The £3.2 million deal will see the video game retailer hand over a 50 per cent stake of its new Belong esports division to Sports Direct, who now holds a 26 per cent stake in Game.
It has also agreed to provide Game's Spanish arm with £55m worth of borrowing facilities, some of which could be used to open new venues.
As part of the agreement, Sports Direct and Game Digital will share profits from standalone Belong sites, Belong sites located in or next to Game Retail stores, Belong sites based in Sports Direct stores, Game Retail concessions situated in Sports Direct stores and Belong/Game Retail stores located in Sports Direct stores.
Game Digital said it hoped to capitalise on the overlap between traditional sports and eSports, a genre that has attracted sponsorship from major brands and captured the attention of celebrity backers such as the singer Jennifer Lopez and the Formula One driver Fernando Alonso.
Game Digital said its Belong division aimed to create "tribes" of gamers clustered around venues, some of which would be concessions in Sports Direct stores.
GAME's CEO Martyn Gibbs commented: "We look forward to collaborating with Sports Direct to increase the availability and scale of BELONG and to capitalise on the increasing overlap between sports and esports fans by bringing this unique experience to a wider consumer base".
It saw United Kingdom retail underlying earnings slump 89.8 per cent to £1.8m after retail sales by gross transaction value tumbled 13.4 per cent over the year.
"As more consumer focus and spend moves to experiences, we are well advanced in delivering unique, world class gaming at both local and national level".