Attorney Shao Shiwei | How to Ensure Legal Compliance When Engaging in Football Match Betting via NFT Digital Collectibles?

Analysis of Legal Issues Surrounding Web3 "Football Betting"

Special Disclaimer: This article is an original work by Attorney Shao Shiwei. It represents only the personal views of the author and does not constitute legal consultation or legal advice on specific matters. For article reposting, legal consultation, or business exchanges, please add: sswls66

Football is one of the most popular sports in the world, with numerous major tournaments attracting hundreds of millions of viewers globally. The summer of 2024 belongs to the UEFA European Championship. As of the time of writing, the tournament has advanced to the final stages, with the competition intensifying.

Notably, in recent years, the Web3 industry has frequently sought collaborations with sports intellectual property (IP). While Web3 platforms leverage the broad influence of sports IPs to enhance brand awareness, sports IPs also utilize Web3 technologies—such as virtual currency tokens and NFT digital collectibles—to explore unprecedented commercial value frontiers. These collaborations have shaped new models for IP marketing and fan engagement, with common formats including the issuance of Fan Tokens, NFT competitive events, and GameFi.

However, while Web3 and sports IPs mutually empower each other, legal compliance issues warrant attention. Coinciding with the UEFA European Championship, many Web3 projects have launched NFT-based competitive gameplay tied to this sporting event. This article provides a detailed analysis of the key legal compliance points based on such cases.

By Attorney Shao Shiwei

01 When NFTs Meet Football Matches

Reviewing recent sports events, particularly football competitions, Attorney Shao has observed that the most mainstream gameplay formats include NFT x IP co-branding and NFT-based prediction mechanisms. A previous article, "When NFT Digital Collectibles Meet the UEFA European Championship: High-Risk Bets for PFPs—How Are the Jingtan UEFA European Championship Blind Boxes?", analyzed gameplay similar to NFT x IP co-branding. Another common format involves using NFTs to predict match outcomes.

1. Gambling Platforms

The most obvious example of using NFTs to predict match outcomes is gambling platforms. Taking a recently launched Web3 gambling platform as an example, its gameplay involves users minting and holding different types of NFT fan cards to participate in daily betting. The betting amounts are determined by the quality and quantity of the NFT fan cards held. Users can also increase their daily betting limits and amounts by upgrading their NFT fans. Upon winning bets, successful users receive tokens issued by the platform, which can be used for in-game activities or directly exchanged for USDT.

2. NFT Prediction Contests

During the 2022 FIFA World Cup, many Web3 platforms launched their own NFT prediction contests. Taking a highly influential event as an example, the core gameplay allowed participating users to stake a small amount of ETH to freely mint an NFT representing their supported team (the staked ETH would be returned after the event concluded). Alongside the World Cup schedule, supporters of the winning team in each match (i.e., holders of the respective team NFTs) could share the prize pool provided by the Web3 platform for that specific match.

Interestingly, for this event, the Web3 platform created invitation posters for many Key Opinion Leaders (KOLs) involved to facilitate promotion. However, some collaborating KOLs directly "backstabbed" the platform by labeling the event in their promotions as "NFT Football Betting”。

02 Analysis of Key Legal Compliance Points

The legal compliance issues surrounding Web3 gambling projects using NFTs for football betting are evident. However, whether NFT prediction contest gameplay involves legal compliance issues remains debatable. Attorney Shao analyzes this topic based on two key points.

1. Does It Constitute Football Betting?

Regarding prediction gameplay organized by Web3 platforms in conjunction with real-world sports competitions such as the World Cup or the UEFA European Championship, determining whether it involves gambling-related legal issues (online football betting) typically requires examining whether the activity forms a gambling chain characterized by "paid entry - random gameplay - cash output." If the prediction is based on the results of real-world sports events rather than being manipulated by humans or systems, the gameplay possesses an element of randomness. If, simultaneously, users are required to pay to participate and share the prize pool based on match results, the prediction contest may be suspected of constituting "football betting."

It is worth noting that "paid entry" can take various forms, such as:

Users paying to purchase NFTs sold by the platform. Of course, direct sales would be too simplistic. In practice, many domestic Web3 game (blockchain game) platforms, to circumvent obvious gambling risks, often adopt a "store manager agency" model: users cannot directly purchase NFT digital collectibles within the platform but must privately contact "store managers" cooperating with the platform, using contact information provided by the platform. Additionally, the platform adds another layer of "protection": the digital collectibles held by store managers are not sold directly by the platform to the managers. Instead, the platform sells physical merchandise such as T-shirts and trophies, with the digital collectibles "gifted" to the store managers as an adjunct.

The platform uses a "ticket" as the "threshold" for user participation. This ticket can take the form of tokens, cash, NFTs, or other paid methods. Regarding how tickets are obtained, the platform may allow users to acquire them directly or indirectly through participation in other activities.

Although nominally offering free minting of NFTs, the costs incurred by users include not only gas fees but also other fees charged by the platform, such as withdrawal handling fees, service fees, or other indirect charging methods.

Based on this definition, does the aforementioned NFT prediction contest involve gambling risks? In this activity, users minted NFTs of their preferred teams for free, and the Ethereum staked for minting was fully returned after the matches concluded. The gameplay did not satisfy the gambling chain criteria. Therefore, Attorney Shao believes this gameplay does not constitute gambling and is essentially an activity where the platform distributes funds for users to obtain benefits at zero cost. In contrast, another Web3 platform launched a similar activity during the 2022 World Cup, requiring users to complete a contract transaction on the day of the match to participate in the prediction and share the rewards.

2. Is It Subject to Policy Restrictions?

Even if NFT prediction contests do not involve football betting issues, Web3 platforms must consider regulatory policies across various jurisdictions during operation. If the event issuer is an overseas Web3 platform serving exclusively foreign users, there is naturally no need to evaluate its conduct under Chinese law. However, according to Attorney Shao's observations, in many similar activities, domestic users can still log in and participate normally, which violates China's policy regulations.

On September 24, 2021, the People's Bank of China, jointly with nine other departments including public security, procuratorial, and judicial organs, issued the "Notice on Further Preventing and Disposing of Risks Related to Virtual Currency Trading and Speculation" (hereinafter referred to as the "Notice"). The Notice stated that business activities related to virtual currencies constitute illegal financial activities, and overseas virtual currency exchanges providing services to residents within China via the internet also constitute illegal financial activities.

Of course, the entities regulated by the "Notice" are not limited to exchanges but encompass a broader concept: platforms operating "virtual currency-related businesses." Therefore, if Web3 project providers with servers located overseas provide financial services to users within China, they violate China's policy regulations.

The 2022 "Initiative on Preventing Financial Risks Related to NFTs" also mentioned "resolutely curbing the tendency towards financialization and securitization of NFTs, and strictly preventing risks of illegal financial activities," and "not providing services such as centralized trading (centralized bidding, electronic matching, anonymous trading, market making, etc.), continuous listing trading, or standardized contract trading for NFT transactions, which amounts to illegally establishing trading venues in disguise." In some NFT prediction contests, besides obtaining NFTs through minting, users can also purchase them in secondary NFT markets, meaning the platform provides a trading venue for NFT transactions.

03 Concluding Remarks

The integration of Web3 with sports competitions has brought new business models and interaction methods to the sports industry. For instance, through NFT trading, blockchain games, metaverse spectating, and smart contracts, sports competitions can achieve greater commercial value within the Web3 domain.

However, while innovating activity gameplay, Web3 project providers must understand the regulatory policies of the countries or regions targeted by their business, conduct prior compliance assessments for their projects, and avoid crossing legal red lines.