French people

Macron’s crypto dream could be a gamble

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

President Emmanuel Macron‘s administration sees benefit in attracting talent and tech investment, while France’s culture and entertainment champions have felt the pressure to venture into meta-collectibles in a world dominated by technology. Silicon Valley – although the enthusiasm has faded somewhat.

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

For example, Sorare, the NFT-based fantasy football game that was valued at $4.3 billion last year in a funding round led by SoftBank. It is an undeniable success, in the Top 20 NFT collections by sales volume of all time, according to data from CryptoSlam, even if the average prices seem to have dropped. Like regular sports cards, there’s collectible appeal; and like fantasy football, there is 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, generating hype-fueled stories of gamers taking out loans or quitting their jobs to win big, and as the best Ethereum prizes and rewards are offered at rarer and more expensive cards. “What we have with people like Sorare is a deliberate blurring of the lines between game and play,” says Kieran Maguire, author of The Price of Football.

And now regulators eager to clean up crypto are looking to Sorare. These are not the financial market watchdogs seen in the United States, where Bloomberg News reports that the Securities and Exchange Commission is reviewing Bored Apes, another NFT collection. Rather, attention is coming from gambling regulators in various jurisdictions worried about addiction and money laundering.

Last year, the UK Gambling Commission began “investigating” Sorare and Swiss watchdog Gespa blacklisted Sorare. The scrutiny has now come to a head with France’s own regulator asking Sorare for information. Christine Lavarde, a senator for the Republicans party, has asked the government to explain why Sorare is not placed under the supervision of the country’s gambling regulator, with all the taxes and red tape that this would entail.

The reaction from Sorare, and to some extent the Macron administration, has been that this is a new type of economic model that should not be strangled at birth. Sorare’s chief of staff, Thibaut Predhomme, says the game is not a gamble, players won’t see their cards disappear like a regular financial bet would, and free cards are available. The French digital minister, Jean-Noël Barrot, echoed the idea that regulation must be “agile” while controlling the risks of money laundering and addiction.

However, just as the SEC must stick to current rules, Sorare’s arguments are unlikely to discourage regulators. In France, if a game combines a financial sacrifice, an offering to the public and the hope of a reward then it is assimilated to a game. When the cards change hands for six-figure sums in the hope of winning better tournament prizes or higher resale value, that would clearly seem to fit the criteria, say game experts. startup is growing in areas like the NBA.

A way out of this impasse will be messy. Gambling law expert Matthieu Escande says special exceptions require legislation, which in the current political environment is unlikely to be something the French government will find easy to do. Or it may require Sorare to search for an existing regulatory classification under the supervision of the gambling authority, which could affect Sorare’s adoption and ability to sign lucrative deals with sports clubs with a cautious eye. on crypto.

Still, if Paris wants to be a crypto hub, it should recognize that more oversight, more consumer protections, 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 primarily a means of getting ahead of regulation rather than building sustainable businesses, then this particular tech dream won’t be pleasant.

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This column does not necessarily reflect the opinion of the Editorial Board or of 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.

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