On Friday (4 October), blockchain-powered fantasy sports operator Sorare will face charges for providing unlicensed gambling facilities in the UK. The case will be heard in Birmingham’s Magistrates Court.
Sorare has long argued its games do not constitute gambling in the UK. Users can earn or buy player trading cards that are used in fantasy sports games and can be traded for real-life prizes.
In response to the Commission initiating its legal action last week, the French-company insisted its business has been “misunderstood’ by the regulator.
Chris Elliott, partner at gambling law firm Wiggin, expects the legal arguments will consider the value of Sorare’s freemium product and whether the trading card marketplace be considered a financial instrument with a gambling element.
Considering Sorare’s free-to-play fantasy offering
In its fairly untraditional fantasy model users enter competitions with trading cards featuring real players collected either through the freemium option or by paying for higher value players. Some of these high value cards are considered NFTs and can be traded with players for money via Sorare’s trading card marketplace.
Elliott expects Sorare will argue its offering satisfies the UKGC’s definition of a free-to-play fantasy model.
“There is a statutory definition around whether or not [an operator] can satisfy that choice [to play for free] through the mechanics of the game,” Elliott tells iGB.
“Effectively the legislation is designed to make sure it’s a free choice so customers are not disadvantaged by only choosing to play for free versus those who pay because they can escalate more quickly under a traditional framework model.”
Fantasy games are considered a game of skill in various jurisdictions. But in the UK, paid-for fantasy sports games constitute gambling.
“Sorare’s argument may well be that you don’t have to pay to play and therefore it’s not betting because that’s one of the constituent opponents of betting,” says Elliott.
Could Sorare change its free-to-play model once again to appease the regulator?
Various gambling regulators have had their eye on Sorare since it appeared on the fantasy scene in 2019. The Gambling Commission first published a note on it investigating the company in 2021.
French gambling regulator ANJ initiated a similar inquiry in 2022 prompting a change in the way Sorare offered its free-to-play services.
Sorare subsequently increased free-play access for players in France and they were able to enter tournaments without blockchain cards.
As of May 2023, French players can enter tournaments without having to purchase NFTs/blockchain cards, which “neutralises the idea of financial sacrifice (stake),” ANJ president Isabelle Falque-Pierrotin said at the time.
It is possible the UKGC case could push for a further shift in the free-to-play model, eliminating any elements of the game that could be considered gambling.
But it is could be the case that the Commission wants to make an example of the operator to crackdown on unlicensed operators.
Is there an unlicensed financial trading element involved?
The role of the player cards and the marketplace built around trading them could face questioning, particularly as it provides a financial trading element.
Some higher-value cards are NFTs and can have significant real-world value. Players can trade among themselves to increase their fantasy gameplay opportunities.
“It’s set in the boundary between gambling and financial services. Whether the marketplace element is a cause for regulation as gambling or even financial services, and how and whether that can be offered in the UK, will be interesting to see,” says Elliott.
“A model which provides a facility for trading a digital asset raises concerns that actually it is a marketplace for speculating on the value of those assets.”
The case of Football Index’s collapse is no doubt still fresh in the GC’s mind, and the fallout that had on players and the regulator may play a part in how the regulator approaches its case with Sorare.
The footballer trading platform went into administration in 2021, resulting in users losing £90m worth of deposits. The GC was heavily criticised for licensing the trading platform.
No risk involved in Sorare fantasy gameplay?
As players cannot lose their cards through playing fantasy tournaments, Elliott suggests there is a case to be made that with no risk involved, can this be considered gambling?
“They are entering these tournaments with those cards and they still have them at the end. They don’t lose anything and are not at risk for anything. An argument goes, because they’re not losing anything by entering into the fantasy sports game therefore it’s not a bet. I think that’s probably the stronger argument,” he says.
Original article: https://igamingbusiness.com/legal-compliance/sorare-uk-gambling-commission/
