Published: October 29, 2023

In a significant stride toward the intersection of blockchain technology and gaming, France has greenlit a groundbreaking law to Not Classify NFT-Based Games as Gambling

In a significant stride toward the intersection of blockchain technology and gaming, France has greenlit a groundbreaking law. The so-called Sorare Law signals a shift in the classification of games based on NFT (non-fungible token) and blockchain technology, ensuring that they’re not part of the gambling ecosystem.

With an overwhelming majority of 437 votes in favor and 77 against in the National Assembly, the legislation aimed to establish a regulatory framework for games incorporating NFT and cryptocurrency elements. The goal of the legislation was to determine whether these games, because of the volatile nature of the cryptocurrency ecosystem, should be defined as gambling.

France refers to these NFT and blockchain games as “games with monetizable digital objects,” or Jonum, for its French acronym. Jonum has been a hot topic lately in the country, which is considering rewriting the script on digital activity with its all-encompassing “SREN” bill.

Bringing Digital Mainstream

This legislative move lays the groundwork for a regulatory framework that separates games utilizing NFT and crypto features from the gambling realm. However, it still must get a nod from the Constitutional Council.

The council, the ultimate constitutional authority in France, now holds all the cards. It can either validate this step toward legitimizing NFT and crypto games, or cast it aside. Which way it will vote has been kept a well-guarded secret.

Should the law pass the council’s scrutiny, the Jonum regime could emerge as a crucial development for companies venturing into the blockchain landscape. Nevertheless, given the nascent nature of the crypto-gaming vertical, it’s anticipated the measure might undergo further refinements.

The law stipulates that the authorization is granted on an experimental basis and initially for just three years. To distinguish these games from those regulated by the ANJ, France’s gaming regulator, the bill specifies that the winnings concern exclusively digital objects. It also prohibits their exchange for fiat.

The Sorare Law also requires the government to submit a progress report on the experiment within 18 months. The aim is to carry out an assessment of the state of the market and the mechanisms for protecting players, and preventing money laundering and the financing of terrorism.

Additionally, NFT and blockchain gaming platforms will have to include identity checks to prohibit anyone under 18 from playing the games. There is also a prohibition on using influencers to promote the games if the communications take place on online platforms that do not have the possibility of excluding minors.

Both of those combined seem to indicate that YouTube, TikTok, and other social media platforms are out of the picture. This is in line with France’s plans to control influencer-led promotions across the social media spectrum.

The Gaming Space is Changing

NFT and blockchain-based games represent a fusion of the cutting-edge technologies to introduce new dynamics to in-game assets. Traditionally, virtual items within games are owned and controlled by the game developers, and players may not have true ownership or the ability to trade these items outside the game environment.

With NFT and blockchain-based games, certain in-game assets are tokenized using NFTs. This means that players have verifiable ownership of these virtual items on the blockchain. The blockchain acts as a decentralized and secure ledger, ensuring the scarcity and authenticity of these digital assets. Players can buy, sell, and trade these items not only within the game, but also on external platforms or marketplaces.

These games often use smart, self-executing contracts with the terms directly written into nonfungible code to automate and facilitate transactions related to in-game assets. This introduces a level of transparency and trust in the gaming ecosystem.

Additionally, the use of blockchain technology enables players to earn cryptocurrency rewards within the game, creating new economic models for gaming ecosystems. It also addresses issues related to fraud, piracy, and the centralized control of virtual assets.

The use of in-game assets, including loot boxes and player packs, has come under intense scrutiny around the world. Many countries have decided that they’re a form of gambling, since users can purchase them without knowing the contents. For now, France is not one of them.

© Public Gaming Research Institute. All rights reserved.