The French National Assembly has given its resounding 'oui' to a regulatory framework for NFT based games, distinguishing them from online gambling. Officially titled the "Loi visant à sécuriser et réguler l’espace numérique" or SREN, the National Assembly voted to adopt the bill by a large majority - 360 votes in favour and only 77 votes against.
This development signals France's first foray into creating a comprehensive regulatory framework for video games that incorporate non-fungible tokens (NFTs) and monetisation models centered around digital assets.
The core objective of SREN is the establishment of a distinct category of video games within the purview of French law, known as "jeux à objets numériques monétisables," or "JONUM". The SREN roughly defines JONUMs or monetisable digital objects as:
game elements, which only confer on players one or more rights associated with the game, and which may be transferred, directly or indirectly, for consideration to third parties.
The SREN law authorises games with monetisable digital objects, including NFTs, for an experimental period of three years from the law's promulgation. This safe harbour will be revisited in 18 months with the French Government expect to report on the state of the market and the mechanisms that would be in place to protect players, in addition to preventing money laundering and financing terrorism
The law has brought relief to the industry participants who have harnessed the potential of NFTs to create modern iterations of collectible card games. One notable example is the French giant Sorare, renowned for its fantasy football game that leverages NFTs. Article 15 of the bill has even been nicknamed the "Sorare law" in some circles.
While the JONUM regulation distinguishes NFT based games from gambling, the law reportedly mandates strong age protections by excluding minors from NFT based games and imposing strict penalties.
The JONUM regulation now awaits approval by the French Constitutional Council. If approved, France positions itself as a trailblazer in Web3 gaming and underscores a global policy shift towards regulating and harnessing the benefits of blockchain technology and digital assets. The NFT sector continues to evolve, even amidst a crypto-asset market still in search of bullish momentum. Notably, digital payment giant PayPal has expressed its intentions to establish an NFT marketplace, aiming to secure its slice of this promising sector's pie.
Recent policy developments in regions such as Australia, Hong Kong, and California signify a collective effort to bring transparency and regulatory clarity to the burgeoning Web3 gaming space, and given the massive size of the video gaming industry, and current centralised in-game collectible market, the move to actual ownership of game assets and how they will be regulated is one that will be watched closely. No one would want a situation where valueless centralised in-game assets continue to be unregulated, while a more valuable model of ownership is stiffled by red-tape or rules.
While it remains to be seen how the sector evolves over the next three years, the French bill represents a step forward in providing the regulatory clarity necessary for innovation to flourish.
Written by Steven Pettigrove, Michael Bacina and Luke Higgins