Sorare's rapid ascent in the digital sports landscape has been remarkable. Established in 2018 by Nicolas Julia and Adrien Montfort, the company is now valued at $4.2 billion (£3.4 billion/€4.0 billion). In September 2021, it raised $680 million in its most recent funding round.
A diverse array of investors backs Sorare, including prominent figures from the tech startup world like SoftBank, Accel, Gary Vaynerchuk, and Reddit co-founder Alexis Ohanian. The company has also garnered investments from esteemed footballers, such as Rio Ferdinand and Antoine Griezmann. Amongst them is Kylian Mbappé, widely regarded as one of the best football players globally, who serves as a brand ambassador for Sorare.
Adding to its stature, Sorare has been appointed the official Web3 token provider for the Paris 2024 Olympic Games. This designation has led to praise from French business leaders and politicians, marking the company as a homegrown Web3 unicorn.
Sorare has formed numerous partnerships with sports clubs and leagues, similar to fan token provider Socios and crypto exchange Binance. Notably, it secured a recent partnership with the English Premier League valued at $30 million per year.
The company's profile has surged, especially in the past two years, leading to increased scrutiny from gambling regulators, including l’Autorité Nationale des Jeux (ANJ) in France. Andrew Rhodes, CEO of the GB Gambling Commission, remarked that the agency would invest additional resources to determine if synthetic shares, crypto-backed NFTs, and similar Web3 products are subject to gambling regulations.
In light of such scrutiny, ANJ began examining Sorare's business model since March to assess whether it equated to real-money sports betting or operated like a betting exchange. Sorare's platform allows users to buy virtual player cards as NFTs through the Ethereum network to form fantasy teams. These cards can be traded on Sorare's digital marketplace, with their value fluctuating based on the real-life performance of the players.
The relationship between player performance and card value has drawn ANJ's concern, especially given that users must pay to engage with Sorare. CEO Nicolas Julia emphasized that purchasing cards does not constitute a betting stake, as users retain their cards and can utilize them multiple times, contrasting with the permanent loss associated with unsuccessful bets.
In November, ANJ announced its ruling, confirming that Sorare would enhance free access to its tournaments to address regulatory concerns about its gaming structure. Sorare will not need to obtain a sports betting license in France, but these changes must be implemented by March 31, 2023. The ANJ's ruling highlighted this adjustment as a crucial step towards a permanent solution that would align Web3 activities with existing regulatory frameworks.
Responding to inquiries about how free access will be integrated, Sorare stated its intent to expand gaming options for users without charge. The company noted, "Sorare has always sought to innovate, and this development is part of the company's roadmap." Citing that 87% of users engage with the platform for free, Sorare remains focused on community growth without expecting card values to decline.
Clarifying the 87% statistic, Sorare explained that most users can obtain non-NFT common cards without cost upon joining the platform. However, purchasing NFT cards remains essential for accessing Unique, Rare, or Limited editions. The company refrained from providing further specifics on its offerings.
Sorare’s growth illustrates a startup capitalizing on new technologies, pioneering areas where regulators are still catching up. In such a sensitive regulatory environment in France, notably, no legal expert in the tech scene was willing to comment on these matters, underscoring the stakes involved for Sorare. If ANJ mandates a sports betting license, it could significantly impact Sorare's global operations. The player's expectations regarding the value appreciation of digital assets are also at the crux of the ongoing dialogue surrounding Sorare’s model, especially as participants, like those on Socios, invest anticipating increases in value.
This context highlights why Web3 companies are eager to distance themselves from gambling associations. Sorare needs to address whether it will eliminate the purchase requirement for NFT cards in future fantasy tournaments to clarify its offerings concerning ANJ’s oversight. The ANJ's review set for March 2023 will be critical in assessing Sorare's adaptation to regulatory expectations regarding free access enhancements.
