The 2024 SREN Act and the gaming industry: what every developer needs to know

In May 2024, France took a decisive step in regulating emerging digital economies with the adoption of the SREN Act (Securing and Regulating the Digital Space). Among the many provisions of this legislation, Articles 40 and 41 attracted particular attention from video game developers and businesses operating in the sector.

For the first time, the French legislature has established an experimental framework authorising online games that allow players to win monetisable digital items through chance. This represents a genuine revolution in a country traditionally strict when it comes to gambling.

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An unprecedented experimental framework for monetisable digital items

The SREN Act introduces a three-year experiment allowing adult players to win, through chance, digital items that have a value. This provision marks a significant advance for the video game industry, which until now had relied on ambiguous business models with respect to loot boxes and other random reward mechanisms.

This development had long been anticipated by the sector. Indeed, the global market for virtual items now represents several tens of billions of euros, and French publishers were at a disadvantage owing to the absence of a clear legal framework. From now on, they can develop features based on chance, provided they comply with the strict safeguards laid down by the Act.

The legislation defines monetisable digital items as game elements that confer specific rights on players and that may be transferred to third parties. This definition therefore potentially encompasses avatars, equipment, virtual land and other assets commonly found in modern games. It is nonetheless essential to note that these items cannot be exchanged for real money or bought back by the gaming company or its partners, which fundamentally distinguishes them from traditional non-fungible tokens (NFTs).

Declaration obligations: an unavoidable preliminary step

For developers wishing to integrate monetisable digital item mechanisms into their games, the first step is to file a prior declaration with the French National Gaming Authority (ANJ). This formality is no mere technicality - it is an absolute prerequisite for operating lawfully.

The declaration must contain precise information, the details of which will be set by decree. Based on the initial information available, businesses will in particular have to provide:

• A detailed description of the game mechanisms and the nature of the digital items offered
• The technical measures implemented to verify players' age
• The arrangements for preventing excessive and pathological gambling
• The resources dedicated to transaction security and to combating fraud

Furthermore, only businesses with their registered office in the European Union or in a country of the European Economic Area that has concluded anti-fraud agreements with France will be able to offer these games on French territory. This provision aims to prevent the emergence of offshore operators that escape any form of regulation.

Identity verification and protection of minors: a major responsibility

Protecting minor players is one of the legislature's central concerns. The Act requires developers to put in place strict age and identity verification mechanisms. It is no longer simply a matter of asking the user to tick a box confirming that they are of legal age, but rather of implementing robust technical solutions.

The legislation states that participation in games involving monetisable digital items is strictly reserved for adults. Businesses will therefore have to implement verification mechanisms that comply with the GDPR, which generally involves a two-stage verification: an initial declaration by the user, followed by validation through an identity document or another reliable technical means.

This obligation raises considerable technical and legal challenges for developers. Identity verification must be sufficiently robust to prevent any circumvention, while remaining respectful of users' privacy and compliant with GDPR requirements. This is a complex equation that often calls for the support of a gambling lawyer familiar with these specific issues.

The stakes are all the higher given that the penalties for non-compliance can be severe, ranging from an administrative fine to the outright closure of the service. The criminal liability of directors may also be engaged in the event of a systemic failure to protect minors.

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International comparison: France in a middle-ground position

The French framework occupies an interesting position on the international landscape of regulation of digital items in games. While some countries, notably Asian ones such as Japan and South Korea, adopted permissive approaches several years ago that fostered the growth of their video game industries, other jurisdictions maintain far more restrictive positions.

Belgium, for example, classified certain loot boxes as gambling as early as 2018, forcing several major publishers to modify their games specifically for that market. Conversely, some US states such as Nevada have developed more liberal frameworks, while maintaining strict requirements regarding transparency and consumer protection.

France is choosing a middle path, with this regulated experiment. This pragmatic approach makes it possible to observe market developments while retaining the option to adjust the regulatory framework at the end of the three-year period. For developers, this means designing systems flexible enough to adapt to future changes in the law.

Tax implications: still uncertain ground

One of the least defined aspects of this new regulation concerns the tax treatment of transactions involving monetisable digital items. While the SREN Act lays the foundations of the legal framework, it remains relatively silent on tax matters.

Publishers will nonetheless have to anticipate several crucial questions: How should the revenue generated by the initial sale of these items be declared? Are any capital gains realised by players on subsequent transfers taxable? What are the VAT obligations for these particular transactions?

The tax authorities have not yet published any specific guidance on these questions. Pending clarification, developers would be well advised to adopt the most cautious approach possible, by carefully documenting their financial flows and applying, by default, the tax regime for intangible assets.

This tax uncertainty represents a significant risk for businesses in the sector. A tax reassessment could indeed jeopardise the economic viability of projects based on these new monetisation models. A preliminary consultation with accountants and tax specialists experienced in the digital economy is therefore strongly recommended before any commercial launch.

Compliance strategies for developers

To navigate this new regulatory framework effectively, game developers and publishers should adopt a methodical compliance approach. It is advisable to proceed in stages, beginning with a thorough analysis of the contemplated game mechanisms in light of the criteria defined by the SREN Act.

This analysis must address both the technical aspects (implementation of age verification systems, securing of transactions) and the legal dimensions (drafting of terms and conditions of use, definition of the contractual nature of the digital items). Rigorous documentation of this process will be a valuable asset in the event of an inspection by the authorities.

Transparency towards players is also a major axis of compliance. Developers must clearly inform users about the nature of the digital items, the probabilities of obtaining them and the limitations inherent in their use. This information must be readily accessible and understandable, in order to avoid any accusation of misleading commercial practices.

Finally, it is crucial to build in compliance from the design phase of the game ("compliance by design"), rather than attempting to retrofit non-compliant mechanics after the fact. This preventive approach not only minimises legal risks but also optimises development costs by avoiding late structural changes. The support of a lawyer specialising in digital law facilitates this integrated approach.

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Future prospects: towards making the model permanent?

The experimental nature of the scheme introduced by the SREN Act logically raises the question of its permanence. At the end of the three-year period, the legislature will have to assess the benefits and risks of this new framework before deciding whether to maintain it, develop it or abandon it.

This assessment will likely take several criteria into account: the economic impact on the French video game industry, any abuses observed in terms of addiction or protection of minors, and the ability of operators to comply with the safeguards imposed by the Act.

Developers therefore have every interest in adopting exemplary conduct during this transitional period, in order to demonstrate the viability and responsibility of the model. This involves, in particular, heightened vigilance regarding problem players, full transparency about the random mechanisms, and a constant willingness to engage in dialogue with the regulatory authorities.

In the long run, it is reasonable to envisage a move towards a permanent framework, potentially accompanied by a few adjustments based on the observations from the experimental period. Businesses that have managed to anticipate these developments by adopting the most demanding standards from the outset will then enjoy a significant competitive advantage.

In summary

The SREN Act undeniably marks a major turning point for the French video game industry. By authorising, even on an experimental basis, games involving monetisable digital items, the legislature recognises the evolution of the sector's business models and offers French operators the opportunity to position themselves in a rapidly expanding market.

However, this opening comes with strict requirements that must not be underestimated. Age verification, addiction prevention, transparency of mechanisms, prior declarations... The obligations are numerous and failure to comply with them can lead to severe penalties.

In this context, developers and publishers have every interest in surrounding themselves with the necessary expertise to navigate this new regulatory framework with confidence. A lawyer specialising in online games can support them at every stage. For beyond mere legal compliance, what is truly at stake is players' trust and the long-term viability of their business models.