In the cold winter of domestic game license restrictions, domestic game manufacturers have two options: exporting their games overseas or creating high-quality games. However, high-quality games require extremely high costs and a long payback period, so exporting games overseas is a choice most game companies have to make. In terms of commercialization model, Web3 blockchain games are one of the types that game companies that export games overseas 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 its launch, with more than 6 million daily active users 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 excited many domestic game manufacturers.
So, are there any legal risks when domestic game developers develop TON ecological mini-games?
Author | Lawyer Shao Shiwei
01. What are Telegram and TON Ecosystem Games?
Telegram (also known as TG, Telegram, Paper Plane) is a free instant messaging software founded by brothers Pavel and Nikolai Durov in 2013. So far, 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 initially developed by Telegram, 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 and continued to develop.
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, chats, social networking, gambling, games, Jettons, NFT services, VPNs, development tools, Shopping, and Launchpads.
Thanks to the huge user base on the Telegram platform and its low participation threshold and simple operation, small games in the TON ecosystem have quickly gained widespread attention and user growth.
02. Examples of popular mini-games in the TON ecosystem
1、Ton horse gamefi
Ton horse gamefi is a gaming 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 rate between the two is 1:10 (one Horse token can be exchanged for 10 diamonds). Diamonds are used to play games. The diamonds earned in the game can be exchanged for Horse tokens, and Horse tokens can be traded for USDT for cash.
Tokens can be obtained by clicking and completing corresponding tasks (such as joining a Telegram group, following Twitter, inviting friends, etc.). Purchasing the platform's NFTs can also produce platform tokens.
The games on the platform include Battle Royale and Rocket Game. Here is a brief introduction to the gameplay:
Battle Royale:
Compare the interfaces of the two pictures above and below, do they look familiar? The upper picture is Ton horse gamefi, and the lower picture is the battle royale game interface of Chaowan Universe (for more details, please visit ➡️(With the popularity of "Battle Royale" gameplay, what are the legal risks of Chaowan Universe?)).
Players enter a room randomly and place bets with coins. The game starts after all players arrive. After the game starts, if the killer enters the room where the player placed a bet, the player will lose the tokens he placed.
Rocket Game:
After betting tokens, start the game. As long as the player chooses to jump off the plane before the plane crashes, he wins. The later he jumps, the higher the reward he will win.
The way for players to cash out is to exchange the diamonds obtained in the game for Horse tokens, and then trade the Horse tokens in the form of pending orders. In this way, players can trade the platform tokens into USDT for cash.
2、Notcoin
Just like the popular WeChat game "Sheep", Notcoin has attracted widespread attention since its launch on January 1, 2024, relying on Telegram's huge user base and social communication capabilities, and simple enough gameplay, with more than 30 million participants.
Introduction to Notcoin gameplay: In the game, players need to periodically click on a token icon and capture rockets to speed up the upgrade. 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 way to make money while clicking without any threshold.
In May 2024, Notcoin issued its own NOT token on the TON (The Open Network) blockchain. Telegram founder Du Rove once wrote that Notcoin has attracted more than 35 million active users after being minted on the TON blockchain and listed on all major cryptocurrency exchanges.
03. What are the legal risks for Chinese people to develop TON ecological mini-games?
1. Legal risks related to gambling
In the Ton horse gamefi introduced above, both types of mini-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 introduced that if a game involves gambling, it will have the following three 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 are claimed to be free at the beginning, users still need to pay for a better gaming experience.
You can withdraw directly or indirectly to obtain legal currency. Users can withdraw NFTs or game tokens in the platform into virtual currency through transactions, and then convert them into legal currency.
How to play: chance, risking a lot with a small bet, and the possibility of loss. If the user's success or failure is highly accidental and there is a possibility of loss, the game involves gambling risks.
In short, the gameplay of gambling games will have three key points: paid investment, random gameplay, and cash output.
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 subject to legal risks of opening a casino.
2. Legal risks of issuing coins
In TON ecological 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 will launch the 58th project Hamster Kombat (HMSTR). From Notcoin (NOT) to HMSTR, Binance has continuously supported the Ton ecosystem 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 (Notice on Preventing the Risks of Token Issuance and Financing), the issuance of tokens was defined as an illegal financing activity. In 2018 (Risk Warning on Preventing Illegal Fundraising in the Name of "Virtual Currency" and "Blockchain"), it was 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 developers in developing TON ecosystem games is to issue coins, they may be subject to relevant criminal legal risks due to violations of domestic policies, as domestic policies classify virtual currency-related businesses as illegal financial activities.
3. Other legal risks
In the article "Top 10 Legal Issues Web3 Game Entrepreneurs Should Pay 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 promotion level and the game model, as well as legal risks such as opening a consignment market for players, illegal fundraising, money laundering, and intellectual property infringement.
04. Compliance Recommendations
Telegram and WeChat also have billions of monthly active users, which is one of the main reasons for attracting project owners and investors to develop mini-games. Moreover, for game developers who choose to go overseas, developing mini-games in the TON ecosystem does not seem to be a high threshold. Its model is also similar to WeChat mini-program games, which are easy to use and have strong communication power. It is like changing the skin, making the once popular WeChat mini-program games or other traditional Web2 games popular again.
In the context of the domestic game winter, this is also one of the business options for game developers. However, even if the game is exported, if the game content violates domestic laws, regulations and policies, 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.
