PLAY-TO-EARN GAMES
draft law to secure and regulate the digital space proposed by the Senate on July 5, 2023, with the draft regulation of the National Assembly of October 17, 2023, which are not quite the same. The Joint Committee will advance discussions, probably from January 2024, and the draft law may thus still evolve accordingly. However, it remains quite unlikely that the Joint Committee will significantly modify the provisions dedicated to the games based on monetizable digital objects. In the absence of a European framework for these new types of games, France, in early 2024, may well become the first country in the world to regulate this ecosystem. Background This draft law was initially led by the French government. It intends to fill a legal vacuum but also to support thriving French start-ups such as Sorare – which raised US$680 million in 2021 and is valued at US$4.3 billion. The draft law has even been informally called the “Sorare law”. In play-to-earn games, players can purchase digital objects to participate and progress in the game. A core feature of these games is the possibility for the player to resell these objects to third parties, either on the game publisher’s platform or on a secondary marketplace. JONUM fall within the definition of video games under the meaning of French law. Video games are defined as “any leisure software made available to the public on a physical medium or online, incorporating elements of artistic and technological creation, offering one or more users a series of interactions based on a storyline or simulated situations, in the form of animated images, with or without sound”. 5 The motivations of JONUM players may generally differ from what motivates gamblers. The JONUM operators’ business model is also perhaps distinct from that of gambling operators. Yet, the current legal regime does not take these circumstances into account, and the legal characterization of JONUM poses a regulatory challenge under French law from a gambling perspective.
Article L. 320-1 of the French Homeland Security Code prohibits gambling as long as the following four conditions are met: (i) an offer is made to the public, (ii) a financial sacrifice is made by the player; (iii) a gain of any kind is hoped for by the player; and (iv) a dynamic of chance is involved, however slight. Gambling as defined above is prohibited unless it is included in the list of exceptions to the prohibition set out in article L. 320- 6 of the French Homeland Security Code. It should be noted that the intervention of chance is not a decisive criterion under French law anymore. The hope of a gain does not have a specific legal definition. Therefore, it could be considered that a digital token, which is tradeable and which has a monetary value, is a gain. JONUM are thus at the edge of the French online gambling regulation. Under French law, violation of the gambling prohibition is an imprisonable offence and subject to heavy fines. 6 The online gambling market is open to competition in France. However, the games allowed under the online gambling regulatory framework are limited to poker, sports betting and horse racing bets. Therefore, it is insufficient to cover all digital token-based games. Consequently, the French government considered that the creation of a dedicated regulatory framework was necessary. Such a dedicated framework would offer legal certainty to operators and the legal barrier for investors will thus be removed. According to a Senate report, these games presented the same kind of risks as those associated with gambling and, to a lesser extent, video games. 7 Therefore, following the French government initiative, the parliament acknowledged that JONUM should be authorized by law and supervised by the ANJ. The authorization of games based on monetizable digital objects As of October 17, 2023, article 15 of the draft law authorizes JONUM: On an experimental basis and for a period of three years from the enactment of this law, games offered via an online
5 Article 220 terdecies, II, of the French General Tax Code 6 Article L324-1 of the French Homeland Security Code 7 Report No 777 (2022-2023) of the French Senate on the draft law to secure and regulate the digital space of June 2, 2023, filed on June 27, 2023, Projet de loi visant à sécuriser et réguler l’espace numérique - Sénat (senat.fr)
PAGE 14
IMGL MAGAZINE | JANUARY 2024
Made with FlippingBook flipbook maker