Are UK gambling laws too dated? Analysis of Sorare’s case as a wake-up call

Lea Hogg September 29, 2024

The UK’s Gambling Act of 2005 was designed for a world of brick-and-mortar casinos, horse racing, and slot machines. Yet, the explosion of digital platforms—fantasy sports and blockchain-based systems among them—has left regulators playing catch-up. The recent case of Sorare, a fantasy football platform dealing in digital collectibles, has exposed glaring gaps in the country’s regulatory framework. Accused of operating as an unlicensed gambling platform, Sorare has triggered a larger conversation about whether the UK’s gambling laws are fit for the digital age.

UK’s legislative quagmire

The problem isn’t new. The UK’s Gambling Act 2005 was designed in a pre-digital age, and over the past 18 years, successive governments have failed to adapt the legislation to the rise of online betting, let alone more sophisticated digital platforms like Sorare. Since 2014, five different Prime Ministers—David Cameron, Theresa May, Boris Johnson, Liz Truss, and Rishi Sunak—have overseen governments that pledged to reform gambling laws. None have delivered.

Likewise, the Department for Digital, Culture, Media and Sport (DCMS) has seen a parade of nine different ministers in charge of gambling during this time, all of whom have floated proposals for reform, only for them to be shelved. These reforms, spanning nearly a decade, were consistently delayed, despite numerous public consultations and parliamentary debates. Even the long-promised white paper on gambling reform, intended to update laws for the digital age, has been endlessly postponed.

Meanwhile, in 2022, the UKGC cracked down on traditional gambling platforms, but the broader framework still lags behind. As a result, digital platforms like Sorare sit in a grey zone, neither fully regulated nor entirely free from oversight, a situation that’s stifling both innovation and consumer protection.

Sorare’s legal conundrum

Sorare, founded in 2018, operates at the intersection of fantasy football and digital assets. Users buy, sell, and trade non-fungible tokens (NFTs) representing football players, which are then used to assemble teams that compete based on real-world performances. What initially began as a niche platform for football enthusiasts has since evolved into a heavyweight in the blockchain space, drawing in a $680 million investment round led by SoftBank and reaching a valuation of $4.3 billion in 2021.

However, this meteoric rise has come with regulatory scrutiny. The UK Gambling Commission (UKGC) is now questioning whether Sorare’s model constitutes gambling. While Sorare argues that it’s simply a hybrid of sports and digital engagement, the financial transactions around its NFTs have sparked debate. If NFTs can be bought and sold for real money, does this transform the game into gambling? This fundamental question is at the heart of the UKGC’s inquiry, and it reveals just how ill-equipped existing regulations are for the digital world.

Outdated regulations of the UK gambling industry

The Gambling Act 2005 was created in a time when online betting was still in its infancy. It was designed to cover traditional forms of gambling, not to address the complexities introduced by blockchain technology, digital assets, or platforms like Sorare. Yet today, digital platforms are increasingly blurring the lines between gaming, finance, and entertainment. Sorare sits precisely in that grey area. While fantasy sports have historically been exempt from gambling regulation due to their reliance on skill, the introduction of tradeable NFTs—assets with real-world financial value—throws this exemption into doubt. The ambiguity surrounding Sorare’s legal status is emblematic of a larger issue: the UK’s gambling laws are outdated. Current regulations struggle to differentiate between traditional forms of gambling and new digital business models. This uncertainty creates a regulatory grey area that stifles innovation, forcing platforms like Sorare to navigate unclear legal waters while facing potential litigation.

Cost of the UK Government’s inaction

While the UK government has acknowledged the need for modernisation, recent efforts fall short of addressing the challenges posed by digital platforms. In 2022, a white paper proposed updates to the Gambling Act, focusing primarily on reducing gambling-related harms. However, these reforms are still rooted in traditional gambling models, leaving emerging technologies such as blockchain and digital assets largely unaddressed.

This regulatory lag has real consequences. Without clear guidance, companies like Sorare may be misclassified or overburdened by compliance requirements that don’t suit their innovative business models. Should Sorare be deemed a gambling platform, it could face stringent licensing requirements, significantly increasing operational costs and limiting its ability to grow. This could discourage further investment in blockchain-based ventures, ultimately leading to a chilling effect on innovation in the UK.

Precedents from the past

Sorare is far from the first digital platform to clash with the UK’s gambling regulators. The lack of regulatory action in these cases highlights the urgency for a more modern legal framework.

✔️ Loot Boxes in Video Games (FIFA, Call of Duty, etc.)
Status: Still under debate
The UK’s Department for Digital, Culture, Media and Sport (DCMS) has repeatedly examined the contentious issue of loot boxes—purchasable in-game items that offer randomized rewards. Some argue these digital items resemble gambling due to their links to real-world spending, but thus far, the UK has stopped short of regulating them as such. A government consultation in 2022 did, however, explore measures to protect players, particularly minors. Despite these discussions, no legislative action has yet been taken, and a final decision remains pending.

✔️ BetIndex Ltd (Football Index)
Status: Resolved
Football Index, which allowed users to trade “shares” in football players whose value fluctuated with their real-world performance, collapsed in 2021 amid accusations of operating as an unlicensed gambling service. The UK Gambling Commission swiftly suspended its license, and the platform entered administration soon after. Football Index was a hybrid of fantasy football and a stock market, raising legal and ethical questions similar to those now surrounding Sorare. Ultimately, it was classified as a gambling platform, leading to its downfall and highlighting the risk posed by regulatory gaps.

✔️ Camelot vs. Lottoland (2018)
Status: Resolved
In 2018, Camelot, operator of the UK’s National Lottery, challenged Lottoland, a company that allowed users to bet on lottery outcomes rather than participate in the lottery itself. Lottoland did not hold a UK gambling license to operate as a lottery, but it argued it was providing a betting service instead. After a legal battle, the UK Gambling Commission sided with Camelot, ruling that Lottoland was in violation of gambling laws, thus reinforcing the boundaries between betting and lottery operations.

Need for reform of UK Gambling Act 2005

The Sorare case is a wake-up call for UK lawmakers. The country’s gambling regulations must evolve to address the complexities introduced by digital platforms, especially those leveraging blockchain technology and digital assets. A new approach is needed—one that distinguishes between traditional gambling and emerging digital business models, while ensuring consumer protection remains a priority. Sorare’s legal battle has sent ripples across the broader tech and gaming sectors. How the UK handles this case will be a signal to other jurisdictions about its readiness to embrace or reject digital innovation. By failing to modernise its regulatory framework, the UK risks losing its competitive edge to markets more open to technological advancement. In the end, the Sorare case isn’t just about whether NFTs constitute gambling. It’s about whether the UK is willing to adapt to the future of digital assets, fantasy sports, and blockchain innovation. With the Gambling Act creaking under the weight of modern innovation, it’s not just Sorare in the dock—it’s the UK’s ability to adapt to the digital age. Starmer’s government faces a critical test: will he finally deliver the reforms that have eluded five Prime Ministers and countless ministers, or will his plans join the ever-growing pile of abandoned proposals? It’s another measure of his capacity to lead. This could be a defining moment for the new UK Labour government.