## Sorare: A Precious Possession – Technological Advancements & Innovation – iGB
Sorare, a make-believe football league fueled by Ethereum and non-fungible tokens, has become a Web3 powerhouse. However, its business strategy has caught the eye of gambling overseers, reports Jacob Pollard.
**Sorare: A Precious Possession**
Sorare’s ascent has been extraordinary. Established in 2018 by Nicolas Julia and Adrien Montfort, the firm is now valued at $4.2 billion. It secured $680 million in its most recent funding round in September 2021.
Investors include some of the most prominent names in tech startups. SoftBank, Accel, Gary Vaynerchuk and Reddit co-founder Alexis Ohanian, along with renowned football stars like Rio Ferdinand and Antoine Griezmann, have all contributed financially. And then there’s the crème de la crème, Kylian Mbappé, the world’s top player, who is also a brand representative for the company.
Sorare’s corporate triumph has been met with high acclaim and robust support from French leaders. In addition to Mbappé’s involvement, the company is the official Web3 token provider for the 2024 Paris Olympics. It has been lauded as a French Web3 powerhouse by French executives and politicians.
**Supervisory Concerns**
Sorare, similar to fan token provider Socios or cryptocurrency exchange giant Binance, has inked agreements with numerous sports clubs and leagues.
This encompasses a recent thirty million dollar annual alliance with the top-tier football league.
Sorare’s appeal, particularly in the last two years, has been extraordinary. Its blend of fantasy gaming, non-fungible tokens, digital currencies, financial technology, and the decentralized web has also attracted the attention of gambling regulators such as the French National Gambling Authority, similar to other emerging products.
The chief executive of the UK Gambling Commission, Andrew Rhodes, also recently addressed the topic. In a presentation to gambling executives, he stated that the commission would be allocating more resources to determine whether synthetic stocks, cryptocurrency-backed NFTs, and other decentralized web-like products fall under gambling regulation.
This follows warnings to consumers in 2021, when the regulator began examining the business.
Regarding the French National Gambling Authority, it has been in communication with Sorare since March to comprehend its business model. The regulator has decided to investigate it further to determine whether it constitutes offering real-money sports betting like a bookmaker, or, perhaps more pertinent to Sorare, operating as a betting exchange.
**Fantasy Framework**
Sorare operates by issuing virtual player cards as non-fungible tokens. Users purchase these cards through the Ethereum platform and utilize them to create fantasy teams. These cards can be traded on Sorare’s digital marketplace/exchange, and their value fluctuates based on the real players’ performance on the field.
The organization ANJ observed the impressive performance of players within the Sorare platform and its impact on the valuation of digital cards. It’s unsurprising that participation in Sorare necessitates financial investment. Similar to other games that utilize real currency, individuals engaging in Sorare fantasy competitions allocate funds, potentially resulting in gains or losses.
Sorare’s chief executive, Nicolas Julia, asserted that the financial resources used to acquire cards do not constitute gambling, and the cards’ worth is not contingent upon the real-world achievements of athletes.
Julia further emphasized that Sorare participants retain ownership of their cards and can utilize them repeatedly, unlike gambling scenarios where financial losses are incurred upon unsuccessful wagers. This distinction, he argued, further differentiates Sorare from traditional sports betting.
**Agreement**
In the middle of November, ANJ declared that Sorare had consented to enhance the accessibility of its tournaments for all participants, addressing ANJ’s concerns regarding gambling regulations.
Sorare will not require a sports betting license in France, but they are obligated to implement these modifications by March 31, 2023. ANJ characterized this as a temporary resolution, deemed necessary until legislative adjustments encompass these emerging Web3 activities.
Sorare was questioned by iGB about their plans to make their “free access” approach a reality. The company stated that their product will progress by “unveiling new gaming possibilities for free users.”
Sorare highlighted their dedication to innovation, describing this shift as part of their strategic plan. This alteration will present users with fresh gaming and strategic opportunities, which will be advantageous for all users, including existing players, as they will profit from the expansion of the Sorare community.
When inquired about whether they anticipate a substantial decline in revenue as a consequence of their French market campaign, the company responded, “When you establish an unparalleled model like Sorare, it’s natural for the product to evolve and enhance over time.
“Sorare is primarily a game, not presented or marketed as an investment or financial product. Presently, 87% of our users participate for free, and our objective is to broaden the community. There is no justification for the value of the cards to diminish.”
The company clarified that the 87% figure pertains to Sorare users who can acquire non-NFT cards, known as “common cards,” which they receive without charge upon joining the platform. Naturally, this implies that Sorare users still need to purchase NFT cards that constitute their “unique,” “rare,” or “limited edition” collections. Sorare informed iGB that they were unable to share further details about this at this juncture.
The ascent of Sorare exemplifies how new technology is being used by emerging companies to create products that surprise regulatory bodies. To be fair, Sorare might even be a perfect example of this.
Sorare’s success story demonstrates that startups can leverage new technologies to develop products that take regulators by surprise. However, this subject is very delicate in France, as evidenced by the fact that no legal expert in the French tech sector was willing to comment on the issues raised in this article. Similarly, the stakes are very high for Sorare: if the ANJ decides that Sorare must apply for a sports betting license, this could have a significant impact on its other operations worldwide.
The question of player intention is another key element of this discussion. Whether from a sports betting or financial speculation perspective, participants in Sorare fantasy football tournaments, similar to those buying and trading fan tokens on Socios, anticipate an increase in the value of their digital assets.
All of this partially explains why these Web3 companies are so determined to avoid being linked to any form of gambling (or financial speculation), which is also why the ANJ has expressed “serious concerns” about Sorare’s business model.
In terms of emphasizing the free-to-play access to its product, the question to pose to Sorare is whether it will eliminate the requirement for players to purchase NFT cards to participate in its fantasy tournaments, as this is the heart of the matter.
It will be truly fascinating to observe how ANJ assesses the company’s efforts in making their competitions free to participate when they evaluate it in March 2023.
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