This weekend I received a flurry of questions regarding Sorare.
Naturally, the recent Footstock announcement and demise of Football Index has left traders anxious. Several asked me to share my thoughts, much like the Football Index review in December. I may revisit this idea in the coming weeks, time permitting.
For now, my first question is…
Is Sorare a Gambling Game?
Sorare describes itself as an online global fantasy football game where you can collect and trade virtual cards via the ethereum blockchain. These ‘virtual cards’ can be used in online competitions to win cash prizes or more cards.
But isn’t that gambling?
Looking at the Google definition of gambling, you might think so…
Although a quick skim of the SO5 game rules states:
THE GAME IS FREE. A PURCHASE OF COLLECTIBLES DOES NOT IMPROVE CHANCES OF WINNING.
I would presume this term is there to allow them the regulatory workaround of the SO5 game being a ‘Prize Competition’ like that of a crossword or sudoku puzzle in the paper offering a prize.
However, looking at the public discussions on Twitter, it appears that the ‘common cards’ that you receive upon signup are of less use when it comes to winning prizes…
Should it be classified as gambling or not, it begs the question – are some Football Index users chasing their losses on SoRare?
Whilst some SoRare users are clearly into collecting cards, many appear to be there for financial gain alone. Hopefully they are not over-exposing themselves in terms of affordability.
A Legal Loophole?
So if the cards enable the user to win cash or additional cards of value, why doesn’t SoRare need a gambling license?
Here’s Sorare’s CEO explaining via discord:
In short; there isn’t an entry fee for the competitions and Crypto/NFT’s mean it’s not gambling. Regardless of the result, the user gets to keep their imaginary card via the blockchain.
It’s an interesting legal workaround in my opinion. My first thought was – how long until Betfair accept cryptocurrency as payment and offer a bet with each NFT you purchase?
By doing this, they wouldn’t need a gambling license either!
The ‘free to play’ in tournaments is true, although I suspect there’s an argument to say it’s not entirely free as you have to purchase cards in the first place (that presumably pay for prizes). A bit like a lottery, or pool betting.
If Regulation Catches Up…
Assuming my thinking here is correct, users need to be careful about their decisions.
Crypto and NFT’s are relatively new and it might be a case that various regulation hasn’t caught up yet. If regulators should decide this is indeed gambling and or there is additional regulation around NFT’s, the company will be safe and users will be left holding some very expensive cards, without the added ability earn prizes.
And remember, the cards are only worth what the next person is willing to pay…
Note: SoRare has reached out via email and offered to answer any questions I have. I’ll be asking them about these points and updating this article once there has been a response!
Update: A Response From Sorare
As promised Sorare have responded to the concerns raised in this article via email, along with a few other questions that will be addressed in a more thorough review.
At first glance, it appears to me that SoRare is a gambling game that requires NFT’s to play. For example, to win a prize in division 4, users need at least 4 rare cards (paid or won) and 1 common (free).
Could you explain why Sorare isn’t gambling and therefore regulated?
No, Sorare sells NFTs (cards) and, in addition, gives access to a free game. This game is reserved for cards holders (free or acquired) as it exists for many services.
From my own personal perspective, it’s disappointing to see this answer. I was hoping for something more explanatory, highlighting something I had missed. It appears that this is not the case though.
Sorare isn’t gambling in the same way a bar that requires you to buy a pot noodle to get a free pint of beer isn’t a bar. For anyone that isn’t in the UK, this is how bar owners here have successfully navigated coronavirus restrictions – stating that legally, they are in fact restaurants providing a substantial meal.
There will be a fuller Sorare review including answers to other questions in the coming weeks!