France has taken a groundbreaking step in addressing the regulatory landscape surrounding NFT and cryptocurrency-based games, sparking discussions about whether it could serve as a model for the United States and other nations grappling with similar issues. On October 17, France approved a significant piece of legislation, known as the Sorare Law, which aims to establish a regulatory framework for games featuring crypto and NFT elements, distinguishing them from traditional “gambling” under French law due to the unique nature of these digital assets.
Differentiating Crypto Gaming from Gambling
The “Digital Space Regulation Law” (SREN), also known as the Sorare Law, creates a clear distinction between crypto gaming and gambling. In France, NFT and blockchain-based games of this nature are referred to as “Jonum” or “games with monetizable digital objects.”
Crypto Winnings and the Fiat Exchange Ban
One of the core principles of the Sorare Law is that the Constitutional Council has granted a three-year experimental period during which winnings from these games must remain exclusively digital. In other words, any crypto-based rewards cannot be converted into fiat currency. This is a deliberate move to set Jonum apart from games regulated by France’s gaming authority, the ANJ (National Gaming Authority).
Progress Reports and Consumer Protection
The law also requires the French government to submit progress reports within the first 18 months of the experiment. These reports will help assess the state of the market, the mechanisms in place to protect players, and measures to combat money laundering and terrorism financing.
Influencer Promotions and Restrictions on Minors
France’s stance on influencers and minors in the context of NFT and blockchain-based games is strict. Failure to comply with these regulations could lead to serious consequences. Influencers who promote these games on platforms such as TikTok, YouTube, Instagram, and others without safeguards to prevent minors from playing can face prosecution, with potential penalties including up to two years in jail and fines of up to $322,000 USD.
French Parliament’s Prior Actions
The French Parliament introduced a law in June that established rules for influencers, defining the parameters for their involvement in various activities. Around 150,000 influencers in France are now required to report whether their content constitutes “advertising” or a “commercial collaboration,” providing the government with insights into consumer engagement with different types of content.
Sports and Gambling
The ANJ (National Gaming Authority) has also issued its guidelines, focusing on preventing gambling addiction, eliminating illegal gambling operators, and safeguarding minors. The guidelines specifically prohibit sports athletes from promoting gambling operators, as part of a broader effort to separate sports from gambling.
What’s Next for the Sorare Law?
Although the National Assembly has approved the Sorare Law, its ultimate impact remains contingent on approval from France’s highest authority, the Constitutional Council. If ratified, the law could fundamentally transform France’s digital landscape by legitimizing NFT and crypto games and carving out a distinct category separate from traditional “gambling” games. This could potentially set a precedent for other nations, including the United States, seeking to address similar challenges.
