Fluxx

If the Trade Hands card is played and the rest of the players have no cards, is that player required to give away the rest of his cards for nothing in return or is the action optional?

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Yes
If you play the card, you have to carry out the action, so yes, you’d have to give away the rest of your hand and get nothing in return if everyone else is empty handed. It says on the card, “This is one of those times when you can get something for nothing.”Well, it’s also a time when you might give something away and get nothing back!