HOW STREAMERS CAN VET SPONSORS

Recently, several FaZe Clan members have come under scrutiny as they were found to be promoting a fake crypto token charity named “Save The Kids.” Specifically, their paid promotion was allegedly tied to an unlawful pump and dump scheme. This matter raises multiple legal concerns, including how the streamers will be affected for their endorsement. At the worst case, if the streamers were aware of the fake nature of their promotion, then they would be liable for fraud. At the very least, false claims were made by the streamers during their promotion, which means that the streamers may be subject to discipline from the Federal Trade Commission under its advertising rules. However, this matter further bemoans a single fact:
 
Streamers must vet their sponsors
 
Streamers need to be especially mindful of certain sponsorship areas. Sponsorships from industries such as gambling or cryptocurrency should immediately cause a streamer to pause and think twice. This is due to the fact that these industries are regulated (or in crypto’s case, that similar industries, namely securities, are regulated) and historically tied to laws imparting criminality or criminal activities for certain kinds of interactions within those industries. That isn’t to say that all gambling or crypto sponsorships are unlawful, but that there are bad actors in both industries who operate unlawful enterprises which could result in civil or criminal liability for the streamer. Just because a company is willing to hand a streamer a contract for a sponsorship does not mean that the enterprise is legal. In order to potentially avoid the legal fallout from a bad actor sponsor, a streamer must research and do their own due diligence into understanding the sponsor and what exactly the sponsor wants them to do.
 
Below are a couple of tips on how to vet a sponsor :

1. Find out the location of the sponsor- where are they based and where do they operate?
2. Determine if the sponsor needs to be licensed or not- gambling is HEAVILY regulated on a State by State basis. Are they licensed where they are based/operating? Are they licensed where you are?
3. Can you find any existing claims of illegality or shady dealings about the sponsor online? What are others saying about the sponsor online?
4. Ask the sponsor what they do and what they require out of you as the streamer- is the activation obviously legal in your locality?
5. Does the sponsor have a track record for previous activations- if this is the sponsor’s first deal, that’s somewhat concerning
6. Always ask as many questions as you feel necessary to be comfortable before signing any sponsorship agreement
7. Ask a professional- Our firm can advise on the legality of a sponsor’s operation, the activation, and help you ask the right questions to learn more about the sponsor.

 
The notion that all sponsors are beneficial is false. From a legal perspective, it is up to the streamer to  understand what they are getting themselves into. Legal liability aside, streamers do not want the brand damage of being associated with unlawful or shady enterprises. Utilizing the above tips and questions will help guide you into determining whether the sponsor is legitimate, legal and appropriate. Ultimately, knowledge is key.

If you need any assistance in vetting sponsors, and reviewing sponsorship agreements, our attorneys are here to help.  

(This post was contributed by Mark Hamilton, intern at Quiles Law and rising 3L at Marquette University School of Law)