France takes a decisive step in the regulation of NFTs.
Last October 17, with the approval of the National Assembly, the Sorare Law will establish a regulatory framework for those games that use cryptocurrencies and NFT as base elements. This will exclude them from the object of the current laws on gambling in the country, given the volatile nature of digital assets. The Law on the Regulation of Digital Space (SREN, for its French acronym), presents a clear distinction between “crypto-betting” and conventional betting. In France, these games that employ NFTs and make use of the Blockchain are known as “jonum“, or “games with monetizable digital objects“.
The Sorare law, moreover, provides that the Constitutional Council will grant a three-year authorization, on an experimental basis, to the extent that the winnings from such games are exclusively digital objects. In other words, those winnings based on cryptos may not be exchanged for fiat money.
This is a provision intentionally written to differentiate Jonum from other games that are currently subject to the French National Gambling Authority (ANJ for its French acronym).
The law also requires the French government to report progress within the first 18 months of testing, in order to better ensure the state of the market and the mechanisms that would be available to protect players, as well as to prevent money laundering and terrorist financing.
It is patent what happens when celebrities or influencers promote NTFs projects or crypto-based initiatives in the United States in the face of the Securities Act’s anti-promotion prescriptions.
As far as France is concerned, the Sorare law reflects the National Gambling Authority‘s view of the relationship between influencers and minors: failure to comply with these laws will result in prosecution of the influencer, who may face penalties of either up to $322,000 or even two years in prison.
The National Assembly defines influencers as “natural or legal persons who, through payments, mobilize their notoriety with their audience to transmit content to the public by electronic means in order to promote, directly or indirectly, goods, services or causes”.
Last June, the French Parliament approved a law stating strict requirements for influencers as well as the parameters in which they are allowed to participate. Having approximately 150,000 influencers in France, the country has forced them to notify what type of content they are posting, i.e. whether it is pure advertising or a commercial collaboration, which helps the French Parliament understand what type of content captures consumers.
As part of the experiment and its assessment, those games based on Blockchain and NFTs will require an identity check, prohibiting anyone under the age of 18 from participating in them, as well as influencers promoting them if they do so through platforms such as Tik-Tok, YouTube, Instagram, among others, which do not have mechanisms to prevent their use by minors. Such a ban also applies to influencers living outside France, although the government has not yet introduced an appropriate mechanism to enforce it.
While the French Parliament was introducing this law, the National Gambling Authority was issuing its own guidelines aimed at mitigating and preventing gambling addiction, pressuring illegal gambling operators to leave the country and, of course, protecting minors. Most notably, sports athletes are prohibited from promoting gambling operators, in a clear effort to isolate the world of sports from the world of gambling.
With the approval of the Sorare law by the National Assembly, the question still remains as to whether this kind of games should actually be classified as gambling as the law still needs the approval of the French Constitutional Council, the highest authority in the country. If ratified by this entity, this law will transform the digital space in France. Not only because it will give legitimacy to NFTs and crypto games, but also because it will demarcate a new category to distinguish those from traditional gambling. This initiative could be a model for the United States.