Sportfans ska bli kryptos nya guldgruva – ”utnyttjas för att pumpa priset”
I jakten på en bredare investeringsbas har kryptoaktörer hittat de perfekta kunderna: sportfans. Sportintresserade har länge setts som enkla byten när bolag vill sälja produkter kopplade till risktagande och stora sponsorpengar kommer redan från gambling och kasinobolag. Efter coronapandemin är klubbarna i behov av pengar och flera kryptotjänster har hittat sätt att sälja bland annat fan-tokens till en ung publik.
– Fotbollsfansen utnyttjas för att trycka upp priset på kryptovalutor, säger en fanclubföreträdare till Bloomberg.
Crypto and Sports: A Marriage Made in … Well, We’ll See
Digital currencies look to football, basketball, and wrestling fans to expand their investor base.
Alex Webb, Bloomberg Businessweek, 7 September 2021
Sports teams, buffeted by the pandemic, need money. And, after a blockbuster year, cryptocurrency investors have a lot of it.
For digital currencies to continue that upward trajectory, however, they need to “expand the investor base” — a euphemism for finding new and, almost by definition, less sophisticated investors willing to pump up the price of Bitcoin, Ethereum, Dogecoin, and any other cryptocurrency that is the flavor of the day.
Which helps explain why crypto companies are pouring hundreds of millions of dollars into sponsorship and commercial deals with professional sports. It’s an effort to lure their massive fanbases into crypto.
Crypto.com has paid to become the official cryptocurrency exchange and technology sponsor of Italy’s Serie A soccer league. Rival exchange FTX alone has announced deals since June totaling more than $360 million in basketball, baseball, and esports. The NBA’s Miami Heat now play home games at the FTX Arena.
Sports fans have long been easy prey for companies pushing risky or addictive behavior, something the teams do little to discourage. The trend is worrying. Some 40% of the jersey sponsors in English soccer’s Premier League are gambling companies, up from just 10% in 2008. As marketing spending increased, so did gambling revenue: In the decade before the pandemic, British spending on betting almost doubled, to £4.7 billion ($6.4 billion) a year.
There’s a strong correlation between appetite for gambling and investment in cryptocurrencies, too. A survey by the gambling treatment charity GamCare found that 50% of regular gamblers have participated in crypto trading, compared with only 3% of the general population.
What is new is the way teams are providing incentives for their fans to join the craze, a practice best illustrated by the rise of so-called fan tokens. These cryptocurrencies are pitched by their creators as a way for clubs to increase digital engagement with fans. In practice, that means token holders get access to exclusive content, such as voting on which song to play in the stadium while the players warm up, or which motivational quote to plaster on the changing room wall. Hardly mind-blowing stuff.
The market leader is Socios.com, which sells tokens for more than 50 different teams and sports, from soccer’s FC Barcelona to basketball’s Chicago Bulls and the Ultimate Fighting Championship. The value of those tokens fluctuates with demand, and each token confers one vote in the frequent polls. Alexandre Dreyfus, the chief executive officer of Malta-based Socios, is adamant that the model is better than classic fan membership programs that charge a recurring flat fee.
With a token, “I have access to a service that doesn’t cost me money every year,” Dreyfus says. “You can own something that provides you with a service, but can resell it — and if you don’t want it, you don’t have to buy it.”
“Voting on fun things like music or the color of the team bus, that’s only going to be appealing to younger fans, [...] you’re pushing young people towards cryptocurrency investment”
The targets are supporters outside domestic markets who follow multiple sports and clubs — for instance, a Japanese or Brazilian fan who supports Arsenal in the Premier League, Paris Saint-Germain in Ligue 1, basketball’s Chicago Bulls, and motorsport’s Aston Martin Cognizant F-1 team. Dreyfus envisions Socios as a platform for global fans to get exclusive(ish) access to teams, which can themselves extract additional revenue from supporters with whom they otherwise have little interaction. In a marketing stunt, part of Lionel Messi’s PSG signing bonus announced on Aug. 12 was in the form of the Socios fan tokens.
“Football fans are just being used to bump the price up”
The marketing appeal is obvious, but these tradable tokens pose a more insidious hazard. “If it’s voting on fun things like music or the color of the team bus, that’s only going to be appealing to younger fans, and if that’s the case you’re pushing young people towards cryptocurrency investment,” says Adam Willerton, secretary of the Leeds United Supporters Trust, a fan group for the Premier League team that is part-owned by the NFL’s San Francisco 49ers. Socios sells Leeds tokens. “Football fans are just being used to bump the price up.”
Dreyfus argues that the price needs to respond to demand in order to give teams an incentive to provide good content. Better content should, in theory, foster demand for the token, boosting the price. The team can then sell more tokens to raise additional capital. So far, however, they’ve proven little more than a means of speculation similar to meme stocks, fueled by frenzied forum discussions. And none of this is regulated.
There’s an added layer of complication. In order to buy the tokens at all, you first have to buy Chiliz, a cryptocurrency developed by Socios and its parent company. And the Chiliz price swings. So the price of your fan token might increase when denominated in Chiliz, but the price of Chiliz itself might decline. Fans are exposed to two layers of risk.
It’s like a casino where the value of the chips changes. Sure, you might double your stack at the blackjack table, but the $100 chip you bought on the way in might be worth only worth $50 by the time you leave. Of course, the inverse is true: The price of Chiliz can increase. And that may be where the greatest opportunity lies for Socios and its backers, which include the French telecoms billionaire Xavier Niel. With the launch of each new token, more fans will in theory then buy Chiliz coins, whose total circulation is capped. The price of Chiliz has accordingly risen 17-fold this year. That in turn increases the barriers to entry for new fans.
There is some desperation at play here on the part of the teams. The European soccer market (total revenue in the top five leagues) contracted by 13% in the 2019-20 season because of the pandemic, according to Deloitte. The combined £150 million pounds that the Daily Telegraph reported that teams in the region have made this year from Socios offsets some of that. It’s a nice fillip to the coffers, but there may be a longer-term cost.
More stories like this are available on bloomberg.com.