Sorare, a crypto-powered fantasy football start-up backed by SoftBank that allows users to buy and trade digital player cards in the form of non-fungible tokens (NFTs), is embroiled in a legal dispute with the UK Gambling Commission, which has charged Sorare with offering unlicensed gambling to consumers. 

The case, heard last Friday, October 4, 2024, at Birmingham Magistrates' Court, raises significant questions about the application of UK gambling laws to modern digital asset-based gaming platforms. 

Background 

Sorare, founded in 2018, has rapidly grown through partnerships and licensing with major sports leagues, including the English Premier League, La Liga, Serie A, and the Bundesliga, as well as several football clubs. The platform allows users to create fantasy football teams using digital collectible cards of real football players, with limited edition cards existing in the form of NFTs secured on the blockchain, which can be bought, sold, and traded, and which are ultimately used to compete in virtual fantasy leagues. These cards can also be used to compete for prizes such as cash, Ethereum, VIP tickets, and signed kits, if a participant’s team places high on the leaderboards. 

The Gambling Commission first began investigating Sorare in 2021 to determine whether its services constituted gambling under UK law. The Commission has now charged Sorare with three counts of providing unlicensed gambling facilities,¹ claims that the company vehemently denies after entering three not-guilty pleas.²

Relevant legislation

The primary legislation governing gambling in the UK is the Gambling Act 2005 (the Act). This Act defines gambling as betting, gaming, or participating in a lottery, each of which can be summarised as:

• Betting: Wagering on the outcome of an event, such as sports or any uncertain event.
• Gaming: Playing a game of chance for a prize, of money or money’s worth, including a game that involves both an element of chance and an element of skill.
• Lottery: A game where prizes are distributed by chance among those who have paid for a chance to win.

Under the Act, any entity providing gambling facilities, which includes those provided by means of remote communication, must hold an operating licence issued by the Gambling Commission. 

The Gambling Commission has previously issued a general warning to fantasy football organisers³ to remind them not to get caught out by gambling rules. This warning emphasised the importance of organisers adhering to gambling rules and reminded organisers that:

• if the fantasy football league is run as a business or involves advertising, organisers may need a pool betting licence;
• promoting the league through advertising, including posts on social media platforms, whether public or private, could classify the league as a business operation, thus requiring a licence; and
• leagues run privately among friends, colleagues, or residents of the same premises are generally exempt from needing a licence.

Analysis

The crux of the case against Sorare lies in whether its fantasy football platform meets the criteria for gambling under the Act. The Gambling Commission may argue that Sorare's platform constitutes “gaming” as defined under section 6 of the Act, due to the fact that its offering includes:

• Prize Element: Users can win prizes of monetary value, such as cash, Ethereum, and valuable digital cards in the form of NFTs.
• Chance: The outcome of fantasy contests is influenced by the real-life performance of football players, introducing an element of chance.
• Consideration: Users can purchase digital cards, in the form of NFTs, which may provide a competitive advantage in fantasy contests and access to exclusive paid-for leagues.

On the other hand, Sorare, which has publicly stated that the Gambling Commission has misunderstood its business, may argue that its game is not a game of chance, but only a game of skill, or that its NFTs are not prizes, but collectibles that are part of the logical evolution of football sticker books. 

Additionally, Sorare may argue that users can choose not to spend any money at all on the platform and that those users would be permitted to play the free version of the game for as long as they please, although the user experience may be limited, or initially restricted, without purchasing the more valuable digital collectible cards. Another possible defence, depending on the arguments raised by the Gambling Commission, may be that there is an absence of risk when playing the game as, although cards may be traded, they are not lost by users as a result of the real-life performance of football players.

Other areas to watch

This case also raises the question as to whether Sorare could be exposed to contractual liabilities in its agreements with any of its partners, in the event that they have given any assurances that their platform is not a gambling product, or have given any warranties relating to compliance with applicable laws.

The outcome of Sorare's legal battle with the Gambling Commission could set a significant precedent for the regulation of digital asset-based gaming platforms and fantasy sports in the UK. The case highlights the challenges of applying traditional gambling laws to modern digital services and the evolving landscape of online gaming and sports entertainment, and the importance of proactively engaging with regulators, implementing adequate compliance measures and understanding the relevant laws and regulations in each jurisdiction in which they operate.

If Sorare is found guilty of the charges, this could ultimately lead to a fine being imposed on the company, or even to the imprisonment of its directors.

The case has been adjourned for trial on June 16 next year with a pre-trial hearing set to take place on March 10, 2025.

¹ Consumer information notice: Sorare.com prosecution (gamblingcommission.gov.uk)
² Premier League partner Sorare pleads not guilty to unlicensed gambling charges, trial set for June 2025 - The Athletic (nytimes.com)
³ Gambling Commission warns fantasy football organisers to not get caught out by gambling rules