Fan Tokens and SportFi Are Drawing Support From Unlikely Quarters, Including Regulators

Fan tokens, issued by sports clubs to drive supporter engagement, are proliferating. This week, English Premier League side Tottenham Hotspur became the latest club to unveil its own token. Issued on Chiliz Chain through the Socios app, $SPURS will join the ranks of tradable tokens issued by dozens of sporting clubs the world over. Initially dismissed by some as a passing fad, fan token seem here to stay. And they’re drawing support from unlikely quarters.

This month, Brazil’s financial regulator, the CVM, gave its verdict on fan tokens. While SEC-style agencies are apt to take a hard line on crypto tokens, the CVM’s Carlos Berwanger explained that fan tokens should not be viewed as investment contracts. Whatever they may be, they aren’t securities. Of course, regulators in other jurisdictions may take a different view, but the very fact that fan tokens should be on the CVM’s radar shows how far they’ve come.

Utility Tokens for Teams

CoinGecko lists around 70 fan tokens with a combined capitalization of $212M. That’s less than the value of a single club on that list; Manchester City, by way of comparison, is worth $5 billion. Although an unfair comparison to make, it illustrates the modest size of the fan token market versus that of the clubs in question. But this is to be expected given that fan tokens are not intended to represent shares in a club. If that were the case, they would rise in accord with major triumphs on the pitch. Instead, fan tokens appear to follow their own trajectory, rising and falling in line with market demand.

This demand appears to be coming overwhelmingly from supporters of the clubs. As one of the last forms of tribalism deemed socially acceptable in modern society, team sport attracts a particularly loyal and passionate breed of supporter. The word “fan” is derived from “fanatic” after all, and anyone who’s witnessed the soccer terraces erupting to celebrate a last-minute goal on a Saturday afternoon would be hard-pressed to disagree.

Holders of fan tokens tend to be millennial, digitally native, and already familiar with cryptocurrency. They’re comfortable with using neobanks, trading stocks on Robinhood, and watching or participating in esports. To such individuals, a fan token is merely another way to demonstrate affinity for their club and to earn a few rewards into the bargain.

What’s a Fan Token For?

The target market for fan tokens is easy enough to determine. But what about the utility that the tokens themselves supply? This naturally varies from club to club, but an examination of the use cases offered by various teams provides an idea. The $SPURS token for example will give fans access to an engagement and rewards ecosystem that includes polls, predictors, quizzes and competitions, administered through the Socios.com app.

This is similar to the use cases that issuers of utility tokens for lifestyle, retail, travel, and hospitality apps have been trialling, with mixed results. As an incentivization mechanism, it appears that sports fans are more enthusiastic than shoppers, and thus more willing to purchase anything bearing their club’s branding.

Despite the modest capitalization of the fan token market, it has the potential to serve as a Trojan horse for greater cryptocurrency adoption. Through normalizing the use of tokens in everyday life, even for something as mundane as voting for Man of the Match or choosing which songs are played at half-time, fan tokens can put distance between crypto utility and crypto speculation. Clubs must nevertheless balance promoting their respective tokens with not being seen to encourage investment in them. Fans must be encouraged to use them for their purpose, not their potential, in other words.

With Manchester City, Paris St Germain, and Barcelona already onboard with fan tokens, the soccer world has latched onto their loyalty-building, brand-enhancing potential. Should other global regulators follow Brazil’s lead and deem them utility tokens first and foremost, the stage will be set for other clubs to follow their lead. In the future, every team may have a token.