Riot Games Fines Cloud9 $175,000 for Issuing Players Stock

Cloud9 will pay a total of $330,000 to $605,000 in penalties for issuing stock to players
Cloud9 will pay a total of $330,000 to $605,000 in penalties for issuing stock to players /

Cloud9 will pay $175,000 in fines for issuing equity to seven players, a violation of League of Legends Championship Series rules.

Before the LCS shifted to long-term partners, players were frequently partial owners of their teams. Riot Games added Rule 2.5, which prevented such ownership, in November 2017. Riot Games has ruled Cloud9's issuing of restricted stock units to players as a violation of that rule.

Riot Games learned in June 2019 several teams had signed contract extensions with players that had not been submitted to the league. The league allowed teams to submit summary sheets with lateness penalties waived. Cloud9's summary paperwork included details of the RSUs, but a clerical error let their inclusion slip through the cracks.

Riot Games flagged the RSUs for the first time in August, but waited until the offseason to address them. In its investigation, the publisher found players either bargained for RSUs instead of salary or were gifted RSUs. These agreements were not included in or referred to in Player Service Agreements or summary sheets, violating league rules.

Seven total players received RSUs. Players believed the equity offers were kosher because they didn't believe Cloud9 would offer them if they were against the rules.

Cloud9 ownership stated it didn't realize RSUs were against league rules, and that it was ignorant of the rules change in franchising. It will be fined $25,000 per player, for a total of $175,000. Cloud9 will also pay certain amounts to players past and present to compensate for the rule-breaking RSUs. Current players may also opt to renegotiate their contracts to substitute for the RSUs, provided the player use a lawyer, agent or other representation in the renegotiation.

In total, Cloud9 will pay between $330,000 and $605,000. The $175,000 in fines will be donated to charity by the LCS itself.

Photo courtesy of Riot Games