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How to Secure Your Financial Future as a Professional Gamer

Key Takeaways:

Professional gaming careers can be lucrative but short-lived, making smart financial management crucial from the start.
Mastering the intricacies of contracts, taxes, and revenue streams is essential for pro gamers to maximize earnings and avoid costly pitfalls.
Building a sustainable financial future in esports demands a strategic balance between capitalizing on current opportunities and planning to achieve long-term goals.

The rise of electronic sports (esports) has been nothing short of phenomenal. According to Variety, esports viewership increased a whopping 92% from 2019 to 2023 — with viewers watching more than 2.5 billion hours of esports events last year. Major colleges and universities like Ohio State now offer esports degrees, and brands like Intel, Coca-Cola, and Mastercard are spending millions on esports sponsorships each year.

As a professional gamer, you’re part of this fast-growing industry. But with the thrill of competition and the allure of sponsorships comes the challenge of managing your earnings. Whether you’re streaming on Twitch, competing on the esports circuit, or signing a deal with a major brand, understanding how to manage and maximize your income is crucial.

Making the Right Deal: Stream Play Versus Team Play

As a pro gamer, you’ll likely face a key decision: Should you focus on building your own brand through streaming or join a team? Both options have their pros and cons, and your choice will impact your earnings significantly.

Streaming: Building Your Own Brand

Streaming offers you the opportunity to build a personal brand and connect directly with your audience. Platforms like Twitch and YouTube allow you to monetize your content through ads, subscriptions, and donations. However, it also means you’re responsible for managing your content, marketing yourself, and properly tracking and reporting your earnings.

An additional challenge with streaming is validating that you’re getting the right percentage from platforms like YouTube. Are you confident that your views and ad revenue are being reported accurately? This is where working with a financial advisor or a business manager can help. They can audit your earnings, verify you’re being paid fairly, and help you optimize your revenue streams.

Joining a Team: Stability with a Salary

Joining an esports team can provide a steady salary and the chance to compete at the highest levels. Teams often handle sponsorships, brand deals, and the logistics of competition, allowing you to focus solely on your gameplay. However, the trade-off is that you may have less control over your brand, and the team may take a cut of your earnings from sponsorships or tournament winnings.

Before signing with a team, it’s critical to have a lawyer review your contract. They can help you understand the terms, such as how much of your earnings the team will take, what happens if you leave the team, and what other obligations you may have. Remember, a contract that seems straightforward can contain clauses that significantly impact your income and career.

Navigating Taxes in Professional Gaming and Esports

As you start earning from your gaming career, taxes are one of the first challenges you’ll face. Your earnings — whether from streaming, sponsorships, or tournament winnings — are all taxable. It’s essential to understand how taxes work in both the country/locality where you live, as well as any jurisdictions where you earn money.

Domestic Taxes: Earning Income Across the U.S.

In the United States, professional gamers are often subject to what’s known as the “jock tax.” Originally designed for athletes, this tax rule applies to individuals who earn income in states where they do not reside. Today, the rule extends beyond athletes to include high-income earners like entertainers and competitive gamers. The tax is typically based on the number of “duty days” you spend in a state for income-generating activities.

For example, if you live in Illinois and come to California for a tournament, California can tax you on that income — even if you’re only there for a few days. Enforcement of the “jock tax” varies by state and locality, and whether you are taxed may depend on how much you earn (the more you make, the more likely you are to be taxed). Because of varying state and local tax rules, you may end up owing taxes in multiple states and localities depending on where you compete and earn income.

Additionally, if you’re selling merchandise or other products as part of your brand, you’ll also need to be aware of sales tax obligations. Depending on where your customers are located, you may be responsible for collecting and remitting sales tax to different states and localities. Each jurisdiction has its own rules, and failing to comply with them could result in penalties or back taxes.

International Taxes: Considerations for Global Gamers

With esports growing globally, you might earn pro-gaming income from multiple countries — each with its own tax rules. For example, if you win a tournament in South Korea or get sponsorship from a European company, you may owe taxes in those countries. You also need to report all foreign income to your home country, adding complexity to your taxes.

Here are some considerations to keep in mind when managing international taxes:

Double taxation: To avoid paying taxes in two countries on the same income, you can use options like exclusions or foreign tax credits (FTCs). Tax treaties between some countries can also reduce your tax burden. But not all countries have treaties, and claiming these credits can involve complex filings and detailed records. Knowing your options and understanding how to apply them can help you manage your taxes strategically and minimize what you owe across borders.
Withholding taxes: Various countries impose a withholding obligation on certain types of revenue streams. This means, before you receive your earnings, the country may withhold a portion of your taxes. The rate varies depending on the type of income and local tax laws.
Intellectual property (IP): Savvy professional gamers are cognizant of IP such as copyrights and trademarks, as well as name image and likeness (NIL). Whether revenue streams like photoshoots, appearances, speaking engagements, and even your social media presence are compensated as “services” or a “right of use” can influence taxation in various countries. Having clear contracts that appropriately define income classes can help you best manage taxation and protect your rights.

Given the complexity of both domestic and international tax laws, it’s wise to consult with a tax team familiar with the esports industry. They can help you navigate multistate and international tax rules, take advantage of deductions and credits, and structure your finances in a way that minimizes your tax burden across multiple jurisdictions.

5 Common Financial Pitfalls Pro Gamers Should Avoid

In the fast-paced world of esports and professional gaming, it’s easy to get caught up in the excitement and make decisions that could hurt your financial future. Here are a few pitfalls to watch out for:

1. Don’t Rush into Contracts

It’s tempting to sign the first deal that comes your way, especially when there’s a significant amount of money involved. But taking your time to understand the terms of the contract can save you from potential headaches down the line. Work with legal and financial advisors to review any offers before you sign.

2. Watch Out for Hidden Costs

Some deals come with hidden costs that can eat into your earnings. For example, if a team covers your living expenses but then deducts those costs from your winnings you could end up with much less than you expected. Always ask for a detailed breakdown of any expenses and how they will be handled.

3. Budget for the Long Haul

Esports careers can be short — a recent Washington Post headline read “Esports stars have shorter careers than NFL players” — with the peak years often occurring in your early 20s. This makes budgeting and saving for the future even more important.

4. Prioritize Needs Over Wants

When the money starts rolling in, it can be tempting to splurge on the latest gear or a luxury lifestyle. But remember, this income may not last forever. Prioritize saving and investing your money wisely. Work with a financial advisor to create a budget that accounts for your current needs and future goals.

5. Plan for a Sustainable Future

Consider how your current earnings can help you achieve your long-term goals. Whether you want to invest in a new business, save for retirement, or buy a home, planning ahead is key. This is where having a solid financial plan and the right advice can make all the difference.

Level Up Your Financial Strategy

Managing your finances as a pro gamer can be overwhelming, especially when you’re focused on winning and building your brand. That’s why having experienced professionals in your corner can make all the difference. Working with a team of advisors — whether it’s a tax professional, lawyer, or financial planner — can give you the peace of mind to focus on your game knowing your finances are in good hands.

How MGO Can Help

We know the unique challenges you face as a professional gamer. From reviewing contracts to navigating international taxes, we’re here to help you maximize your earnings and secure your financial future. Before you sign any deal or make a financial decision, talk to our Entertainment, Sports, and Media team.

How to Protect Your Business Against Asset Misappropriation

Key Takeaways:

Asset misappropriation involves the theft or misuse of an organization’s physical and digital assets, posing a major threat to businesses.

Red flags of asset misappropriation include unexplained shortages, unauthorized transactions, altered records, excessive resource use, and employees living beyond their means.

Strategies to combat asset misappropriation include strong internal controls, employee education, surveillance technology, promoting an ethical culture, and data analytics for fraud detection.

In the dynamic landscape of modern business, asset misappropriation remains a pervasive threat, undermining the financial stability and integrity of organizations across industries. As part of MGO’s fraud series, this article delves into the critical issue of asset misappropriation — offering your business the knowledge and tools needed to safeguard your valuable assets.

Understanding Asset Misappropriation

Asset misappropriation, a prevalent form of fraud, involves the theft or misuse of an organization’s assets. Unlike financial statement fraud, which distorts the truth on paper, asset misappropriation manifests in the direct pilfering or misuse of physical and digital assets. From cash and inventory to intellectual property and digital data, no resource is immune to this fraudulent activity.

Red Flags of Asset Misappropriation

Unexplained shortages or discrepancies: Whether it is cash, inventory, or other assets, unexplained shortages are classic signs of theft or embezzlement. For instance, casinos might notice discrepancies in chips or cash, pointing toward internal theft.

Unauthorized transactions: Any unauthorized withdrawals or transfers, especially in sensitive environments like casino accounts or gaming tables, should raise immediate concerns about asset misappropriation.

Alteration of records: Manipulating gaming records, player accounts, or payout systems can facilitate theft, often going unnoticed without rigorous audits.

Excessive use of company resources: When employees use company vehicles, equipment, or facilities beyond their professional needs, it suggests potential misuse of organizational assets for personal gain.

Lifestyle inconsistencies: Employees exhibiting a lifestyle significantly above their income level can be a red flag for embezzlement or fraud, often funded by stolen assets.

Strategies to Combat Asset Misappropriation

To effectively shield your organization from the perils of asset misappropriation, a multifaceted approach is necessary. These strategies are designed to fortify your defenses, helping your business operate with the highest standards of integrity and security. By implementing these measures, you can create a resilient barrier against fraudulent activities and safeguard your organization’s future.

Here are some pivotal strategies to combat asset misappropriation:

Establishing robust internal controls is the first line of defense. Professionals with experience enhancing internal controls can assist your organization in assessing and refining its practices — including segregation of duties, regular audits, and securing access to sensitive areas and systems. This approach establishes a solid foundation for preventing asset misappropriation.

Educating employees about the signs of fraud and the importance of ethical behavior is essential to deter potential fraudsters and empower your staff to report suspicious activities. Training programs, which can be supported by advisory firms, effectively communicate the risks of fraud and the importance of vigilance, helping to build a knowledgeable and proactive workforce.

Utilizing technology like surveillance cameras, advanced access controls, and cybersecurity measures can significantly reduce the risk of asset theft or misuse. Cybersecurity and physical security professionals can integrate cutting-edge solutions to protect your assets from both internal and external threats, providing a comprehensive defense strategy.

Promoting a corporate culture that values honesty and transparency can discourage fraudulent behavior. Developing policies and practices that foster open communication and a strong ethical foundation is crucial. Establishing a whistleblowing policy that encourages reporting without fear of retaliation can be an integral part of this effort.

Deploying data analytics and fraud detection software to monitor for unusual patterns or anomalies can indicate asset misappropriation. Advanced data analytics and forensic accounting services can identify and investigate suspicious activity, using sophisticated tools to detect early signs of fraud and prevent asset loss.

Safeguarding Your Assets Against Pervasive Threats

Asset misappropriation poses a significant risk to businesses, draining resources and eroding stakeholder trust. By understanding the red flags and implementing a comprehensive strategy to detect and prevent asset misappropriation, your organization can protect its assets and maintain its financial integrity.

MGO’s Business Advisory solutions offer a pathway to strengthen your defenses against the risks of asset misappropriation. For a deeper dive into how we can help protect your business, reach out to our team today.

This article is part of our ongoing fraud series, “Alert Signals: Uncovering the Spectrum of Fraud,” aimed at educating your business on identifying and preventing fraudulent activities. Read the previous article in the series on spotting red flags of financial reporting fraud and stay tuned for more insights and strategies to protect your organization.

Strategies for Mitigating Municipal Employee Fraud

The second article in a series for municipal executives: Avoiding the Headlines

By Scott P. Johnson, CPA, CGMA
Partner, State & Local Government, Advisory Services

As a public official for more than 24 years, I continuously strived to implement best practices, internal controls and policies and procedures to mitigate fraud, waste and abuse. Being a municipal finance officer responsible for literally billions of dollars, there were times when I would wake up in the middle of the night thinking about what could happen or what I may not know that could be occurring that could put the organization at risk. Fortunately throughout my municipal career the organizations I served did not experience headlines due to significant fraud. We had the appropriate “tone at the top” and practiced effective measures throughout the organization to mitigate potential fraud. However, from time-to-time, we would uncover the occasional lapse of an employee’s good judgement and detect inappropriate use of government funds, such as; improper procurement credit card use for personal purposes, time cards reporting that fraudulently claimed hours worked in excess of actual hours worked, and fictitious reimbursement claims for travel.

Employee fraud is a significant problem across industries and is faced by organizations of all types, sizes, locations, and industries. While employee fraud in private organizations rarely merits a mention in the local paper, the same fraud in a government agency will have editors competing to write the splashiest headlines and garner the highest reader traffic. It is critical for such organizations to maintain a positive reputation. Reputational risk can carry long-lasting damage in monetary losses, regulatory issues, and overall risk exposure. Frankly, all types of fraud are on the rise, and municipalities need an effective fraud mitigation strategy in place to protect against reputational and monetary harm.

Just a few recent examples of municipal fraud that have had significant press coverage and put the respective organizations in a challenging position: In 2014 officials in St. Louis County, IL, uncovered a $3.4 million embezzlement that escaped detection for more than six years. According to officials, a County Health Agency Division Manager overcharged for IT computer and technical services (unbeknownst to the County, the Division Manager owned the technology company). Unfortunately, the day after the suspected embezzlement was detected by County officials, the employee committed suicide, according to the County Medical Examiner.

The largest known municipal fraud in US history was uncovered in 2012 at the City of Dixon, IL. This embezzlement scheme of almost $54 million over a 22 year period was perpetrated by its Comptroller, Rita Crundwell, who used the proceeds to finance her quarter horse ranch business and lavish lifestyle. She was convicted and pleaded guilty to the crimes and is currently serving a 20 year sentence. Another recent case of an alleged fraud allegation is currently under trial in the Los Angeles Superior Court in which ex-Pasadena city employee, Danny Wooten and co-defendants are due back in court for arraignment on April 1, 2016, according to the Los Angeles County District Attorney’s Office. The criminal case involves allegations that more than $6 million in city money was embezzled over a decade in which Wooten is suspected of creating false invoices for the underground utility program between 2004 and March 2014.

Many factors can contribute to fraud, but the key factors are the improper segregation of duties, lack of management review, maintaining undocumented procedures, common exception processing, trust without verification and validation, and lack of accountability and monitoring. Employing proper risk assessments of events that could prevent, delay, or increase the costs of achieving organizational objectives and implementing a risk management plan not only ensure compliance, but strategically safeguard on organization against fraud. There are three important steps to earning a good night’s sleep.

1. Fraud Risk Assessment – understanding the organization as a whole and individual business units will lead to the most comprehensive risk management plan. Understand how resources flow as well as internal environments and processes. Conduct interviews, make observations and review all factors. Identify the possible and probable fraud schemes for all resource flows.

2. Prevention – “Tone at the Top” is critical. Inspiring employees to follow ethical standards starts with the tone at the executive level and must trickle down through the management level and ultimately throughout the entire organization. The organization needs to know that unethical practices will not be tolerated and when detected, will be dealt with in a timely and effective manner. One measure to communicate the “tone” is writing a fraud policy in concert with the employee conduct handbook will ensure the message is designed into the orientation, onboarding, and training process. Conduct management reviews, provide whistleblower channels, and communicate often with key business unit leaders, who in turn should communicate with their staff regarding fraud prevention, detection, and correction.

3. Detection – while assessment and prevention will create a strong defense against fraud, it is still important to seek out other measures to detect fraud that may not have been included in the fraud risk assessment plan. Only three percent (3%) of all fraud is discovered by accident or the good luck of the right person in the right place. Only six percent (6%) of fraud is discovered through account reconciliation. Clearly we cannot simply rely on these detection methods. In addition to account reconciliation and keeping your ears open, creating channels for detection are of the utmost importance. Eleven percent (11%) of fraud discoveries are due to an internal audit. Return to step one by assessing and re-assessing fraud risk regularly. Conduct meaningful management reviews on-time. Twelve percent (12%) of fraud detection were the result of properly conducted management reviews. Finally, be sure to enforce an open door policy and a culture of interest in detection and reporting. Fifty-four percent (54%) of all fraud detection comes through insider tips. Ensuring there are proper procedures in place to accept these tips is paramount when designing and especially, implementing the fraud management and detection plan.

Deceitful misconduct among employees significantly damages reputations, negatively affects resources, and limits the ability of any organization to effectively serve the consumer and their community. Following this roadmap on how to respond to and prevent employee fraud will not only protect the organization and its key objectives but will lead to an easier night’s sleep – even in the face of increasing fraud across all industries.

This article is only a small representation of the material presented during MGO’s “Case in Point” presentation at the 2016 CSMFO Conference. Special recognition to Ruthe Holden, Internal Audit Manager at the City of Pasadena for her contribution to the “Case in Point” presentation. Contact Scott Johnson at [email protected] if you have any questions or comments. Comments and opinions expressed in this article are those of the authors and may not reflect the positions, opinions, or beliefs of the CSFMO or MGO and should not be construed or interpreted as such.