Before the game starts, put a buoy out on the water for each team. 

The game is played with three boats and 5 kids per team.  There can be any number of teams. 

All the teams start from the same place, home port.  There is a merchant ship with a skipper, a pirate ship with two pirates and a Coast Guard ship with two coast guardsmen. 

The merchant ship leaves home port with a pot of gold (sometimes a tennis ball).  When the merchant boat arrives at the team’s buoy, the pirate ship, which has been watching it, starts out to seize the gold.  As the pirate ship is arriving, the merchant captain becomes afraid of being captured and jumps overboard.  The pirates then board the merchant boat, grab the gold, capsize the merchant ship, and take the merchant captain aboard.  The Coast Guard is alarmed by this and sends out the coast guard boat.

The coast guardsmen arrive at the scene, capture the pirates, release the merchant captain and right the merchant boat.  The merchant captain boards his own boat.  There is one guardsman and one pirate on each of the other boats.  They all sail to home port.  The first team with all its boats home wins.

Kids often enjoy making up variations of this game.