Under the harsh winter of domestic game licensing restrictions, domestic game developers have two paths to choose from: either to go overseas or to create high-quality games. However, creating high-quality games means investing extremely high costs and facing a long return cycle, so going overseas is a choice that most game developers have to make. In terms of commercialization models, Web3 blockchain games are one of the types that overseas game developers will consider.
Recently, blockchain game GameFi has seen explosive growth on the TON platform. Taking Notcoin (tap to earn, click-to-mine game) as an example, it has been reported that the project quickly attracted 35 million users after its launch, with daily active users exceeding 6 million at its peak. Before its launch, the market value reached as high as $850 million, and within just two weeks of its token $NOT being listed on Binance, its market value skyrocketed to $2.5 billion, creating a boom for mini games in the TON ecosystem. This has also excited many domestic game developers.
So, do domestic game developers face any legal risks when developing mini games in the TON ecosystem?
Author | Lawyer Shao Shiwei
01、What are Telegram and TON Ecosystem Mini Games?
Telegram (also known as TG, Telegram, Paper Plane) is a free instant messaging software founded by brothers Pavel and Nikolai Durov in 2013. As of now, it has over 1.3 billion registered users and nearly 900 million monthly active users, becoming an important tool for the Web3 community.
The TON project (Telegram Open Network) was initially developed by Telegram, but due to compliance issues, Telegram withdrew. In May 2021, the TON Foundation restarted the project, and TON was renamed from Telegram Open Network to The Open Network for further development.
The TON ecosystem covers a wide range of application scenarios, including but not limited to the following 19 main areas: centralized exchanges, decentralized exchanges, staking, wallets, browsers, bridges, public tools, channels, NFT collectibles, chat, social, gambling, games, Jettons, NFT services, VPN, development tools, shopping, and launchpads.
Thanks to the large user base on the Telegram platform and its low participation threshold and simple operation, mini 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, which has two types of currencies: one is the platform currency Horse, and the other is the game currency Diamond, with an exchange rate of 1:10 (one Horse token can be exchanged for 10 Diamonds). Diamonds are used during gameplay, and the Diamonds earned in the game can be exchanged for Horse tokens, which can then be traded for USDT for cashing out.
Tokens can be obtained by clicking, completing corresponding tasks (such as joining Telegram groups, following Twitter, inviting friends, etc.), or purchasing the platform's NFTs to generate platform tokens.
The games on the platform include Battle Royale and Rocket Game. Here’s a brief introduction to the gameplay:
Battle Royale:
Comparing the interfaces of the two images above, does it look familiar? The upper image is from Ton Horse GameFi, and the lower image is from the Battle Royale game interface of Chao Wan Universe (for more details, see ➡️《What Are the Legal Risks of Chao Wan Universe, Which Became Popular with the 'Battle Royale' Gameplay?》).
Players randomly enter a room and place bets, and once all players are present, the game begins. If a killer enters the room where a player has bet, the player loses the tokens they wagered.
Rocket Game:
After betting tokens, the game starts, and as long as the player chooses to jump out of the plane before an accident occurs, they win. The later the jump, the higher the reward.
Players can cash out by exchanging the Diamonds earned in the game for Horse tokens, and then trading the Horse tokens in the form of limit orders, thus converting the platform tokens into USDT for cashing out.
2、Notcoin
Similar to the once-popular WeChat mini game "Sheep A Sheep," Notcoin leverages Telegram's large user base and social dissemination capabilities, with a gameplay that is simple enough to attract widespread attention since its launch on January 1, 2024, with participation exceeding 30 million.
Gameplay introduction for Notcoin: In the game, players need to periodically click on a token icon while capturing rockets to accelerate upgrades. The game is not limited to single clicks; it also includes team cooperation point leagues, energy management, and referral rewards. Additionally, Notcoin has an "earn" system that allows players to earn Notcoin by completing advertising tasks. Players can accelerate their collection through various boosts, such as all-energy boosts and multi-point boosts. For users, this game has no barriers to entry and allows for earning while playing.
In May 2024, Notcoin issued its own NOT token on the TON (The Open Network) blockchain. Telegram founder Du Rove stated that after Notcoin was minted on the TON blockchain and listed on all major cryptocurrency exchanges, it attracted over 35 million active users.
03、What Are the Legal Risks for Chinese Developers Creating Mini Games in the TON Ecosystem?
1、Legal Risks Related to Gambling
In the previously mentioned Ton Horse GameFi, 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 While Earning?》, Lawyer Shao introduced that if a game involves gambling, it will have the following three characteristics:
Paid purchases of in-game items/game currency. The vast majority of blockchain game platforms require users to purchase in-game items or tokens through payment. The specific process is as follows: first, buy virtual currency with fiat currency through an exchange; then download a cryptocurrency wallet to transfer the purchased virtual currency into the wallet; after connecting the wallet in the blockchain game, users can purchase items or tokens on the platform using the wallet. Even if a small number of blockchain games initially claim to be free, users still need to spend money for a better gaming experience.
Direct/indirect cash withdrawal to obtain fiat currency. Users can convert NFTs or game tokens within the platform into virtual currency through trading, which can then be cashed out into fiat currency.
Gameplay: Randomness, small bets for big wins, and the possibility of loss. If the outcome of a user's win or loss is highly random and carries the risk of loss, the game poses gambling risks.
In short, gambling game mechanics will simultaneously feature three key points: paid investment, random gameplay, and cash output.
Therefore, if domestic game developers want to create mini games in the TON ecosystem, unless they allow players to play for free, once there is any paid investment from Chinese players in the game, the developers will inevitably face legal risks related to operating a gambling establishment.
2. Legal Risks of Token Issuance
In TON ecosystem mini games, the revenue sources for game developers mainly include player top-ups and advertising income, but most developers still hope to issue tokens.
In September 2024, Binance announced the launch of the 58th project on Launchpool, Hamster Kombat (HMSTR). From Notcoin (NOT) to HMSTR, Binance has continuously supported mini games in the TON ecosystem.
(A P2E game simulating a CEO of a cryptocurrency exchange built on the Telegram mini program platform)
As is well known, issuing tokens is prohibited in China. As early as 2017, the "Announcement on Preventing the Risks of Token Issuance Financing" classified token issuance as illegal financing activities. The 2018 "Risk Warning on Preventing Illegal Fundraising in the Name of 'Virtual Currency' and 'Blockchain'" also mentioned that "some criminals issue tokens under various names such as ICO, IFO, and IEO… which are highly concealed and misleading."
If the ultimate goal of domestic game developers in creating mini games in the TON ecosystem is to issue tokens, they may face relevant criminal legal risks due to domestic policies classifying virtual currency-related activities as illegal financial activities.
3. Other Legal Risks
In the article 《The 10 Legal Issues Web3 Game Entrepreneurs Should Pay Attention To》, Lawyer Shao mentioned that in addition to gambling-related and policy-related legal risks, attention should also be paid to potential pyramid scheme risks related to marketing and game models, as well as legal risks related to setting up consignment markets for players, illegal fundraising, money laundering, and intellectual property infringement.
04. Compliance Recommendations
Both Telegram and WeChat have billions of monthly active users, which is one of the main reasons attracting project parties and investors to develop mini games. Moreover, developing mini games in the TON ecosystem seems to have a low barrier to entry for overseas game developers. Its model is similar to WeChat mini program games, being simple to use and highly shareable, akin to re-skinning previously popular WeChat mini program games or other traditional Web2 games for another round of success.
In the context of the domestic gaming winter, this is also a viable business choice for game developers. However, even if games go overseas, if the game content violates domestic laws and regulations, under the constraints of China's criminal jurisdiction, criminal risks are difficult to avoid.
Therefore, if domestic game developers create mini games in the TON ecosystem, they also need to fully understand domestic regulatory requirements for Web3 games, ensuring that all activities related to project financing, business cooperation, labor employment, game marketing, and content are conducted within the legal framework to avoid being classified as illegal financial activities.
【Disclaimer】The market has risks, and investment requires caution. The relevant cases cited in this article are for legal education purposes only and do not constitute legal advice on specific matters, nor do they constitute any investment advice.
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