Play-to-earn as a term has become popular with the rise of the metaverse, where you can participate in games that look very close to what is considered casual video or turn-based games. What is different is that you may stake something, and can walk away after the game with more than you staked or with nothing. Play-to-earn is legally in a bit of an unclear phase where it sure sounds like gambling, but does it have all the components to be considered to be gambling?
Play-to-earn games are where you can play various types of game where the outcome has more than a win or a loss, more than a number and achievement badge. The play-to-earn games that are coming out in this category now usually have various types of crypto tokens as rewards, such as NFTs or tokens that fall under different categories. The biggest play-to-earn game currently is Axie Infinity, which resembles Pokémon in game mechanics. You play with characters called Axies which are in fact NFTs and battle other Axies with rewards such as the Smooth Love Potion (SLP) Token.
The rough definition of an act of gambling is that you are staking something of value knowing that there is a risk of losing while hoping to win more than the staked value. This can be done as part of a game of chance, where you have no impact on the game, you can just hope you get lucky. Or as part of a game of skill, where if you have the knowledge or skill you are more likely to win, and if you do not have the knowledge you are more likely to lose.
Play-to-earn games at the moment seem to lean towards being games where you stake something that has a perceived real world value, most commonly tokens of various kinds, in the hopes of winning more. It is somewhat debated which tokens category represents what attributes and if it can actually be classified as real world value. As an example Bitcoin is fairly widely accepted to have financial value, whereas NFT is representing an object or reference to an object, which can be thought of differently.
What is defined as gambling differs between different jurisdictions, where some countries have it extremely tied down and others leave the interpretation open. Generally the laws apply from where the user accesses the play-to-earn game, the game developer may have a local company and servers or have them abroad which also is handled differently for each jurisdiction. If the experience feels like gambling and you can use the winnings to buy something, it likely falls under gambling. And if that form of gambling is regulated in the market you are in, this play-to-earn experience most likely will be as well.
Traditionally when you gamble at a land based establishment or online there has been a clear owner of the experience, who has certain obligations and needs to abide by the regulations to keep offering gambling services. The ownership of most play-to-earn games are centralized still, but some of the organizations have been built as a Decentralized Autonomous Organization (DAO). In the DAO structure, given the distribution of the ownership is wide enough, it is hard to point to a specific owner.
Sku Mavis, the creator of Axie Infinity, has the governance token Axie Infinity Shard (AXS), which enables any holder to vote for the future of the Axie Infinity experience. As of now Sky Mavis holds a majority, so there is a clear owner, but over time this is likely to change. And this would for most jurisdictions be a new, yet to be regulated way of organizing a gambling experience.
Regulators are usually the last to get up to speed with the newest form of technology, which is due in part to making sure the activity and the implications are not always clear and constantly evolving. It is looking like a lot of the structure behind the organizations and the offered play-to-earn games are close to what would be considered a gambling experience. And with that most likely will sooner or later have to change the mechanics or follow regulations to stay in business.
What is considered to be gambling at the end of the day is a combination of who is offering the play-to-earn experience, where the players are located, is a game of chance/skill where the winnings can be considered to have real tangible value. It will likely take some time before this is clarified while a host of new play-to-earn games will inevitably crop up.