2019, Riot Games was made aware of several teams signing contract extensions with players without notifying the LCS. All LCS teams were then asked to send in their contract summaries to reestablish a record of accurate information. While Cloud9 did send in their documents, a clerical error on the side of Riot Games overlooked their grants of restricted stock units to players. The subsequent investigation found that Cloud9 had failed to notify the developer of any contract changes or extensions, as well as any stock units granted to players.
Riot Games implemented a rule in November of 2017 that prevented team owners from playing on their own active League of Legends Championship Series roster. Under this rule, LCS players are also prohibited from owning equity in the organization they play for. Cloud9 violated this rule when they granted equity to seven current and former members of their League of Legends roster.
Riot’s investigation found that players received equity in two ways, one where they agreed to a lower salary in exchange for restricted stock units, and another where the stock units were given as a gift. The investigation also found that the stock issues were not listed on a Player Service Agreement as required by LCS rules.
ESPN reports that five of Cloud9’s Summer roster - Eric “Licorice” Ritchie, Dennis “Svenskeren” Johnsen, Robert “Blaber” Huang, Zachary “Sneaky” Scuderi, and Tristan “Zeyzal” Stidam - were granted restricted stock units. Former Cloud9 members Andy “Smoothie” Ta and Nicolai “Jensen” Jensen were issued restricted stock units as well. Riot Games has ruled that Cloud9 is to be fined $25,000 per player involved, amounting to a total of $175,000. Along with the fine, the developer has ruled that Cloud9 must pay certain current and former players in restitution for the stock grants. Cloud9 must also negotiate with current players to extinguish all existing stock grants, while Riot requires that each player be joined by independent representation during those discussions. Riot’s investigation found that only two players had negotiated with representation when the initial stock units were granted.
As per an October rule change, Riot Games allows LCS players to own equity in their organization if they have played with that team for at least three consecutive years. Sneaky is one of three eligible LCS players, though he was issued the stock units before this rule was changed.