On 26 September 2024, the UK Gambling Commission issued a ‘Consumer information notice’ stating “Football-themed website Sorare.com is due to appear in court next week charged with providing unlicensed gambling facilities to consumers in Britain”.  The notice also stated “Sorare is charged with providing facilities for gambling without holding an operating licence”.

This follows a previous information notice from the Commission relating to Sorare back on 8 October 2021 which set out:

“It has come to our attention the football-themed website, Sorare.com, is available to consumers in Great Britain. 

Sorare.com is not licensed by the Gambling Commission.”

This means that any activity completed on the site by consumers in Great Britain is outside of the gambling regulations that a licensed operator should comply with.

Consumers are being advised to consider this information when deciding whether or not to interact with the site.

The Gambling Commission is currently carrying out enquiries into the company to establish whether Sorare.com requires an operating licence or whether the services it provides do not constitute gambling.”

Although in both notices the Commission declined to comment further, due to the impending court hearing, it is clear that the Commission considers the products offered to be gambling under the Gambling Act 2005.

Sorare is a fantasy sports platform where users collect, buy, sell, and trade digital player cards to create teams in sports like football, NBA, and MLB. Users compete in fantasy contests based on real-life player performance to win rewards like cash, Ethereum (ETH), exclusive player cards, and experiences. An aspect of the product that may have caught the eye of the Commission is that a user can gain an advantage in the creation of their team by purchasing top-performing or rare cards in Sorare’s marketplace. Enhancing a team’s potential could lead to better outcomes in competitions. Player cards vary in rarity, and owning rarer cards can improve your chances in higher-level contests.

According to the Gambling Act 2005, ‘Betting’ is defined as wagering on outcomes of events, such as sports or any events of an uncertain nature.

Under the Gambling Act 2005, a product where you can pay for an advantage could be considered gambling if it meets certain criteria:

1. Prize Element: If paying provides a chance to win a prize of monetary value (such as money, assets, or in-game items with real-world value);
2. Chance: If the advantage involves an element of chance, rather than skill alone; and
3. Consideration: If users pay to participate, such payments could bring the product under the scope of gambling regulations.

If all three criteria—prize, chance, and consideration—are present, a product may be classified as gambling, necessitating compliance with UK gambling regulations.

This classification depends on how the “advantage” operates within the product and whether the outcomes involve a significant chance-based factor. It is accepted in the UK, that predicting the outcome of sporting events would qualify as betting when a stake is involved and a prize is paid, whether money, or ‘moneys worth’. Therefore, predictions on sporting events would not be considered a skill factor so as to negate the betting definition or make it a skill competition.

Now some products will have a free entry route and may qualify as a ‘free prize draw’, but there are requirements that must be met for this to be acceptable (see the Commission Guidance here). Requirements include that the system for allocating prizes does not distinguish between those using either a paid or free entry route. So if, for example, a fantasy sports game such as Sorare allows you to purchase extra assets that give an advantage over free players, this would not be considered a free prize draw.

There is added complexity when we consider the ‘Financial Services and Markets Act’. If Sorare’s products are classified as a regulated financial activity under the Financial Services and Markets Act 2000 (FSMA), they might not be considered gambling because financial products are governed by a different regulatory framework. Section 22 FSMA covers investments and other financial instruments, and if Sorare’s digital cards are deemed to be financial products (e.g., securities or investments), they would fall under the remit of the Financial Conduct Authority (FCA). This would distinguish them from gambling, which is overseen by the UK Gambling Commission.

The main distinction lies in the nature of the product:

• Gambling focuses on paying for a chance to win based on uncertain outcomes; and
• Financial products involve investments with potential returns, governed by stricter financial regulations.

Therefore, regulated financial products are treated under different legal provisions and are not subject to gambling laws if they meet the FSMA criteria. Although so far it appears that Sorare’s main defence has been to claim that its products, primarily digital collectibles used in fantasy sports games, do not meet the legal criteria for gambling since the games are free to enter, though users can purchase NFTs for competitive advantages. Again, this still makes clear that spending money on the mentioned NFT’s will provide customers an advantage.

It is likely that this case will set a clear precedent for similar products and should Sorare be successful in their defence, it could open the gates for many similar or copycat products. In the same sense, it could deter many NFT related products from considering the UK should the Gambling Commission prove successful in their prosecution.

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