The National Gambling Authority warns Sorare, which it plans to regulate

The French service, based on the speculative purchase of virtual football cards, could be seen as a platform offering hidden sports betting.

The start of the school year was supposed to be hectic for Sorare. As BFM Business has learned, the National Gaming Authority (ANJ) has issued a warning to the young company behind French Tech’s biggest fundraiser ($680 million). This fall, Sorare, valued at $4.3 billion, will have to prove it’s not a disguised sports betting platform.

To understand the charge against Sorare, we have to go back to how it works: customers can buy virtual cards (whose ownership takes the form of an NFT), more or less rare, associated with a football player, to be able to speculate their rise in accordance with the development of the latter’s celebrity.

The purchase of the cards in question

They then use the same cards to participate in virtual tournaments, which earn rewards based on player stats associated with the cards, in real matches. For example in the case of a goal or an assist. It is this usage that crystallizes ANJ’s doubts.

“Shall be deemed to be games of chance and games of chance and prohibited as such all operations offered to the public, under any denomination, to give rise to the hope of a gain which would be due, even in part, to chance and which a financial sacrifice is required from the participants” specifies Article L320-1 of the Internal Security Code.

A definition that Sorare’s activity, which has just recruited Kylian Mbappé as an investor and ambassador, could correspond to in the eyes of Frédéric Guerchoun, legal director of ANJ.

“For there to be gambling, there must be an offer to the public, a gain in kind or cash and a financial sacrifice. In our view, financial sacrifice as understood in jurisprudence is an expense. But in the case of Sorare, it is imperative to buy a card to participate,” believes Frédéric Guerchoun, from BFM Business.

This notion of financial sacrifice is not perceived in the same way by Sorare, who defends the operation of his platform.

“As the legislation currently stands, our analysis is that Sorare does not fall within the scope of the rules of the game. […] At Sorare, there is no notion of effort or financial sacrifice depending on a sporting event. When a Sorare card is played in our fantasy game, it is never lost. This card can be played 1 time or 500 times, during the first season as well as in the tenth season” defends the company with BFMTV.

Big potential consequences

However, the French regulatory authority is not the only one that takes a dim view of Sorare’s activity. In October 2021, the UK equivalent of ANJ opened an investigation into the young company for the same reasons.

“We have issued a warning and requested information from this company. We have already received a number of arguments from them, which we still have serious doubts about. We await at the beginning of the school year what the representatives of Sorare will present to us If this difficulty were to continue, we would have to take a stand,” warns the ANJ director, who particularly recalls the institution’s blocking power.

For Sorare, this threat can weigh heavily. French law prohibits gambling, despite certain exceptions such as the casino or sports betting. If the purchase of virtual cards to earn money based on sports performance is characterized as sports betting, then Sorare must submit an application to the ANJ to become an authorized operator online, in the same way as Betclic, Winamax and consorts.

In addition to facing higher taxation, Sorare will then have to verify each user’s identity and prohibit access to minors (which is already the case under its terms of use). This can have serious consequences for the number of active users of the platform and for its profitability.

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