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Phoenix1 and Team Envy have been declined entry into the 2018 North American League of Legends Championship Series, sources close to those teams and the league told ESPN.

Phoenix1 and Envy were notified by Riot Games last week that their applications for a franchise spot in the restructured league were declined, sources said. Reasons behind Riot's decision were not disclosed.

Both teams will be entitled to compensation that will be made up of a pool from $3 million buy-ins paid by new teams entering the league. Each split that teams participated in the League Championship Series is worth three shares from that pool, with Phoenix1 and Envy both participating in three splits in the summer of 2016 and the entire 2017 season for a total of nine shares each. The total amount paid will be determined once the league is locked in.

The rejections came after a process that saw ownership of more than 100 existing esports teams, sports team owners, entrepreneurs and venture capitalists apply by a July 28 deadline. Riot then narrowed those applications to a short list in August and September. That lineup of teams -- including Phoenix1 and Envy -- traveled to Los Angeles in September to meet with Riot Games, review their applications and answer any outstanding questions for the developer in the second phase of the process.

Phoenix1 and Team Envy shake hands after competing in the 2017 League Championship Series in Santa Monica, California. The two organizations had their applications for the newly franchised 2018 LCS denied. Riot Games

Both teams will be forced to sell or terminate the contracts of players whose agreements last until the end of the 2018 season to be entitled to their exit payments. Those players include Envy mid laner Yasin "Nisqy" Dinçer, AD carry Apollo "Apollo" Price and substitute mid laner Alexey "Alex Ich" Ichetovkin. Phoenix1 will have to do the same with jungler Mike "MikeYeung" Yeung and substitutes Kieran "Allorim" Logue and Raymond "Wiggily" Griffin.

With the removal of Phoenix1, Team Envy and reportedly Team Dignitas, at least three new teams will be welcomed into the North American League Championship Series. Golden State Warriors majority owner Joe Lacob and his son Kirk reportedly obtained one of those slots, sources told ESPN on Friday.

Phoenix1 and Envy bought into the league for over $1 million each in May 2016 by acquiring the slots owned by Team Impulse and Renegades, both of which were banned from the league due to alleged misconduct. Phoenix1 and Envy have both made playoff appearances in the league since.

Team Envy declined to comment. Phoenix1 and Riot Games did not respond to requests for comment.