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Analysis | Macron’s Crypto Dream May Be a Gamble


Paris is offering shelter from crypto winter. The City of Lights has welcomed Binance and more recently Crypto.com (of Matt Damon cringe fame) with regulatory licenses; an “NFT Factory” showcasing digital artworks has also opened its doors opposite the Centre Pompidou.

President Emmanuel Macron’s administration sees an advantage in luring tech talent and investment, while France’s culture and entertainment champions have felt pressure to dabble in meta-collectibles in a Silicon-Valley-dominated world — even as  enthusiasm has dimmed somewhat.

But hopes for a French “exception” to the wider crypto market wreckage are running into the need for tougher rules.

Case in point is Sorare, the NFT-based fantasy-football game that was valued at $4.3 billion last year in a funding round led by SoftBank. It’s been an undeniable success, in the Top 20 NFT collections by all-time sales volume, according to CryptoSlam data, even if average prices appear to have cooled. Like regular sports cards, there is a collectible appeal; and like fantasy football, there’s a game involved, where performance scores points.

Yet the risky speculative appeal has become impossible to ignore as cards can be bought and sold using cryptocurrency, spawning hype-fueled tales of players taking out loans or quitting their jobs to win big, and as the best prizes and Ethereum rewards are on offer to rarer, pricier cards. “What we have with the likes of Sorare is a blurring of the lines, deliberately, between gaming and gambling,” says Kieran Maguire, author of The Price of Football.

And now regulators keen to clean up crypto are looking at Sorare. These are not the financial-market watchdogs seen in the US, where Bloomberg News reports the Securities and Exchange Commission is taking a look at Bored Apes, another NFT collection. Rather, attention is coming from gambling regulators in various jurisdictions nervous about addiction and money laundering.

Last year, the UK Gambling Commission began “carrying out enquiries” into Sorare and Switzerland’s Gespa watchdog put Sorare on its blacklist. Scrutiny has now reached fever pitch with France’s own regulator asking Sorare for information. Christine Lavarde, a senator for the Republicains party, has asked the government to explain why Sorare isn’t placed under the oversight of the country’s gambling regulator, with all the resulting taxes and red tape that would imply.

The reaction from Sorare and, to an extent, the Macron administration, has been that this is a new kind of business model that shouldn’t be strangled at birth. Sorare Chief of Staff Thibaut Predhomme says the game is not gambling, that players won’t see their cards disappear the way an ordinary financial bet might and that free cards are available. France’s Digital Minister Jean-Noel Barrot echoed the idea that regulation should be “agile” while still supervising money-laundering and addiction risks.

However, just as the SEC has to stick to current rules, so Sorare’s arguments are unlikely to deter regulators. In France, if a game brings together a financial sacrifice, an offering to the public and the hope of reward then it counts as gambling. When cards change hands for six-figure sums in the hope of earning better tournament prizes or a higher resale value, that would seem to clearly fit the criteria, gambling experts say. Waving this away by saying Sorare is an entirely new “model” looks too much like wanting to have it both ways as the startup expands into areas like the NBA.

A way out of this impasse will be messy. Gambling law expert Matthieu Escande says that special exceptions require legislation, which in the current political environment is probably not something the French government will find easy to do. Or it may require Sorare to seek an existing regulatory classification under the gambling authority’s oversight, which could affect take-up of Sorare and its ability to sign lucrative deals with sports clubs keeping a wary eye on crypto.

Still, if Paris wants to be a crypto hub, it should recognize that more oversight, more consumer protection and more digital literacy are a small price to pay to avoid the potential social costs of “ gamblification.” The UK’s reputation is still reeling from the 2021 Football Index scandal, which left people financially and mentally distressed after the stock-market-style trading game collapsed. If innovation becomes mainly a means to leap ahead of regulation rather than create sustainable businesses, then this particular tech dream won’t be a pleasant one.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. Previously, he was a reporter for Reuters and Forbes.

More stories like this are available on bloomberg.com/opinion

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