Author: Lawyer Shao Shiwei
In the policy winter of domestic version number restrictions, domestic game manufacturers can choose to either export their games overseas or create high-quality games, but high-quality games mean extremely high costs and a long payback period, so exporting is a choice that most game companies have to make. In terms of commercialization model, Web3 blockchain games are one of the types that overseas game companies will consider.
Recently, the blockchain game GameFi has exploded on the TON platform. Taking Notcoin (tap to earn, tap mining game) as an example, it is reported that the project quickly attracted 35 million users after it went online, with more than 6 million active users per day at its peak, and a market value of up to $850 million before the opening. In just two weeks after its token $NOT was launched on Binance, its market value soared to $2.5 billion, creating a trend for TON ecological mini-games. This also makes many domestic game manufacturers excited.
So, when domestic game companies develop TON ecological mini-games, will there be relevant legal risks?
Telegram (also known as TG, Telegram, Paper Plane) is a free instant messaging software founded by brothers Pavel and Nikolai Durov in 2013. As of now, it has more than 1.3 billion registered users and nearly 900 million monthly active users, and has become an important tool for the Web3 community.
The TON project (Telegram Open Network) was developed by Telegram in the early days, but Telegram withdrew due to compliance issues. In May 2021, the TON Foundation restarted the project, and TON changed its name from the original Telegram Open Network to The Open Network to continue its development.
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 collections, chat, social networking, gambling, games, Jettons, NFT services, VPN, development tools, Shopping, Launchpads.
Thanks to the huge user base on the Telegram platform and its low participation threshold and simple operation, the mini-games in the TON ecosystem have quickly gained widespread attention and user growth.
1. Ton horse gamefi
Ton horse gamefi is a game platform built on the TON chain. The platform has two currencies, one is the platform currency Horse, and the other is the game currency diamond. The exchange ratio between the two is 1:10 (one Horse token can be exchanged for 10 diamonds). Diamonds are used when playing games. Diamonds earned in the game can be exchanged for Horse tokens, and Horse tokens can be traded for USDT for cash.
To obtain tokens, you can complete the corresponding tasks (such as joining the Telegram group, following Twitter, inviting friends, etc.) by clicking, and purchasing the platform's NFT can also produce platform tokens.
The games on the platform include Battle Royale and Rocket Game. A brief introduction to the gameplay:
Battle Royale:
Compare the interfaces of the two pictures on the left and right, are they familiar? The left picture is Ton horse gamefi, and the right picture is the battle royale game interface of Chaowan Universe (for more information, please refer to "With the popularity of "Battle Royale" gameplay, what are the legal risks of Chaowan Universe?").
Players enter a room randomly and place a bet with coins. After all players arrive, the game starts. After the start, if the killer enters the room where the player places a bet, the player will lose the bet tokens.
Rocket game:
After betting tokens, start the game. As long as the player chooses to jump off the plane before the plane crashes, the player wins. The later the jump, the higher the reward will be.
Players can cash out by exchanging the diamonds obtained in the game for Horse tokens, and then trading the Horse tokens in the form of pending orders. In this way, players can trade the platform tokens into USDT for cash.
2. Notcoin
Notcoin gameplay introduction: In the game, players need to periodically click on a token icon and capture rockets to speed up upgrades. The game is not limited to a single click, but also includes features such as teamwork points league, energy management and referral rewards. In addition, Notcoin also has an "earn" system to earn Notcoin by completing advertising tasks. Players can accelerate the collection of tokens through different gains, such as full energy gain and multi-point gain. For users, this game is a point-and-click earning game without any threshold.
In May 2024, Notcoin issued its own NOT token on the TON (The Open Network) blockchain. Telegram founder Du Rove once said that Notcoin has attracted more than 35 million active users after being minted on the TON blockchain and listed on all major cryptocurrency exchanges.
1. Legal risks involving gambling
In the Ton horse gamefi introduced in the previous article, both types of games on the platform are probability-based games. To put it bluntly, both types of games are gambling games. In the article "How to avoid gambling in blockchain games that make money while playing?", Lawyer Shao once introduced that if a game involves gambling, it will have the following 3 characteristics:
Pay to purchase props/game coins on the platform. Most blockchain game platforms require users to pay to purchase props or tokens on the platform. The specific method is: first use legal currency to purchase virtual currency through an exchange; then download a cryptocurrency wallet to transfer the purchased virtual currency to the wallet; after connecting the wallet in the blockchain game, you can use the wallet to purchase props or tokens on the platform. Even if a small number of blockchain games claim to be free at the beginning, users still need to pay for a better gaming experience.
Direct/indirect withdrawals can be obtained to obtain legal currency. Users' NFTs or game tokens on the platform can be withdrawn into virtual currency through transactions, and then converted into legal currency.
Gameplay: accidental, small bets for big gains, and the possibility of loss. If the user's victory or defeat is highly accidental and there is a possibility of loss, the game has gambling risks.
In short, the gameplay of gambling games will have the three key points of paid investment, random gameplay, and cash output at the same time.
Therefore, if domestic game developers want to develop small games in the TON ecosystem, unless they allow players to play for free, once there are paid investments from Chinese players in the game, the game developers will inevitably be involved in the legal risk of opening a casino.
2. Legal risks of issuing coins
In TON ecological small games, the main sources of income for game project parties include players' in-game recharges, advertising revenue, etc., but most project parties still hope to issue coins.
In September 2024, Binance announced that Launchpool launched the 58th project Hamster Kombat (HMSTR). From Notcoin (NOT) to HMSTR, Binance has continuously supported TON ecological small games.
（A crypto exchange CEO simulator P2E game built on the Telegram applet platform）
As we all know, issuing coins is prohibited in China. As early as 2017, the "Announcement on Preventing the Risks of Token Issuance and Financing" defined the issuance of tokens as illegal financing activities. In 2018, the "Risk Warning on Preventing Illegal Fundraising in the Name of "Virtual Currency" and "Blockchain"" also mentioned that "some criminals also issue tokens under the names of ICO, IFO, IEO and other new names... which are highly concealed and confusing."
If the ultimate goal of domestic game companies developing TON ecological mini-games is to issue coins, they may be involved in relevant criminal legal risks due to violation of domestic policies, as domestic policies define virtual currency-related businesses as illegal financial activities.
3. Other legal risks
In the article "10 Major Legal Issues Web3 Game Entrepreneurs Should Pay Most Attention to", Lawyer Shao mentioned that in addition to gambling-related and policy-related legal risks, it is also necessary to pay attention to the risks of pyramid schemes that may be involved in the publicity and distribution level and game models, and legal risks such as opening consignment markets for players, illegal fundraising, money laundering, and intellectual property infringement.
Telegram and WeChat also have billions of monthly active users, which is one of the main reasons for attracting project parties and investors to develop mini-games. Moreover, for game developers who choose to go overseas, developing TON ecological mini-games does not seem to be a high threshold for developing mini-games. Its model is also similar to WeChat mini-program games, which are simple and easy to use and have strong dissemination power. It is like changing the skin and making the once popular WeChat mini-program games or other traditional Web2 games popular again.
Against the background of the domestic game winter, this is also one of the business options for game developers. However, even if the game goes overseas, if the game content violates domestic laws, regulations and policy provisions, it is difficult to avoid criminal risks under the constraints of my country's criminal jurisdiction.
Therefore, if domestic game manufacturers develop TON ecological mini-games, they also need to fully understand the domestic regulatory provisions on Web3 games, and ensure that all activities are carried out within the legal framework in terms of project financing, commercial cooperation, labor employment, game promotion and content, etc., to avoid being identified as illegal financial activities.
【Disclaimer】The market is risky and investment should be cautious. The relevant cases cited in this article are only for legal education and do not constitute legal opinions on specific matters, nor do they constitute any investment advice.
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