Jonathan Hyman and Nic Couchman of the sports team Charles Russell Speechlys explore how Fan Token Offerings offer football teams the potential to reach new levels of fan engagement.
What links the giants of European football Paris Saint-Germain and Juventus to the Brazilian second division team Avaí FC? On the field, not much. However, off the field, each of these clubs has launched, or plans to launch, the sale of their coins or digital tokens to raise funds.
By taking the principles of initial coin offerings (ICOs) and applying them to sport, fan tokens (FTO) offers an innovative way for clubs, big or small, to create and support engagement with fans.
In fact, the fan tokens attract the interest of some of the biggest European clubs. PSG and Juventus have both announced partnership agreements this season with the Socios.com blockchain platform to launch the FTOs. These token offers will allow fans to access PSG or Juve brand tokens, which will be provided with various rights to fans. Tokens will also be tradable on the Socios market against the native ChiliZ token.
Meanwhile, the Brazilian soccer team Série B, Avaí, has recently become the first company worldwide to launch its own cryptocurrency. 22 million Avaí FC tokens have been made available, each with a price of US $ 1, to help raise funds that the club deems essential for being able to challenge a place in the top division.
Coins against tokens
It is worthwhile to draw some fundamental distinctions between a & # 39; coin & # 39; and a "token" fan. Coins are trading chips often referred to as cryptocurrencies, such as Bitcoin or Litecoin. They are crypto-assets, not supported by a central bank, but which can act as money and denominate the exchange of value, acting essentially as a cash substitution. However, they do not provide the types of rights or access provided by fan tokens. Fan tokens can have a marketable value, but are not considered similar to money in the same way as coins.
In general, fan tokens, also known as utility tokens, are crypto-assets that can be redeemed by fans for access to a specific product or service, such as football tickets and VIP experiences. They can also be used by an issuer to activate certain functions of a specific project, for example, by giving voting rights to fan token holders on how certain aspects of a football team are handled. Alternatively, fan tokens could also be used to represent the legal or advantageous ownership of a share in a company, such as the football team itself. Depending on how these tokens are structured, they can amount to what is known as a security token, e.g. a cryptographic activity that falls within the definition of regulated investment in the United Kingdom, which typically provides rights such as ownership, the reimbursement of a specific sum of money or the right to a share of future profits.
Building fan involvement
Socios.com claims that FTOs allow football teams to create a completely new economy that can be monetized, while building a new ecosystem of fan involvement. Using FTO rhetoric in opposition to traditional ICO terminology is an intelligent move.
These initiatives offer a unique opportunity for fans to engage with their own football team – without acquiring participation – by voting on some club issues such as the match man or the shirt design.
Fans of some clubs are larger than the population of small countries, with global communities straddling all international borders. Moreover, the loyalty of the fans to their clubs is certainly stronger than that of the average citizen towards his central bank.
Therefore, in some ways fanbases are the ideal ecosystems in which to incubate new methods of measuring and exchanging values.
Appealing to the passion of fans will likely prove to be a successful selling point, but it is important not to ignore that an FTO shares many features with an ICO.
Investing in ICO involves known and unknown risks, also due to the general lack of regulation. In sport, the regulatory environment is still evolving to address the use of cryptocurrencies. The specific characteristics of each token must be taken into account on a case-by-case basis, as it is likely that when clubs issue security tokens, they will be regulated investments and will fall within the jurisdiction of regulators, such as the Financial Conduct Authority. in the United Kingdom.
The trading value of a football club's cryptocurrency will of course depend largely on how the team calculates competitively. If fans of a football team feel they have lost money because of the poor performance of the club, there is the risk of damage to reputation or even legal claims.
However, when used responsibly in a way that fascinates fans while sufficiently warning them of investment risks, FTOs offer the potential for football clubs to reach new levels of fan engagement. These agreements raise funds and provide supporters with the opportunity to get involved in club issues in a way that, in the past, public lists or models of collective ownership of fans have not been successfully achieved.