- Up to 95% of NFTs are now worthless
- Commission hears evidence of misleading advertising and copyright infringement
- We want independent regulators to consider NFTs an unacceptable form of fan engagement
UK MPs say sports clubs and federations can damage their reputations and cause financial hardship for fans by selling blockchain-based digital products such as fan tokens and non-fungible tokens (NFTs). He said there was a risk.
A report published by the Commission on Culture, Media and Sport (CMS) says that while NFTs offer teams and athletes a new source of income with little financial risk, crypto-based products are “not essential” for fans. It was found that there is a risk of
NFTs are often sold as collectible digital items, often implicitly positioned by the seller or interpreted as an investment by the buyer. NFT sales value and volume have collapsed since the market peaked in early 2022, with one report suggesting that 95% may now be worthless.
The committee was also critical of Fan Tokens, which promise owners access to membership benefits such as voting rights, discounts and exclusive events. Despite containing additional utility beyond collectible value, Fan Tokens do not deliver what they promise, given that they are often sold as the equivalent of formal club memberships. said the company.
The report also cited incidents of deceptive and misleading advertising, lack of proper regulation, and instances of copyright infringement in this sector.
The recommendations to the UK government also state that while the marketing of crypto assets clearly communicates the financial risks, a future independent football regulator will not recognize fan tokens as an acceptable measure of engagement. .
Dame Caroline Dinenage, Chair of the CMS Committee, said: “The traditional regulatory regime has failed to protect both creators and consumers caught up in the volatile new world of cryptocurrencies.” .
“Artists are at risk of having the fruits of their labors exposed and promoted without their permission, while deceptive and misleading advertising poses an added risk to investors in an inherently risky business. Governments must ensure that everyone in the cryptocurrency chain is working to adequately protect the rights of consumers and creators.
“In the world of sport, clubs are promoting volatile crypto asset schemes to extract additional funds from loyal supporters, often promising privileges and perks that never materialize.Fan Token schemes are , and should not be used as a substitute for meaningful engagement with supporters.”
Sports professionals say…
Blockchain is divisive, especially when it comes to NFTs. Supporters see this as the future of technology and even society, and dismiss critics as ignorant. Opponents, on the other hand, see Web 3.0 as pure exploitation and the greed of early adopters as evidence that crypto-based innovations cannot be used responsibly and effectively.
As with many things, the reality is a little more nuanced. The ability to “own” things in the digital world has a purpose, but the problem is that many crypto enthusiasts confuse ownership with value. Just because a fan has a teaspoon at home doesn’t mean others will want to buy it.
The best use cases for blockchain in sports are those that provide tangible utility or where it is completely transparent that the product is a collectible. Two that come to mind are the Australian Open Tennis Grand Slam “Art Ball” concept and NFT commemorative tickets.
However, there is no denying that there are many people in the sports world, and even outside of the sports world, who see NFTs as a cash grab. The field’s early days were rife with dubious schemes unthinkingly promoted by prominent athletes. Meanwhile, clubs and federations have neglected their responsibilities to fans by failing to do due diligence when entering into crypto partnerships and sponsorships, as several deals have fallen through over the past 18 months.
The NFT market has probably reached its peak, and many fans are now more aware of such schemes. But that does not alleviate the economic hardship suffered by some fans, nor does it absolve sports of a moral obligation to seek new sources of income.
Stronger regulation and greater accountability are needed for sports to realize the potential benefits of blockchain technology.