UKGC Warns About NFT Start-Up Sorare
The UK Gambling Commission has warned potential customers that the heavily backed fantasy football NFT start-up Sorare does not hold a UK Gambling licence. The regulator has released a consumer information notice on its website regarding the product.
The UK’s regulator has warned potential customers of Sorare – a fantasy football platform that enables users to trade digital collectables – that the company does not hold a valid UK gambling licence.
In the ‘news’ section of the Gambling Commission’s website, the regulator has issued a consumer information notice stating that they would be investigating the company to deem whether Sorare requires an operating licence and if using the platform equates to gambling.
The notice reads: “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.”
A reason why the Gambling Commission has taken the unusual step of warning consumers about a product that isn’t as yet licenced by UK authorities is likely to be due to the criticism the regulator received over its handling of Football Index, owned by BetIndex.
Football Index allowed customers to buy ‘shares’ in football players, and by holding shares, users would earn interest on these shares and could buy and sell their holders to make a profit.
BetIndex got into financial trouble and significantly reduced the dividends that the holdings would receive. This decision caused a panic with customers attempting to sell off their shares, and as a result, the company suspended the trading platform.
A 67,600-word independent review into the regulation of Football Index was released last month and was damning in its criticism over the regulator’s failings.
Among its many failings, the UKGC was accused of allowing Football Index to go about its business largely unchecked by the regulator before the ‘whole house of cards came crashing down’ in March 2021.
The company’s demise was so severe that £124m in customers’ open bets were lost for good, and in the review, the UKGC was slammed for taking three years to realise that Football Index’s key product had changed drastically.
When the company began trading after being granted a licence in September 2015, the product was primarily about awarding dividends based on media ‘buzz’ and social media activity. Then, however, the company model changed into allowing customers to buy and sell ‘shares’ (three-year bets). The company also introduced new functionality such as ‘instant sell’.
The regulator wasn’t aware of these changes until 2019, and this was only because that BetIndex had applied for a new licence for a new entity called BetExchange, which the company wanted to use as an intermediary in operating the Football Index platform.
Malcolm Sheehan QC wrote in his report: “Therefore, for the first three years of its operation, the Football Index product offered a key functionality, the ability for customers to buy and sell shares, that had not been regulated or properly appreciated by the Commission as part of the licence issued.
“It is this functionality, and consumers’ current inability to use it to sell their shares, that has generated much of the concern arising from the suspension of BetIndex’s operating licence.”