A group of UK MPs has cautioned professional sports clubs that are issuing digital fan tokens. The Culture, Media and Sport Committee has expressed concerns about the rise of such assets, which can be traded and vary dramatically in value, with the potential to cause financial harm to fans. The fan tokens can be equated to certificates of ownership, offering fans access to certain benefits, including voting in polls and getting access to ticket ballots. They are similar to non-fungible tokens (NFTs) in that they have no tangible form of their own.
The CMS committee has warned that clubs must not exploit their loyal supporters with these volatile crypto-asset schemes, particularly by providing promises of benefits and privileges that do not materialize. Dame Caroline Dinenage, CMS committee chair, signaled that the unique relationship between clubs and fans could result in financial and reputational harm to the clubs. The committee report also raised alarm of crypto assets being promoted in art, leading to intellectual property theft.
The warning by the CMS committee comes with the introduction of new rules by the Financial Conduct Authority (FCA), requiring firms that deal with crypto investments to display a warning stating that the investment is high-risk and people must be prepared to lose all the money they invest. Fan tokens have enjoyed considerable fame during and after the pandemic, with increasing numbers of people and businesses creating and trading them. However, the substantial fluctuations in their prices have diminished the hype behind this digital asset.
Football finance strategist, Kieran Maguire, acknowledged that large football clubs much regarded these digital assets as an easy cash-grab and an additional revenue stream after the pandemic. Nevertheless, their value since dwindled, and the hype has decreased. Fan tokens can be a fungible asset, thus exchangeable with other tokens, while NFTs carrying unique digital identifiers are one-of-a-kind collectibles. Formula 1 parties have adopted NFTs to engage fans and offer enriching membership perks in recent times. Williams F1, for instance, partnered with crypto exchange Kraken to hold a contest for NFT owners to vote for tokens that the team could display at the US Grand Prix
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