Dangerous game? Football clubs try to mine fans’ money with crypto offers | cryptocurrencies

When FC Barcelona took the field for the 2021 Spanish Super Cup final, the trophy was not the only prize at stake.

Thousands of blaugrana fans also kept an eye on the market for FCB’s “fantoken”, the club’s own cryptocurrency. Socios, the web-based platform that pioneered fan tokens, had promised to “burn” 20,000 tokens for every goal Barcelona scored – and 40,000 if they won the cup.

In theory, success in the field would increase the scarcity of the currency, increasing its value. In practice, Barcelona lost the game and, football passions aside, it didn’t matter much anyway. With 3.5 million tokens in circulation, not to mention millions held by the club for future issuance, a few thousand here or there wouldn’t have moved the needle.

Question and answer

What is cryptocurrency?

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Cryptocurrencies are an alternative way to pay with cash or credit card. The technology behind it allows the ‘money’ to be sent directly to others without having to go through the banking system. For that reason, they are beyond the control of governments and not regulated by financial watchdogs – and transactions can be done in a way that you keep reasonably pseudonymous.

If you own a crypto asset, you control a secret digital key that you can use to prove to everyone on the network that a certain amount of that asset belongs to you. When you spend it, you tell the entire network that you transferred ownership of it and use the same key to prove you’re telling the truth. Over time, the history of all those transactions becomes a permanent record of who owns what: that record becomes the blockchain.

Bitcoin was one of the first and largest cryptocurrencies and has taken a wild ride since its inception in 2009, sometimes surging in value as investors piled up – and occasionally collapsing again. Dogecoin – which started as a joke – has also seen a stratospheric appreciation.

Skeptics warn that the lack of central control makes crypto assets ideal for criminals and terrorists, while libertarian monetarist enjoy the idea of ​​a currency with no inflation and no central bank.

The whole concept of cryptocurrencies has been criticized for its environmental impact, with “mining” new coins requiring huge energy reserves and the associated environmental footprint of the entire system.

Richard Partington and Martin Belam

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But the stunt symbolized something more, the budding love affair between football and cryptocurrency, an alliance that holds the promise of new revenue streams for a game already awash with money but always wanting more.

Football finance expert Kieran Maguire thinks clubs have clung to crypto as revenues from other sources begin to level off, which have been rising reliably for decades.

“Football clubs have realized that we now have maximum broadcast revenue, with at most modest growth to look forward to,” he said.

“As for commercial sponsors, we see deals being extended, but not with more money. The only way to increase sales on matchdays is to increase prices and fans are hesitant.”

Manchester United – whether you believe the club or not – claims to have 1.1 billion fans on the planet. With £488m in revenue in 2019-20, that’s just 45p a year, per fan.

“Clubs think, ‘Can we ‘find another way to make money out of that huge fan base?’ That’s where tokens come in.”

When AC Milan launched a token in early 2021, it raised $6 million (£4.4 million) in less than an hour, or about 12% of the value of the club’s record purchase, Leonardo Bonucci. The Paris Saint-Germain token, the most valuable, has a market value of $45 million.

However, in the murky and unregulated world of crypto, it is difficult to know how much clubs actually earn. Socios said it sold $300 million worth of fan tokens last year, but declined to say how much of it went to the clubs it partnered with.

Other platforms, such as Binance, are also entering the fantoken market, indicating that there is room for growth, especially given that only a few dozen clubs have entered the market in a meaningful way.

Pedro Herrera, senior blockchain analyst at DappRadar, a marketplace for blockchain-related apps, said most fans buy tokens for their associated benefits, such as voting on minor decisions about which song to play across the stadium after a goal, or access. to a tie to win an autographed shirt.

“It’s a win for the fan because they feel more involved; it’s a win for the team because it adds an extra source of income; and it’s a win for the [crypto] industry because you attract the masses and it is one step closer to mass adoption.”

Maguire is not against crypto, but adds a more skeptical note: “Many fans love crypto and in its purest form it is amazing. Banks have been charging people too much in terms of transaction costs for years and if crypto can reduce those costs, that’s great.”

“The problem is when unscrupulous traders, especially via social media, try to exploit fans who think a token is a serious investment product, rather than a glorified collectible.

“They’re magic beans. As long as it’s sold as a digital Panini card, it’s okay. But if it is seen as a form of investment, it is treading in uncomfortable territory.”

“It’s unregulated, it’s volatile and it’s subject to manipulation by people who own large amounts of the assets.”

Fantokens, however, are just one paragraph in the rapidly unfolding crypto saga of football.

In 2021, crypto sponsors plunged into football and were welcomed with open arms by money-hungry clubs, leagues and players.

Watford player wearing stake.com shirt
Watford has arguably England’s biggest crypto deal, a front-of-shirt sponsorship of Stake.com, which offers crypto gambling. Photo: Tess Derry/PA

Exchange app Crypto.com sponsors Italy’s Serie A, one of the world’s most glamorous leagues, while Socios is Internazionale’s shirt sponsor. EToro, a trading platform that allows investments in multiple cryptocurrencies, has deals with more than half of the clubs in the Premier League.

Southampton players are said to have been given the option to get bonuses in bitcoin, as part of a £7.5million-year deal with Coingaming Group. And in January 2021, striker David Barral made history when he became the first player in a major league to be awarded a contract with bitcoin, albeit in Spain’s third tier with Internacional de Madrid.

Many more famous players and ex-pros, such as Paul Pogba and John Terry, are also promoting cryptocurrencies, trading platforms and non-fungible tokens (NFTs) – the controversial digital art form.

This should come as no surprise, given the reach big stars have through social media and the money they can earn from promotions. Other partnerships may be more unexpected. Visitors to former Irish international Tony Cascarino’s Twitter profile may have been misled by the former striker’s sudden change of pace in mid-2021. One minute he was musing on the latest developments in the Premier League, the next he evangelized about blockchain bank Babb (no relation to former Irish teammate Phil) and musing that the “crypto market is on fire”.

Even in its infancy, the reputational risks of this new commercial pact between crypto and football have become all too apparent. Last year, Manchester City’s deal with a mysterious company called 3Key Technologies fell apart in a matter of days when it turned out that no one seemed to know anything about the company or its executives.

Arsenal FC ad promoting fan tokens
The Advertising Standards Authority banned Arsenal FC ads promoting fan tokens. Photo: ASA / PA

In December, Arsenal was reprimanded by the Advertising Standards Authority (ASA), which banned a club promotion that it said exploited the “inexperience or credulity of fans, downplaying investments in crypto assets, mislead consumers about risk of investment and not making it clear that the ‘token’ was a crypto asset”.

“For athletes seeking sponsorship, it’s a whole new market of opportunity, but it’s a bit of a landmine that you’re dealing with,” said Bill Esdaile, director of sports marketing firm Square in the Air.

“My feeling is that such a small percentage of people understand how” [crypto] works that too many decisions are made based on trust, thinking that if [crypto firms] say they have the money, they have.”

The amounts offered seem to be going up.

Premier League fighters Watford have arguably the biggest crypto deal in the country, a front-of-shirt sponsorship of Stake.com. The site offers crypto gambling, which is not legal in the UK but may appeal to the competition’s hundreds of millions of viewers around the world.

The scheme even means that Watford players’ shirt sleeves will bear the logo of Dogecoin, a “joke” currency whose value has fluctuated wildly, often in response to tweets from Tesla billionaire Elon Musk.

Kieran Maguire estimates the shirt deal could be worth up to £8 million, based on the typical value of such partnerships, while an insider at Watford told MSN in August that the Dogecoin sleeve display added £700,000 to the mix.

Such amounts will become increasingly difficult for clubs to ignore, he thinks, especially if the government continues a major overhaul of gambling regulations, which could see football lose the cash cow of shirt deals with gambling companies.

“She [clubs] see the token market as a bit one-sided, it won’t be picked up by the betting review and it will help fill the gap,” says Maguire.

“Those £5m to £8m deals could be replaced by NFT advertising and crypto.”

In a recent article, psychology researcher and gambling expert Dr. Phil Newall that football sponsorship is about to trade one risky product for another.

“Research has found that cryptocurrency traders are likely to have gambling symptoms and have identified psychological similarities between cryptocurrency trading and online sports betting,” Newall wrote. He believes that removing gambling ads can create more room to legitimize equally dangerous products.

As they burn money in the pursuit of glory, it seems unlikely that clubs will worry about that.

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