Prizes in Cryptocurrency and NFT Regulated in New FAQ on Promotions in Italy
ITALY (February 10, 2023) — The new version of FAQs on prize promotions in Italy introduce new rules on prizes in cryptocurrency and NFT.
Regulations on prize promotions in Italy are overly complicated. And this level of complication is further increased by FAQs that the Italy Ministry of Enterprise and Made in Italy (“Mimit”) periodically publishes.
In Italy, Presidential Decree No. 430/2001 regulates two main categories of events: (i) prize competitions, in which the awarding of prizes depends on the luck/alea or skill/capacity of the contestants, and (ii) prize operations, in which the offers of prizes or gifts usually depend on the purchase or sale of products or services.
The decree is accompanied by the Ministry’s (formerly Mise, now Mimit) FAQs, in versions updated from time to time, which play a key role in clarifying industry regulations and resolving interpretative doubts arising from the evolution of the phenomenon of prize events and technological progress.
Not coincidentally, the new version of the FAQs addresses one of the most debated issues at the moment, regarding which it was necessary to unravel the doubts that have arisen or at least define a guideline for the operators involved to follow: is it permissible in prize promotions to award prizes in cryptocurrency or in unique digital objects e.g., NFTs?
On the one hand, Mimit reports that prizes in cryptocurrency are NOT permissible because they are (in their view), for all intents and purposes, equivalent to money, and Presidential Decree 430/2001 prohibits cash prizes. On the other hand, it declares unique digital objects, thus NFT (Non-Fungible Token) or others with similar characteristics, eligible to be awarded as prizes.
The Ministry, therefore, believes that cryptocurrency should be equated with money and refers to the exclusion of the latter among the prizes that can be raffled as part of a promotion. However, it could be argued that from a regulatory point of view, cryptocurrencies are not equated with fiat and therefore the conclusion reached by Mimit is without legal basis, and in any litigation the outcome would be uncertain, to say the least.
With regard to unique digital objects, such as NFTs, the Ministry – again taking Article 4 of the decree as a normative reference – considers them to be intangible assets susceptible to economic valuation and subject to taxation, both at the time of issuance and during circulation in the market, when it is possible to attribute to them, as to any good subject to a commercial transaction, a “normal value” (i.e., commercial value for consumers or market orientation value).
Mimit thus seems to focus on the unique and infungible nature of these digital instruments, contrary to what has been discussed for cryptocurrencies. There is a question, however, as to whether such digital tokens can also fulfill interchangeability functions, leading to the need for deeper reflection on the point by the Ministry. A further critical issue also seems to arise with reference to the determination of the value of the prize (and thus the security), NFTs, among others, being subject to price fluctuations related to market trends.
The Mimit’s position is very recent and therefore it has not been tested before courts, but we shall see future developments. In any case, the FAQs confirm that, in the case of online promotions run by an entity based in a different EU Member State, only the regulations of the country of the establishment will apply, save for the applicability of Italian consumer laws. This practice is becoming frequent to bypass such restrictions.