The value of one Bitcoin has soared to record highs over the last 45 days as institutional investors (including: Square, Mass Mutual and Ruffer Investment Company) have increasingly made larger treasury allocations to the cryptocurrency and the Federal Reserve continues to print dollars like they are going out of style. Last week, $BTC flipped Facebook by market cap, clearing $41,000 for the first time, though the price has since pulled back a bit.
Bitcoin’s rapid ascent ($BTC was priced at “just” $19,000 on Dec, 1) has brought a significant amount of mainstream media attention back to the crypto space. Given that, we thought it would be a worthwhile endeavor to explore how cryptocurrencies are likely to begin playing into the sports ecosystem, particularly after Carolina Panthers tackle Russell Okung recently announced a partnership with Strike (a mobile payments company) that will see him become the first NFL player to take a portion of their salary in Bitcoin. But conversations with a trio of crypto authorities—including Mark Cuban—suggested that digital currencies like Bitcoin and the current version of Etherium may not be ushering in a revolution in sports business. In fact, Cuban said they are unlikely to have “much of a role at all.” Cryptocurrencies have “evolved from a goal of being a currency to a store of value that is more like gold,” the Dallas Mavericks owner said. “[And] if [they are] not used as a currency, I’m not sure [of] the impact.”
Our Take: The Mavs were early adopters in the crypto space. In 2019, they became just the second NBA franchise to accept Bitcoin as a method of payment for tickets and merchandise (the Kings were first in ’14). But $BTC has been widely viewed as “digital gold,” not “digital cash” since at least the “scaling wars” of 2016/2017, when fans quit spending the tokens, which would seemingly explain why were haven’t seen a flood of teams follow the Kings’ lead.
Fans may never use $BTC to pay for items at the stadium. But that doesn’t mean the blockchain based technology won’t be used within in the sports world. Both William Foxley (CoinDesk) and Tonya Evans (professor, Penn State University–Dickinson Law) suggested it is probable additional athletes will follow Okung’s lead and invest a portion of their salaries in digital assets as a hedge against inflation. “If you have large amounts of cash, you’re kind of sitting on a melting ice cube. The dollar is breaking apart; 35% of physical dollars in circulation were printed within the last year,” Foxley explained. With so much new money being printed, it’s hard to predict what today’s big money contracts will be worth in five years. Investing in “alternative means beyond fiat is also seen as a means of taking greater control, greater financial freedom and greater opportunities—a particularly important issue for athletes,” Evans said.
One of the inefficiencies within our existing financial system is the lack of ability to move large amounts of money across the world. So it’s reasonable to suggest—as Foxley did—that the sports industry would ultimately end up using crypto much the same way that the banking system has adopted the technology. You could see owners paying million-dollar salaries in $BTC, Foxley said, “just because it is cheaper and more efficient to move a contract across the Bitcoin network than it is through intermediaries like a bank.”
It remains to be seen if there is a place for the use of non-fungible tokens (NFT) in sports. Last summer, Nets guard Spencer Dinwiddie tried—and failed—to sell a tokenized security backed by his $34 million playing contract. Just 10% of the 90 NFTs available sold (each was valued at $150K). Evans says that should not be viewed as an indication NFTs aren’t a fit within the sports world. “Non-fungible tokens can be the new fan club. They can be another means of empowering athletes to connect directly with their fans without an intermediary [and they don’t have to include an investment or some secondary market value component the way Dinwiddie did it].” To date, there have not been any particularly successful NFTs tied to U.S. sports.
Several European soccer teams use the Chiliz platform ($CHZ) for tokenizing rewards to gift shops and/or tickets to games. But Foxley is not convinced “a tokenized version of a [coupon] or ticket is better than the one the fan already has on their phone. I think there’s just a misunderstanding about blockchain technology. It’s not a cornucopia; it’s a specific use case.”
Evans disagrees. The law professor said, “The programmable nature of the tokens means that [rights holders] could add value (think: experiences) over time,” and that NFTs could help put an end to ticket scalping.
Cuban also envisions an opportunity for rights owners to sell unique digital items “that become collectibles and potentially increase in value.” On its face, it sounds ridiculous to think a digital baseball card could command significant dollars. But Evans says Crypto Kitties was the use case proposition for the creation of digital collectibles. “The whole point of it wasn’t to make people fall in love with cryptographically secured cats. It was to prove the use case for the ownership of assets that are exercised digitally”—including those owned on a fractional basis. As of March 2018 Crypto Kitties had conducted more than $40 million worth of transactions on their platform, with some cats commanding more than $200,000.
The Kitties have company in the NBA. In 2019, the Kings pioneered this field, too, offering the first physical crypto-collectibles in professional sports. And NBA Top Shot (still in Beta) has seen $8.5 million invested by collectors on the platform, including $1.3 million in peer-to-peer transactions within the last week.