Whilst the US crypto space continues its defence against regulatory scrutiny from the Securities and Exchange Commission (SEC), a more trivial crypto crackdown has arisen across the pond…
Such news comes via a report from the UK’s Media and Sport Committee (CMS), which suggests that football clubs in the country should no longer be allowed to sell crypto ‘fan tokens’ to supporters.
As you’d expect, the CMS - which is composed of a cross-party committee of MPs - has ushered this new consensus under the premise that fans are being exposed to the associated risks that come with investing in volatile crypto assets.
What are Football Fan Crypto Tokens
For anyone well-versed in football fan crypto tokens, you’ll know that Socios is by far and away the biggest player in the space.
Per its app (or dApp), users can link their crypto wallets in order to purchase Chiliz crypto ($CHZ), which can then be exchanged for bespoke fan tokens of over 100 of the world’s biggest clubs.
As per the top fan tokens listed on CoinMarketCap (regarding market capitalisation), there are 17 projects that make the top 1000 crypto projects. Most notably, these include the tokens of FC Barcelona ($BAR), PSG ($PSG), and Manchester City ($CITY) - who have respective market caps of $23 million, $19 million, and $15.5 million.
As do most of the projects on the market, Socios fan tokens serve as access keys to exclusive content and rewards around a football club. Further, Socios mention in the report relates to how it operates as a crypto marketplace that generates income by promising access/events/experiences to fans that it can’t always deliver on.
Additionally, fan tokens can also offer governance rights to holders, however these often relate to relatively trivial matters such as deciding a matchday’s walkout music. And when it comes to their distribution, clubs often hold the majority of their total supply and decide when and how to release them.
"In the world of sport, clubs are promoting volatile cryptoasset schemes to extract additional money from loyal supporters, often with promises of privileges and perks that fail to materialise… Fan token schemes must not be used as a substitute for meaningful engagement with supporters''- CMS committee chair Dame Caroline Dinenage MP.
Regulation on the matter is expected to arrive next year when clubs will be forced to prove that their business models are governed correctly and financially sound.
In response, Socios has told news publications that:
”Fan token holders received more than 24,000 matchday tickets and over 1,000 items of merchandise last season, and continue to engage with their club in a unique new way…Fan Tokens offer new and complementary benefits to clubs' traditional fan engagement beyond the boundaries of geography, and unlike NFTs (non-fungible tokens), are regulated by the FCA (Financial Conduct Authority).”
That being said, the company has since appeased regulators by displaying the following pop-up to visitors of its website:
Other new notices on the Socios website include one that states "Before using crypto-assets (tokens), consider that: (a) their value can go down or up; (b) they are not regulated in most countries; (c) you may have to pay taxes on any profits made from their sale."
Conclusive Thoughts
After removing our crypto-tinted lenses, the CMS’s concerns with fans investing in volatile crypto tokens certainly holds some validity, as it would be obtuse to insist that there aren’t any problems posed.
Most intuitively, this comes through the fact that whilst fans are fixated on the current form and success of a club, the value of its respective fan token is still largely dictated by the overall sentiment of the crypto market.
With these frailties in mind - which could easily catch-out unbeknownst football fans that believe value is explicitly tied to real-world performances - the new regulatory frameworks will be implemented to dampen the crypto-niche’s emergence into mainstream fandom moving forwards.
However on a final note, it’s impossible to ignore the complete disparity in regulatory approaches when it comes to crypto and ‘explicit betting’ matters. For example, the UK betting industry is undoubtedly thriving right now, as is demonstrated through the fact that more-or-less every professional football match in the country exhibits some kind of sports betting sponsorship (and that’s without even mentioning the array of betting adverts that come on our screen at half or full time, or when watching highlights on YouTube).
Further, as basic societal know-how suggests, it’s evident that many football fans suffer from betting addiction, however authorities continue to shove it down our throats as it’s essentially an infinite money glitch for them.
As is often the case then, all we can say here is that this is another case of money being funnelled in the direction of centralised/mainstream beneficiaries, which of course, comes at the expense of decentralised/alternative enterprises that pose the same (if not less) risks to so-called ‘valued’ supporters.
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This article is intended for educational purposes and is not financial advice.
