UK Regulators Launch Probe into NFT-Powered ‘Fantasy Sports’ Platform Sorare
Posted on: October 13, 2021, 07:27h.
Last updated on: October 13, 2021, 01:18h.
UK gambling regulators have said they are investigating fantasy soccer platform Sorare. The French startup recently became the darling of the red-hot NFT market with a $680 million cash injection led by SoftBank.
Sorare enables users to trade soccer-player cards using NFTs (non-fungible tokens), which can rise or fall in value depending on players’ real-world performances.
NFTs are a relatively new but fast-growing craze in the crypto space. These digital tokens can represent ownership of a virtual item, like collectible sports trading cards, a work of art, or even a virtual horse. Each NFT is unique and acts as a collector’s item that can’t be duplicated, while ownership is tracked on the blockchain, a digital ledger of transactions.
That means an item’s rarity or uniqueness can always be proven beyond doubt, making NFTs highly attractive to collectors.
No UK License
Sorare may be making waves in this revolutionary new market. But the UK Gambling Commission has warned British consumers the company is doing so without a UK gambling license. Whether it needs one or not is currently the subject of a UKGC investigation. In the meantime, consumers should proceed with caution, it advised.
The regulator has been accused of fumbling the ball when it comes to new technological trends in the gambling space and is clearly determined not to let the NFT craze slip through its grasp.
A recent damning report by the British government into the collapse of another soccer trading platform, Football Index, found the UKGC had been slow to understand the novel betting product it was tasked with regulating.
Sorare has a different and apparently less risky business model than Football Index, and believes blockchain affords more transparency into its operations.
Football Index, meanwhile, marketed itself as a virtual soccer stock market, where users could buy and sell notional shares in professional players. They would then receive “dividend” payouts, based on the performance of those shares.
But Football Index overextended itself, and in March the market crashed. The company is now going through insolvency proceedings and owes players millions.
Sorare’s Fantasy Sports in Trouble
In contrast, Sorare earns revenue by issuing and selling new cards, which, unlike Football Index’s “shares,” have underlying value, thanks largely to NFTs. Since January, more than $150 million worth of cards has been traded on the platform.
Sorare’s users can buy cards and add them to their collection. Or they can add them to a “team” of players to earn points based on real-life performances. These teams can compete in leagues and tournament to win non-cash prizes.
But it’s this fantasy sports aspect of the platform that has caught the UKGC’s attention. Operators of fantasy sports are required to apply to the agency for a pool-betting license if they want to engage with UK customers. Sorare’s games are nominally “free” to play, which could be a loophole, although, of course, users must first buy a team before they can enter.
In a statement, Sorare said it anticipated and welcomed regulatory questions because of the sheer newness of the technology involved. But it added it was “very confident” that it was not violating any gambling laws.
“This has been confirmed by expert legal opinions at every stage since the company was founded, including during a number of fundraising rounds,” a Sorare spokesman said. “We will always engage and have an open dialogue with authorities who reach out to us to learn more about our game.”
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