NFT lawyer explains why crypto isn’t compatible with gaming

We had a chat with an NFT lawyer to look into the issues of incorporating NFTs into games

Cryptocurrency and NFTs are a new market that is breaking into the mainstream. Held on a decentralized blockchain, the coins or items are supposed to offer a sense of security away from the unstable nature of centralized banks.

However, what we have seen is instability everywhere. FTX, the second largest crypto exchange, recently crashed, wiping out $30 billion with it. Big-name developers such as Square Enix and Ubisoft seem hell-bent on incorporating NFTs into games, but have seen little success.

To find out the issues of incorporating the two different technologies, we sat down with the deputy head of commercial litigation and dispute resolution at London law firm Saunders Law, Will Charlesworth, to talk about the challenges.

Will Charlesworth is the deputy head of commercial litigation and dispute resolution at UK-based law firm Saunders Law

His title might be long, but what it basically boils down to is that Charlesworth is a lawyer who deals in NFT cases. Giving us a rundown on the basics, he said: “NFTs can offer considerable advantages to brands, to establish a commercial presence. It’s a way to generate revenue streams and build a community. And it’s potentially a challenging legal landscape, as it’s constantly shifting.”

Charlesworth shifted to NFT-related law in 2017, which is recent for most types of law, but ancient in terms of cryptocurrency.

People are still winning and losing vast amounts of money on the crypto market, and protections need to be put in place to prevent disruption.

When talking about companies such as Ubisoft, which recently attempted to add NFTs to Ghost Recon before shutting the project and game down, Charlesworth shared his concerns.

He explained: “There are definitely challenges to overcome and it has to be more than NFTs for NFTs sake. It has to be something that adds real value, and compliments and adds value to the gaming space. They need to move away from being a hype investment and a passing fad.”

Gamers see this trend as just that. When someone can create value with their FIFA Ultimate Team cards, or Sims furniture, why would they move to the blockchain.

He continues: “It’s a challenging sell to push NFTs at the moment. The example of Ghost Recon in particular shows that gamers are wise to this, and the hype around NFTs I don’t think translates into the world of gaming necessarily.”

Ubisoft experimented with playable NFTs in Ghost Recon Breakpoint, before ending NFT support for the game

Not only do companies have to convince gamers that their crypto assets have worth, but there are technological hurdles to overcome.

In terms of the basis of the technology, Charlesworth explains: “Trying to get NFTs and technology that works outside a gaming environment, that is truly decentralized, to be able to work on different platforms all at once is truly a unicorn. That’s just incredibly difficult. I can also see a headache in terms of licensing for use across multiple platforms.”

There are upsides, however. While Stadia was not a crypto asset, when Google refunded all its users, there was faith restored in the company. People no longer feel they are taking a risk with a Google gaming product, and while Charlesworth admits “it could be a selling point for the company” he doesn’t see many companies following suit.

When Google cancelled its Stadia gaming service, it refunded all users, setting an example that companies which dabble in NFTs should follow in order to restore user trust

For him, crypto and gaming are at a crossroads until one thing gives. He claims: “Unless gamers are willing to accept [that their NFT dies with the game], then I think that’s always going to be an issue. But then, if they do accept it, there isn’t an advantage over having an NFT [rather than an in-game item] in that space. I think we’re a little bit away from working out how it could actually work.”

However, there is light at the end of the tunnel for those who have invested in cryptocurrency or NFTs. In the UK, the courts have determined that crypto assets are a form of property and therefore protected under consumer rights. This doesn’t mean you are protected. As Charlesworth explains: “It always comes down to the terms and conditions on whether you would get compensation.”

The consumer rights issue does pose a significant problem, though, when it comes to selling NFTs on a global scale. As we’ve seen with loot boxes that are restricted in some countries, companies have to alter their games in order to adhere to local rules.

He said: “When a UK consumer acquires an NFT in a game, they do acquire consumer rights, and those rights apply whether or not the seller resides in the UK. You have to be fully informed as to exactly where you are directing your sales. And they can’t rely on obscure terms and conditions in order to protect themselves.”

Whether NFTs in gaming will become the norm despite the pushback, just as microtransactions did in the past, Charlesworth is unsure. He explains: “I don’t want to be quoted as saying ‘no’ because, at some point in the future, something might happen. The problems to be overcome with NFTs and gaming are the cultural side, where people don’t want to add another layer of microtransactions in games, and that the blockchain is not completely compatible with games. Blockchains are decentralized, games are centralized.”