“Play To Earn” Gaming and the Growing Crypto-Backlash
The Tyz Law team has partnered with popular gaming and educational YouTube series Extra Credits for a special informative video discussing “Play To Earn” blockchain-enabled gaming initiatives. Watch the video here: https://www.youtube.com/watch?v=jzVt3AFA4w4.
The buzz around Web3, NFTs, and blockchain technology reached a fever pitch this year, and unsurprisingly, many game and game-adjacent companies were quick to jump on the bandwagon. The prospect of “Play To Earn” gaming might sound great on paper: players play your game, create or unlock unique items, and then buy or sell those items to other players as NFTs on the blockchain. And depending on the nature of those NFTs, game developers could receive a share of the sale price every time one changed hands. Unfortunately, this has proven to be a controversial strategy at best: developers like Ubisoft saw major player backlash to their NFT initiatives, Square Enix sold off valuable IP in part to invest in crypto-technologies just months before the value of many cryptocurrencies plummeted, and publishers like Team 17 got blasted on social media by their own developers for pursuing NFT initiatives. This is to say nothing of cyberattacks against major blockchain-powered games, such as the hack against Axie Infinity that wiped out over $600 million in value, or smaller Play To Earn games that “rug pulled” and shut down their games’ servers despite substantial player investment.
Combine that with a recent collapse in the crypto market generally, and it’s perhaps no surprise that so many in the games industry have turned on Web3-based gaming. At a recent game developers conference in Brazil, one developer made headlines (and received a spirited ovation from the developers in attendance) when he crossed out his panel title “The Future of Game Design” and replaced it onstage with a surprise presentation entitled “Why NFTs are a Nightmare.” In an interview after the event, the developer referred to those who push NFTs and other blockchain-powered initiatives in gaming as unwelcome “outsiders."
How did we get here? Why have so many in gaming soured on this once-ballyhooed tech? In the video, we theorize that this question cuts to the very core of why people make and play games. The video game industry has always combined elements of both entertainment and commerce, but in many Play To Earn games, the commerce is the entertainment. And while introducing the prospect of real money speculation into a video game may “up the stakes” for some, it also raises serious consumer protection concerns. Advertising and testimonials claiming that “playing this game made me rich” are likely to be heavily scrutinized by the FTC, which is already going after celebrities like Kim Kardashian and Floyd Mayweather for their involvement in advertising alleged “crypto scams.”
If you are venturing into the Web3 space, you probably already know you’ll need good lawyers to navigate the securities, tax, banking, and myriad other legal issues associated with this technology. But don’t neglect the basic principles of consumer protection – after all, without consumer support, Web3’s video game proponents will never be more than “outsiders.”
If you’d like to see more legal conversations between Tyz Law and the Extra Credits team, you can also watch Jonathan appear on the Extra Credits Twitch Channel to discuss even more cutting-edge legal topics.