Playing catch-up: the regulation of blockchain gaming in Japan
The Japanese legal regulations related to blockchain games or NFT games, where items and characters are tokenized through NFTs using blockchain technology, have not fully caught up with the global trends. This article discusses the key practical issues related to blockchain gaming against this backdrop.
The law against unfair prizes and misleading representations
Providing goods or in-game currency as a reward for logging into a game or downloading a game is an effective method of increasing game participation from users. These in-game rewards may be considered “prizes” under the Anti-Unfair Prizes and Misrepresentations Act.
The main requirements for such rewards to constitute prizes are as follows:
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They are provided as a means of getting customers to participate;
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They are provided in connection with a transaction involving goods or services; and
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Goods, money or other financial benefits are offered.
For example, a login reward or a download reward may be considered an incentive to users who are the target of a transaction to download or continue playing the game and ultimately purchase goods. In this case, these rewards are provided, as a financial benefit, in connection with a transaction as a means of attracting customers to participate, who can meet the prize requirements.
Even if the reward constitutes a prize, the law against unfair prizes and misleading representations only regulates prizes when the amount exceeds a certain limit, as follows:
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Maximum number of prize/prize |
Maximum total prize/prize |
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Premiums |
In cases where the prizes or recipients of prizes are determined by chance or by the superiority of specific actions (competitions); for example lotteries in shops. |
The transaction price is less than JPY 5000 (around $36) |
20 times the transaction price |
2% of the planned total sales amount |
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The transaction price is JPY 5,000 or more |
¥100,000 |
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Prizes are offered to all |
In cases where money or goods are offered to users or visitors to shops without any restriction, other than competitions; for example gifts to all buyers. |
The transaction price is less than 1000 JPY |
¥200 |
― |
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The transaction price is 1000 JPY or more |
20% of the transaction price |
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In blockchain games, it is assumed that goods can be traded freely among users, and goods are acquired through payment gachas (toy machines) are also assumed to be capable of secondary sales/purchases. The result of gacha is randomly determined.
There will be instances where users may obtain an item with a market value that exceeds the value of the in-game currency claimed for gacha, or cases where the market value of the item is less than the in-game currency value. Given that this aleatory element can stimulate users, it is debatable whether blockchain games fall under the category of gambling under the Criminal Code.
One of the elements of the gambling offense is “the act of contesting gain or loss” of property, or property benefits. A blockchain gaming company obtains money in an amount equal to the selling price of an item, and the user obtains the item with a value equal to the amount paid. Therefore, in principle, the act of contesting gain or loss, where the winner gains property or real estate benefits and the loser loses them, may not be recognized between a blockchain gaming company and its users.
Furthermore, transactions between users take place in a secondary market and are usually carried out when both users agree on a price, which leads to the conclusion that there is no action to dispute profit or loss also among users.
