UK Gambling Commission launches inquiry into NFT fantasy game Sorare

On Friday, the UK’s Gambling Commission issued a notice about fantasy football game Sorare, saying that the platform is not licensed by the Commission. It also stated there is a current pending inquiry. As outlined below, there’s more to this than might be evident at first. The Gambling Commission was itself recently scrutinized, and it’s conceivable that the inquiry aims to consult outside lawyers given the novelty of the platform.

Sorare has deals with more than 180 football clubs, including some of the world’s biggest, as well as league wide contracts with the likes of Spain’s LaLiga and the German Bundesliga. Players buy NFT card collectibles and can use them in free-to-play fantasy games, earning prizes of other collectibles or ether cryptocurrency.

Just three weeks ago, the French startup announced a $680 million funding round led by Softbank.

In response to the Commission’s notice, Sorare published a statement saying, “We are very confident Sorare does not offer any forms of regulated gambling. This has been confirmed by expert legal opinions at every stage since the company was founded, including during a number of fundraising rounds. We will always engage and have an open dialogue with authorities who reach out to us to learn more about our game.”

The Commission’s stance on fantasy games

Back in 2017, the Gambling Commission issued a notice about fantasy games, warning “that those organising fantasy football leagues … could require a pool betting licence from the Gambling Commission, as prize values are determined by the number of paying entrants.” We don’t believe this is how Sorare operates, as the game is free to enter.

However, the 2017 notice also states, “Advertising, when it comes to gambling, includes doing anything that encourages someone to gamble, or provides information about gambling facilities so that it will increase use. This includes Twitter or Facebook posts, whether public, or private or within groups.” 

That begs the question that if there’s no pool, then is there gambling? Hence does social media activity matter? We’ve reached out to gaming lawyers but did not receive a response in time for publication.

Standing back, while Sorare offers collectibles and runs fantasy games, there’s no question that the entire NFT space has become pretty speculative, driven by a significant subset of users. 

Elsewhere, the UK’s Premier League offers a free-to-enter fantasy competition, and we don’t believe that it has a gambling license. Likewise, Sorare’s fantasy game is free to enter.

This is the description from the Sorare website: “The Game is a free promotional game organized to promote the main activity of the Organizer….The purpose of the Game is to create the best team of five Collectibles representing professional football players.”

So while the game is free to play, users buy collectibles, which are not free.

Gambling Commission scrutinized

The timing of this warning may be relevant. Just two weeks ago, the Gambling Commission was criticized by an independent government review for its handling of Football Index that operated a stock exchange-style football investment platform. 

BetIndex, the owner of Football Index, went into administration in March 2021. By that time, the open bets amounted to £124 million. Despite being licensed for several years, the company only started to receive detailed scrutiny in 2019. The government Review stated that it “considers that the nearly two years that passed between 2019 and the suspension of BetIndex’s licence in March 2021 was too long.”

The FCA, which regulates investments, was also criticized. “In the face of the need to consider the regulatory position of an undoubtedly novel product, the legal interpretation of which was nuanced and open to different conclusions, the FCA did not obtain external legal advice from leading counsel until after BetIndex’s gambling licence had been suspended.”

The Review also stated the FCA’s approach was driven by available resources rather than legal analysis. That shortage of manpower is something that regulators elsewhere, including the SEC in the United States, have highlighted.

Circling back to Sorare, another question is if the Commission is investigating Sorare, why only Sorare? Looking at the description of Football Index, other blockchain platforms sound far closer, although they too are novel and different.

Published By : Ledger Insights

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