Flex Chapman (no, not his real name) believes fans could do more for their favorite teams than just cheer from the stands. And he thinks one of the newest blockchain-powered trends provides the perfect tool to let them.
Chapman is one of the creators of Krause House DAO, a decentralized autonomous organization set up to one day help fans govern an NBA team. And yes, it’s named after former Chicago Bulls GM Jerry Krause.
“I think we’ve typically thought of fans as this mob,” Chapman said. “But when you look under the hood, these are really talented people that own their marketing agencies or they’re developers or entrepreneurs or general counsels… I really, really think this concept of agency and ownership and shared upside is a huge unlock for teams to tap into all that potential energy.”
While Krause House’s ultimate goal of having fans gain control of an NBA team may prove elusive, it is now one of many sports-focused DAOs showing how blockchain technology could empower enthusiasts, even as the larger crypto sector faces renewed doubt.
For example, GarageXYZ, another sports-focused DAO, is looking to power community-owned motorsports. On Sunday, it will sponsor the Indy 500 ride of Scott Dixon—who is on the pole for Sunday’s race for the fifth time in his career— while also sending nearly a dozen of its supporters to the race.
“Garage has only been around for three months, but we want to show how quickly and positively we can build relationships to create the next round of insiders in motorsports,” Garage co-founder Peter Miller said.
Several members of GarageXYZ’s Indy-bound crew were selected based on what they could give back to the group.
“It wasn’t just like, Hey, do you want to go to the Indy 500?,” Garage team member David Diaz said. “It was, What are some skills that you can bring that we can then parlay into experiences for the folks that are back home?… How do we take the skill set of all of our members to then help grow Garage as well?”
Defining DAOs can quickly devolve into cryptospecifics, but most of the groups share three key characteristics: 1. A group of financial supporters with a shared interest; 2. A pool of money, often called a treasury; and 3. Decisions to be made about how to spend that money. New York Magazine compared DAOs to “a group chat with a bank account.”
Blockchain tech plays a key role each step along the way. Many sports DAOs start by selling NFTs that represent community membership and confer power in the DAO. Krause House raised roughly $4 million in the fall by selling NFTs, while the golf-focused project LinksDAO generated $10 million this winter after announcing its intention to buy a top golf course.
NFT holders are then entitled to a number of custom tokens specific to the DAO (such as $KRAUSE). In some cases, those tokens are tied to potential DAO profits. However, citing financial regulations, many DAOs instead only supply governance tokens, giving token-holding members a say in decisions if not a financial stake in their results.
LinksDAO Inc., for instance, is a separate entity currently looking for more traditional funding as it continues its hunt for a course. The group recently signed with WME Sports to assist with its search, and to bring the upstart further into the golf world.
In the meantime, it has offered members a variety of perks, from merchandise to meetups. Ways to spend the collective cash are generally put up for votes that are held on a blockchain to verify the results.
“Our goal is to create one of the most forward thinking and impactful communities across the world in golf,” LinksDAO founder Jim Daily said. “We want people with us for the long haul.”
Chapman said Kraus House members often consider a handful of proposals each week, with plenty of them not garnering enough support. Last month though, $KRAUSE holders unanimously approved a plan to spend $500,000 on Big3 NFTs, giving them some control of one of the teams.
“The very first thing we’re gonna do is go full R&D mode and just figure out how—because it’s never been done before,” Chapman said. “How do you take 10,000 people worldwide with a variety of skill sets and actually deploy them to benefit a franchise?”
From scouting to marketing, Chapman believes the group can innovate and separate their Ball Hogs team from its Big3 competition.
While some DAOs launch with a clear goal, such as buying a golf course or basketball team, a soon-to-launch group supporting University of Michigan athletics is willing to go so far as to let its members determine the goals too.
Built on the Draftly platform, MGoDAO will sell NFT community passes in June to raise an initial treasury. Its first set of member proposals will be done in a more controlled, web 2.0 fashion to prevent bad actors (i.e. someone buying 60% of the NFTs and then voting that all the proceeds be sent to his or her wallet), with plans to decentralize over time. MGoDAO founder Reece Kurdyla said he’s hoping the group ultimately divides the money somewhat evenly between fan perks and NIL compensation for Wolverine athletes.
“DAOs are good for two things: capital formation… and community coordination around specific goals and niches,” Draftly CEO Nick DeNuzzo said. “Using these NFTs as crowdfunding tools, they’re actually able to empower regular people to have a meaningful say in how college sports is run and operated.”
Even before MGoDAO launches, Draftly is already talking to fans at other colleges about spinning up similar groups.
“Sports is leading the way in DAOs right now,” Daily said. “You have these collections of like-minded people that love one thing very much. And that one thing could be Formula 1. That one thing could be golf. That one thing could be football. Sports has a way of really having communities come together for a common goal, and that’s why DAOs in sports are kind of a natural application.”