Attorney Shao Shiwei | Developing Telegram Mini-Games: How to Mitigate Legal Risks?

Telegram (also known as TG, Dianbao, or Paper Plane) is a free instant messaging software founded by brothers Pavel and Nikolai Durov in 2013. To date, it has over 1.3 billion registered users and nearly 900 million monthly active users, becoming an important tool for the Web3 community.

The TON project (Telegram Open Network) was initially developed by Telegram. Due to compliance issues, Telegram withdrew from the project. In May 2021, the TON Foundation restarted the project, and TON continued its development under the new name The Open Network.

The TON ecosystem covers a wide range of application scenarios, including but not limited to the following 19 major areas: centralized exchanges, decentralized exchanges, staking, wallets, browsers, bridges, utilities, channels, NFT collectibles, chat, social media, gambling, gaming, Jettons, NFT services, VPNs, development tools, shopping, and launchpads.

Benefiting from Telegram's massive user base and the low barrier to entry and ease of operation, mini-games within the TON ecosystem have rapidly gained widespread attention and user growth.

Ton Horse GameFi is a gaming platform built on the TON chain. The platform features two types of currency: the platform currency 'Horse' and the in-game currency 'Diamonds.' The exchange rate between them is 1:10 (one Horse token can be exchanged for 10 Diamonds). Diamonds are used for gameplay, and Diamonds earned in the game can be converted into Horse tokens, which can then be traded for USDT for cash-out purposes.

Tokens can be acquired by clicking, completing corresponding tasks (such as joining Telegram groups, following Twitter accounts, inviting friends, etc.), or purchasing the platform's NFTs, which can also generate platform tokens.

Games on the platform include Battle Royale and Rocket Game. A brief introduction to the gameplay follows:

Battle Royale:

Comparing the interfaces in the left and right images, do they look familiar? The left image shows Ton Horse GameFi, while the right image displays the Battle Royale game interface from 'Chao Wan Yu Zhou' (for detailed information, see ➡️ 'What Are the Legal Risks of 'Chao Wan Yu Zhou,' Which Became Viral with Its 'Battle Royale' Gameplay?》）。

Players randomly enter a room and place bets with coins. Once all players are present, the game begins. If the 'killer' enters the room where a player has placed a bet, that player loses their wagered tokens.

Rocket Game:

After placing a bet with tokens, the game starts. Players win if they choose to jump off the plane before it crashes. The later a player jumps, the higher the reward they receive.

Players cash out by converting Diamonds earned in the game into Horse tokens, and then trading Horse tokens via order listings. This allows players to convert platform tokens into USDT for cash-out purposes.

2、Notcoin

Similar to the WeChat mini-game 'Sheep a Sheep,' which previously went viral, Notcoin leveraged Telegram's massive user base and social propagation capabilities, along with its simple gameplay. Since its launch on January 1, 2024, it has attracted widespread attention, with over 30 million participants.

Introduction to Notcoin Gameplay: In the game, players need to periodically click on a coin icon while capturing rockets to accelerate upgrades. The game is not limited to single clicks; it also includes features such as team-based point leagues, energy management, and referral rewards. Additionally, Notcoin features an 'Earn' system where players can obtain Notcoin by completing advertising tasks. Users can accelerate coin collection through various boosts, such as full-energy boosts and multi-click boosts. For users, this game offers a barrier-free experience of earning money while clicking.

In May 2024, Notcoin issued its own NOT token on the TON (The Open Network) blockchain. Telegram founder Pavel Durov stated in a post that Notcoin, after being minted on the TON blockchain and listed on all major cryptocurrency exchanges, has attracted over 35 million active users.

1. Legal Risks Related to Gambling

In the previously mentioned Ton Horse GameFi, both types of mini-games on the platform involve probability-based mechanics. Put plainly, both games are gambling games. In the article 'Play-to-Earn Blockchain Games: How to Avoid Becoming Gambling?', Attorney Shao previously explained that if a game involves gambling, it typically exhibits the following three characteristics:

• Purchasing in-game items/currency with payment. Most blockchain game platforms require users to pay to purchase in-game items or tokens. The specific process usually involves: first, using fiat currency to buy virtual assets on an exchange; second, downloading a crypto wallet and transferring the purchased virtual assets into the wallet; and third, connecting the wallet within the blockchain game to purchase items or tokens on the platform. Even if a small portion of blockchain games initially claim to be free, users often still need to spend money later to enhance their gaming experience.

• Direct or indirect cash-out to obtain fiat currency. Users can trade their NFTs or game tokens on the platform, withdraw them as virtual assets, and subsequently convert them into fiat currency.

• Gameplay: Chance-based, high risk-high reward, and potential for loss. If the outcome of winning or losing is highly contingent on chance and involves the possibility of financial loss, the game carries gambling-related risks.

   

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In short, gambling-related gameplay simultaneously involves three key elements: paid input, random mechanics, and cash output.

Therefore, if Chinese game developers wish to create mini-games within the TON ecosystem, unless they allow players to earn without any initial investment ('zero-cost farming'), once Chinese players make paid inputs into the game, the developers will inevitably face legal risks related to the crime of operating a casino.

2. Legal Risks Related to Token Issuance

For mini-games in the TON ecosystem, revenue sources for project teams mainly include player top-ups within the game and advertising income. However, most project teams still hope to issue their own tokens.

In September 2024, Binance announced the launch of the 58th project on its Launchpool, Hamster Kombat (HMSTR). From Notcoin (NOT) to HMSTR, Binance has continuously supported mini-games in the TON ecosystem.

(A Play-to-Earn (P2E) game simulating the role of a crypto exchange CEO, built on the Telegram mini-app platform)

It is well known that token issuance is prohibited in China. As early as 2017, the 'Announcement on Preventing Risks of Token Issuance and Financing' classified token issuance as illegal fundraising activities. The 2018 'Risk Warning on Preventing Illegal Fundraising in the Name of "Virtual Currency" and "Blockchain"' also mentioned that 'some criminals issue tokens under ever-changing names such as ICO, IFO, and IEO... which possess strong concealment and deceptive nature.'

If the ultimate goal of Chinese game developers creating TON ecosystem mini-games is to issue tokens, since domestic policies classify virtual asset-related businesses as illegal financial activities, they may face relevant criminal legal risks due to violations of domestic policies.

3. Other Legal Risks

In the article 'Top 10 Legal Issues Web3 Game Entrepreneurs Should Focus On', Attorney Shao mentioned that beyond gambling-related and policy-related legal risks, developers must also pay attention to risks related to promotion and marketing, as well as potential pyramid scheme risks associated with game models. Other legal risks include providing consignment markets for players, illegal fundraising, money laundering, and intellectual property infringement.

Like WeChat, Telegram boasts billions of monthly active users, which is one of the main reasons attracting project teams and investors to develop mini-games. Furthermore, for game publishers choosing to expand overseas, developing TON ecosystem mini-games appears to have a low barrier to entry. The model is similar to WeChat mini-program games: easy to learn and strong in virality. It is akin to reskinning previously popular WeChat mini-program games or other traditional Web2 games to achieve renewed popularity.

Against the backdrop of the domestic gaming industry's downturn, this represents a viable commercial choice for game publishers. However, even when expanding overseas, if the game content violates Chinese laws, regulations, and relevant policy provisions, criminal risks are difficult to avoid under the constraints of China's criminal jurisdiction.

Therefore, if Chinese game publishers develop TON ecosystem mini-games, they must fully understand domestic regulatory provisions regarding Web3 games. They must ensure that all activities, including project financing, business cooperation, labor employment, game promotion, and content creation, are conducted within the legal framework to avoid being classified as illegal financial activities.

[Disclaimer] The market involves risks, and investment should be approached with caution. The cases cited in this article are for legal education purposes only and do not constitute legal advice on specific matters, nor do they constitute any investment advice.

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