Posted: Oct 13, 2021, 7:27 a.m.
Last updated on: October 13, 2021, 7:27 a.m.
UK gambling regulators have said they are investigating fantasy football platform Sorare. The French startup recently became the darling of the boiling NFT market with a $ 680 million cash injection led by SoftBank.
Sorare allows users to trade footballer cards using NFTs (non-fungible tokens) which may increase or decrease in value depending on the actual performance of the players.
NFTs are a relatively new but rapidly growing craze in the crypto space. These digital tokens can represent ownership of a virtual item, such as sports trading cards, a work of art, or even a virtual horse.
Each NFT is unique and acts as a collector’s item that cannot be duplicated, while ownership is tracked on the blockchain, a digital ledger of transactions.
This means that the rarity or uniqueness of an item can always be proven without a doubt, which makes NFTs very attractive to collectors.
No UK license
Sorare may be making waves in this revolutionary new market, but the UK Gambling Commission has warned UK consumers that the company is doing so without a UK gaming license. Whether or not it needs it is currently under investigation by the UKGC. In the meantime, consumers should proceed with caution, he advised.
The regulator has been accused of fumbling the ball when it comes to new technological trends in the gaming space and is clearly determined not to let the NFT craze slip away.
A recent damning report from the UK government on the collapse of another football trading platform, Football Index, revealed that the UKGC had been slow to understand the new betting product it was tasked with regulating.
Sorare has a different and seemingly less risky business model than Football Index and believes the blockchain offers more transparency in its operations.
Football Index, meanwhile, billed itself as a virtual football stock market, where users could buy and sell notional shares of professional players. They would then receive “dividend” payments, based on the performance of those stocks.
But Football Index outdid itself, and in March the market collapsed. The company is currently in insolvency proceedings and owes millions to players.
What is Sorare’s business model?
In contrast, Sorare generates income by issuing and selling new cards which, unlike Football Index ‘stocks’, have underlying value, largely thanks to NFTs. Since January, more than $ 150 million in cards have been traded on the platform.
Sorare users can purchase cards and add them to their collection, or they can add them to a “team” of players to earn points based on actual performance. These teams can compete in leagues and tournaments to win non-cash prizes.
But it was this fantasy sports aspect of the platform that caught the UKGC’s attention. Fantastic sports operators are required to apply to the agency for a pool betting license if they wish to engage with UK customers. Sorare’s games are theoretically “free,” which could be a loophole, although of course users must first purchase a squad before they can enter.
In a statement, Sorare said he anticipates and accepts regulatory issues due to the novelty of the technology involved. But he added that he was “very confident” that he was not breaking any gambling laws.
“This has been confirmed by expert legal opinions at every step since the inception of the company, including a number of fundraisers,” said a spokesperson for Sorare. “We will always engage and have an open dialogue with the authorities who contact us to learn more about our game.”