The Culture Media and Sport Committee warned that football clubs are putting supporters at risk of financial harm by promoting crypto assets.
The committee also warned that the emergence of non-fungible tokens (NFTs) in the world of art has led to the risk of widespread copyright infringement.
An NFT is essentially a digital asset that can be created, bought or sold, much like similar assets in the real world.
In its report NFTs and the Blockchain: the risks to sport and culture, the committee noted that while sales of NFTs peaked last year and that they may not reach the same level of popularity again, concerns remain over how traditional regulatory regimes have “been exposed” by the emerging technology.
The report calls for the Government to ensure that all those involved at each stage of the marketing of crypto assets take responsibility to protect consumers.
With regards to sport, the report recommends that the use of fan tokens in football do not count as an acceptable measure of engagement in the forthcoming regulation of the game. The committee highlights the price volatility of such tokens and reservations from fan groups.
Cryptoassets ‘carry real risk of financial harm’
NFTs are becoming increasingly popular within professional sport because they offer a new revenue stream for professional athletes, clubs, international teams and leagues at little cost to them. The report states that despite having little to no financial risk for clubs, NFTs have proven to be inherently risky for fans who invest in them.
Distinct from generic NFTs, are utility tokens, which in a sporting context are called “fan tokens”. They theoretically give holders access to certain privileges and membership perks such as voting on club decisions, rewards, merchandise designs and unique experiences, and thus have more tangible and inherent value.
But the committee heard criticisms that they are not delivering on promises of fan engagement and are being marketed as equivalent to other legitimate club memberships.
Dame Caroline Dinenage MP, chair of the CMS committee, said: “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. Fan token schemes must not be used as a substitute for meaningful engagement with supporters.”
The report concluded that the unique relationship between football clubs and fans means that “fan speculation on sport-based cryptoassets carries a real risk of financial harm to fans and reputational harm to clubs”. It added that “we recommend that any measurement of fan engagement in sports, including in the forthcoming regulation of football, should explicitly exclude the use of fan tokens.”
