1. Introduction

The rise of crypto assets and the inception of NFTs popularized a new genre in the gaming industry. Play-to-earn games utilize tokens in blockchain networks in their game dynamics. Players may obtain the tokens upon completing in-game tasks or purchasing them. They have their own value in the market, and players may trade them with other tokens or coins. Some game projects plan to establish a decentralized autonomous organization, and some have already taken their place in the metaverse. What does not change is that their legal mechanisms should be carefully set to avoid legal problems.

This article will focus on the legal aspects of Play-to-Earn Games under the laws of Turkey. Although the crypto assets have not been so far regulated in Turkey, it is instrumental to highlight some critical features regarding play-to-earn games.

  1. Legal Classification of Tokens in Play-to-Earn Games

The legal classification of tokens is essential to decide the legal requirements to be met for any play-to-earn game. Although jurisdictions may have their own classifications, game tokens can be generally classified as currency, utility, or security tokens. Turkish laws do not make any categorization of crypto assets yet. However, it is expected that such classification will be regulated by the Turkish legislators to impose different rules for each class.

The Regulation on the Disuse of Crypto Assets in Payments (“Crypto Payment Regulation”) published by the Central Bank defines crypto assets as intangible assets that are created virtually using distributed ledger or a similar technology but are not classed as fiat money, deposit money, electronic money, payment instrument, securities, or other capital market instruments. This Regulation ban the use of crypto assets in payments in Turkey.  In other words, no service or product can be provided in exchange for crypto assets. However, trading between crypto assets may not be deemed payment for services or products.

The tokens may be used as an in-game currency and traded in the game or open markets to the point that they will not be used to obtain services or products in the game. For example, in a game where all armors and weapons are tokenized as NFTs and has its own fungible token, if one purchases an armor with the game tokens, this transaction may not be deemed as a payment and not be forbidden by the Turkish law, since it is only exchange of crypto assets. However, if the skins are not tokenized and can be bought with game tokens (i.e., crypto assets), this transaction may be accepted as invalid under Turkish law, and the game may carry the risk of being removed from the stores accessible to the users in Turkey. It is important to state that no court decision has been made or no sanction has been issued regarding the ban on using crypto assets in payments under the Crypto Payment Regulation.

  1. KYC/AML Requirements

As of 1 May 2021, crypto asset service providers became responsible for compliance with the Regulation on Measures to Prevent Money Laundering and Financing of Terrorism (“AML Regulation”). The Regulation defines crypto asset service providers as the institutions that mediate the trading of crypto assets. By the definition of “crypto asset service providers”, the legislator intends to refer to the crypto asset trading platforms. However, most play-to-earn games introduce a marketplace for selling game NFTs. Players can buy or sell avatars, armors, swords, or other instruments in NFT forms from such marketplace in exchange for game tokens. As NFTs are accepted as crypto assets under the definition of the Crypto Payment Regulation, such marketplace may be considered as a crypto asset provider since it mediates crypto asset exchanges. In that case, play-to-earn game owners must comply with the KYC/AML requirements for the transactions in their marketplaces. Some of these requirements are:

  • Traders must be identified in accordance with the AML Regulation.
  • Suspicious transactions must be reported to the Financial Crimes Investigation Board of Turkey.
  • All documents, including suspicious transaction reporting forms, books and records must be kept for eight years from the date of issuance, and all identification documents for eight years from the last transaction date.
  1. Gambling and Games of Chance

Some play-to-earn games may carry the risk of having elements of gambling or betting.

The Turkish Criminal Code (“TCC”) defines gambling as games played for profit where profit and loss depend on fortune, and conducting gambling is illegal in Turkey. TCC does not qualify gambling as a crime but rather as a misdemeanor where the players must pay a small administrative fine and are forced to surrender their earnings from gambling.  However, the party providing a platform and gambling opportunity will be subject to imprisonment between one to three years and a punitive fine of not less than 200 days. Such penalty will increase to between three and five years' imprisonment and a punitive fine up to 10.000 days if the party provides such platform and opportunity by using information systems.

However, the TCC does not give any clarification about the term “fortune”. The Regulation on Fortune Games Played on Virtual Platform defines “fortune games” as games that are played on virtual platforms depending on skill and chance, with game machines or with game equipment and instruments against a house. Fortune games are the games that (i) are played on a virtual platform with game equipment against a house or with game machines and (ii) include skill and luck. In this regard, owners of the play-to-earn gaming platforms must determine whether their games include any element of gambling or profit or loss depending on chance.

Law on Organization of Betting and Chance Games on Football and Other Sports Competitions forbids to run betting and chance games on sports competitions or providing platforms or opportunities for such betting and chance games without having a license/permission. This law should be considered if there is any betting in the relevant play-to-earn game.

  1. Taxation

As the fundamental idea of play-to-earn games is to let players earn rewards with real-world value, it is important to determine whether such rewards will be subject to any income or other taxes as per Turkish tax regulations.

The Income Tax Law states that all types of income (even donations), regardless of their nature, are subject to income tax. Some of such income types are business profits, agricultural profits, salaries and wages, income from capital investment, income from stock value appreciation, dividends, income from stock transfers, and other income and earnings.

All economic value generated in any way may be subject to income tax since The Income Tax Law includes other income and earnings. This means that economic value generated from digital assets (including cryptocurrency transactions) may also be subject to income tax.

However, thus far, no legislative action has been taken, and the tax authorities have not demanded the filing of tax statements with regard to digital asset holdings or funds and revenues generated therefrom. Therefore, based on the current practices of Turkish tax authorities, the income of players from play-to-earn games is not subject to income tax or any other tax.

  1. Intellectual Property Rights of Game NFTs

All NFTs have a token ID, address of the owner and metadata. They may either place the asset which the NFT represents in the metadata and store it on chain or link the web page where the NFT is stored. InterPlanetary File System may also be used for NFTs that have large file sizes to store them on the chain.1

The Law on Intellectual and Artistic Works (“IP Law”) defines “work” as any intellectual or artistic product bearing the characteristic of its author, which is deemed a scientific and literary or musical work or work of fine arts or cinematographic work. Works that are (i) expressed by language and writing in any form, and (ii) computer programs expressed in any form together with their preparatory designs, provided that the same leads to a computer program at the next stage, are one of the literary and scientific works under IP Law.

Intellectual property rights grant economic and moral rights to creators of works. Economic rights include the right of adaptation, right of reproduction, right of distribution, right of performance, right to communicate the work to the public, and right to request payment of a share of the sale. Agreements concerning the licensing of economic rights must be in writing and the rights that are licensed must be specified individually. In this regard, transferring ownership of a work does not mean transferring intellectual rights directly under the IP Law.

Play-to-earn games utilize NFTs to tokenize game elements. The Artwork that NFT represents is a work of fine arts under the IP Law, therefore may be accepted as work. For computer programs to be accepted as work, they need to be the original idea creation of the author. If that condition is met, NFT metadata and smart contract code may also be accepted as work. Accordingly, game platforms, developers or NFT artists may be the original intellectual property rights holders. Therefore, it is important to determine intellectual property rights of game platforms, developers or NFT artists and to include provisions in platform agreements about intellectual property rights to avoid major legal disputes.


1 https://www.wipo.int/wipo_magazine/en/2021/04/article_0007.html (Access Date: 14.06.2022)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.