Recently, the UK’s Culture, Media, and Sport Committee (CMS) has issued a warning that Fan Tokens could pose significant risks to genuine sports enthusiasts.
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 fails to materialise.Dame Caroline Dinenage, the chair of the CMS committee, stated
Many football clubs in the UK have been launching fan tokens that allow supporters to purchase services and vote on important club matters. The purchase of these tokens by fans is becoming a measure of loyalty to the clubs. This could harm genuine sports fans.
From a fan protection perspective, the committee representatives believe that the UK government should either ban these fan tokens or implement stricter regulations. Like any other digital asset, the prices of fan tokens are subject to significant fluctuations, which can seriously impact inexperienced fans.
For instance, during the World Cup, fan tokens for national teams like Portugal, Spain, Brazil, and Argentina saw their values drop by 60% to 88% since the tournament began. Chiliz (CHZ), the platform token for Socios, also faced a similar fate, dropping by 36% after a surge during the tournament’s first match. Moreover, the reputation of these clubs among fans was severely affected.
Currently, the UK lacks direct regulations for cryptocurrency trading activities, and it’s the fans who are most affected. While the UK Financial Conduct Authority (FCA) has increased its supervision of cryptocurrency trading activities, the nuances of fan tokens still require careful consideration.
Cryptocurrency has become an alternative source of income through digital business and sponsorship from a rapidly growing industry. According to a Deloitte report published in December, revenue from the sale of irreplaceable Non-Fungible Tokens (NFTs) in the sports media is expected to generate over $2 billion from transactions in 2023.