France has made a powerful statement in the blockchain-based gaming industry by calling into question the country's current classification of NFT and crypto games as 'gambling'. The French National Assembly passed a new law on October 17; "JONUM" (for Monetizable Digital Object Game), also nicknamed "Sorare" (after the French crypto-based gaming company), aims to fill the regulatory gap within which Web3 games currently operate.
Its primary goal is to create a regulatory framework for games that incorporate crypto and NFT elements, with the goal of distinguishing them from traditional gambling activities.
JONUM games are clearly distinguished from gambling under the "Digital Space Regulation Law" (SREN). This legislation paves the way for a reimagined digital landscape in France, potentially influencing the global conversation about blockchain-based gaming regulation.
Nevertheless, the new law effectively prohibits the conversion of digital currency winnings into fiat currency during the three-year experimental authorization period granted by the Constitutional Council. The Sorare Law, explicitly states that winnings from these games must be kept entirely digital. This provision distinguishes JONUM games from those currently supervised by France's National Gaming Authority, the "Autorité Nationale des Jeux" (ANJ). Furthermore, the ANJ will still oversee the compliance of the JONUM games.
The legislation will require the French government to provide progress reports during the first 18 months of the experiment, to understand the market's state and evaluate the mechanisms set to protect players while preventing money laundering and terrorism financing.
The new law aligns with the ANJ's unwavering stance on protecting minors from influencer content that promotes gambling. It specifically forbids the use of influencers to advertise betting games on online platforms from which minors cannot be excluded. In this regard, JONUM and the ANJ leave no room for ambiguity or leniency, as any violation can lead to dire consequences for influencers, including prosecution, potentially resulting in a two-year jail sentence and fines reaching up to $322,000.
The French market regulator, the "Autorité des Marchés Financiers" (AMF), and the French advertising self-regulatory organization, the "Autorité de Régulation Professionnelle de la Publicité" (ARPP), reintroduced the "Responsible Influence Certificate" at the beginning of September. The regulators have collaborated to add a training module for financial influencers. In this course, influencers will be educated on key ethical and legal guidelines, including "transparency in commercial partnerships, adherence to rules when discussing various topics (e.g., environment, health, cosmetics, food, gambling), and fundamental ethical principles of influence marketing such as "loyalty, child protection, decency, and dignity", the ARPP said. The certificate was first launched in 2021, with around 1,000 certificates issued by the ARPP.
This module widens its scope to include a diverse range of investment products such as equities, bonds, ETFs, funds, and derivatives, and a range of services such as investment advice, portfolio management, order reception, and transmission. It also delves into trading and investment advice, and the world of crypto-assets, and includes oversight of digital asset service providers (DASPs), among other things. Notably, this comprehensive module focuses on products with limited advertising, such as binary options and contracts for differences (CFDs).
Finfluencers must pass the certification test with a minimum accuracy rate of 75% by correctly answering 25 multiple-choice questions. However, in order to obtain the certificate, French finfluencers need to first get a 'general' certificate, which places a strong emphasis on the governance of commercial influence activities, among other things. The ARPP's General Manager, Stéphane Martin, emphasized the certificate's universal applicability. He emphasized the ARPP and AMF's collaborative effort in developing a specialized module for financial advertising that provides influencers with a comprehensive understanding of applicable legal provisions and the ARPP Code's recommendations.
The AMF's Chair, Marie-Anne Barbat-Layani, stated that protecting retail investors is a top priority. She emphasized the importance of clear and transparent disclosure, especially when influencers are compensated for their publications. The Responsible Influence Certificate is intended to raise the level of professionalism in financial advertising, protecting investors from overly complex or risky financial products, and ultimately promoting a more secure and informed investment environment.
The interaction between regulators and finfluencers is complicated. Despite regulatory warnings, a sizable number of retail investors rely heavily on influencers. According to a CySEC survey, 31% of retail investors seek investment advice from finfluencers. In France, this figure rises to 42%. Only a third of retail investors seek advice from an authorized financial adviser.
Aside from France, several other countries are grappling with the uncontrolled rise of influencers. While regulators in the United Kingdom have launched a comprehensive education campaign aimed at finance industry influencers, the Australian financial market watchdog has taken a tough stance, pursuing one of the country's most prominent financial figures for providing unlicensed investment advice, indicating the potential need for finfluencer licensing.