The Collins Dictionary word of the Year for 2021 was NFT (Non-Fungible Token), defined as “a unique digital certificate, registered in a blockchain, that is used to record ownership of an asset such as an artwork or a collectible.” NFTs can be used for art, videos, and virtual avatars and are becoming increasingly common within the sports world.
What Is the Current and Upcoming Regulation?
The UK’s Financial Conduct Authority (FCA) does not currently regulate NFTs, stating: “The FCA has not been given regulatory oversight over direct investments in cryptoassets and NFTs. There are no consumer protections for those who buy any crypto assets and NFTs, and they are not FSCS protected. As a result, if you buy cryptoassets you should be prepared to lose all the money you invest.”
The UK Treasury is currently undertaking a consultation looking to regulate crypto asset activities (for example, payment activities, exchange activities, and investment and risk management activities) rather than, at this stage, regulating the assets themselves.
Alongside an increased regulatory focus on NFT activity, the sports world is also preparing for anticipated changes to the 2005 Gambling Act. Premier League clubs announced, in April 2023, a voluntary agreement to remove gambling sponsors from the front of football shirts by the end of the 2025-26 season. Eight Premier League teams currently have gambling sponsors on the front of their shirts and the removal of these will lead them to seek out new sponsors. While this voluntary agreement removes the front of shirt sponsorship, Premier League clubs will still be able to have gambling brands on shirt sleeves and stadium LED advertising.
In light of this evolving environment, this article analyses current crypto and NFT involvement in the Premier League and whether the Premier League and its Member Clubs are doing enough to protect fans’ interests.
The Premier League and Its New Crypto Partners
This season, 18 of the 20 Premier League teams have a crypto official partner, following a rise in crypto sponsorship. For example, Tezos is currently the sponsor of Manchester United’s training kit. Some clubs have encountered difficulties with their choice of crypto partner, highlighting the need for due diligence before entering into an agreement: Manchester City suspended a partnership with cryptocurrency start-up 3Key, as it was reported that there was no visible digital footprint of 3Key executives and the company’s website lacked such basic information as contact information, registered office, and company number.
While the global NFT market boomed between July 2021 and May 2022, with average monthly sales of $3.9 billion, sales of the tokens dropped on average 80% between June 2022 and March 2023. Despite this decline, in January 2023 the Premier League entered a four-year partnership worth around £120 million with Sorare, a fantasy sport game that offers NFTs in the form of authorized Premier League digital player cards that can be bought, sold, and traded. The Premier League already offers its own popular free-to-play fantasy football game which has over 11 million players.
The NFT games, similar to FIFA loot boxes, promote a “pay to win” mentality since players spend money to improve their teams and compete against others online. In June 2020, the UK Department for Digital, Culture, Media, and Sport (DCMS) launched a call for evidence in light of concerns regarding the potential for loot boxes to cause harm. The government declined to amend or extend the scope of gambling regulation to cover loot boxes, noting that such amendments would require “substantial changes to the gambling tax system [and] would dramatically increase the scope of costs of running the Gambling Commission.” By contrast, in Europe, following a 2018 ban in Belgium, an Austrian court recently ruled that loot boxes should be banned as they violate the nation’s gambling laws.
Sorare, the company behind the Premier League NFT game, was banned by the Swiss gambling regulator in 2021 on the basis that games of chance or gambling are prohibited in Switzerland. In October 2021, the UK Gambling Commission stated that Sorare is not licensed by the Gambling Commission and that they were looking to assess whether Sorare would require an operating license or is exempt from the gambling regulation; however, there have been no further announcements in this regard.
Fan Tokens and the Market Decline
Our analysis has identified 67 football Fan Tokens across the world, including 11 in Turkey, 10 in Brazil, nine in Italy, six in England, and six offered by international teams. The six English teams, all in the Premier League, have partnered with Socios/Chiliz to offer Fan Tokens. Fan Tokens are finite digital assets which offer holders the chance to vote on team-related decisions. These votes tend to relate to minor matters such as picking the song to be played in the stadium, what message should be on the captain’s armband, or the design of the corner flag.
To purchase a Socios Fan Token, buyers must first purchase the Chiliz cryptocurrency, which means that Socios Fan Token holders are vulnerable to movements in the cryptocurrency as well as the Fan Token. The cryptocurrency market is volatile, for example, the value of the Chiliz cryptocurrency dropped 56% from May 2021 to March 2023.
There has only been an 15% uptake of Fan Tokens for five of the six Premier League clubs (current supply data is not available for Crystal Palace), and only 22% for all 47 teams analyzed where supply data is available. West Ham fans encouraged their club to terminate its relationship with Socios, with no tokens sold, arguing that the club were attempting to monetize supporter engagement when it should be free of charge.
Notably, while Socios has partnered with American sports teams, they have not launched any Fan Tokens in the United States due to concerns raised by the U.S. Securities and Exchange Commission (SEC) regarding cryptocurrencies. A 2022 Financial Times article noted that, according to an SEC commissioner, “U.S. regulators have kept digital art creators and investors in the dark about which non-fungible tokens (NFTs) could qualify as securities.” For U.S. sports teams, the Socios partnership provides clubs and fans with an engagement platform that is not reliant on Fan Tokens.
Our analysis of the 67 Fan Tokens shows that the price of tokens has, on average, dropped by 54% during the period April 2020 to March 2023, with only five Fan Tokens seeing a price increase. Of the 67 Fan Tokens, 54 are provided by Socios, nine by Bitci, and four by Binance. If a fan had invested £100 into all 67 Fan Tokens, their portfolio would be down 57%, having been at a loss since November 2021, as shown in the graph below:
The six Premier League teams have seen the Fan Token price drop by 71% on average during the period from May 2021 (Manchester City), October 2021 (Arsenal, Aston Villa and Everton), November 2021 (Leeds), and October 2022 (Crystal Palace) to March 2023, with the decline in the fan tokens shown in the graphs below:
Arsenal’s Fan Token has dropped 39% from October 2021 to March 2023, despite having seen growth at the beginning of 2023. Aston Villa’s Fan Token dropped 84% from October 2021, Crystal Palace 55% from October 2022, Everton 84% from October 2021, and Leeds 84% from November 2021. Manchester City’s Fan Token price dropped 77%, from £16.24 to £3.67, during the period May 2021 to March 2023.
Those purchasing Fan Tokens may be hoping for the value to increase. While newsworthy events, such as title pushes or big-name signings, may drive up the value of a team’s Fan Token, these increases in value don’t seem to last.
For example, when the rumors surfaced in 2021 that Lionel Messi would be leaving Barcelona to join PSG, the team’s Fan Token price replicated the fans’ excitement, rising in price rise from £16.17 at the beginning of August 2021 to £36.26 on 10 August 2021, the day that Messi signed for PSG. Just eight days later the value of PSG’s Fan Token dropped to £23.69. A similar spike in value occurred with Argentina’s recent World Cup win. The team’s Fan Token price rose from £1.46 in August 2022, prior to the tournament starting, to £5.06 the day they were crowned champions; before falling to £1.23 just 12 days later.
Accordingly, consumers should be aware that, historically, the price of a Fan Token is volatile and subject to significant movement, and price increases may not last long.
Failure to Highlight Crypto Risks Associated with Fan Tokens
The Arsenal Supporters’ Trust has highlighted its concerns related to Fan Tokens, stating that none of the marketing addressed the fact that the tokens are cryptocurrency. The Leeds United Supporters’ Trust also raised a concern that non-fans can buy and sell Fan Tokens and may be profiting from teams’ successes and that fans looking for engagement will have to enter a crypto market of which they may have little understanding.
Indeed, Arsenal saw its Fan Token advertisements banned by the Advertising Standards Authority for trivializing investments in cryptoassets, as they omitted appropriate risk warnings and took advantage of consumers’ inexperience by not making it clear that capital gains taxes could be due on cryptoasset profits.
Licensing Ending and Token Collapse
Fans should heed the FCA’s warning that they should be prepared to lose all the money invested since recent collapses have left fans out of pocket. For example, IQONIQ went into liquidation in 2022 and left fans out of pocket with tokens that became virtually worthless.
One of the first NFT games, F1 Delta Time, shut in 2022 following the game’s developer being unable to renew its F1 license, leaving fans’ tokens virtually worthless. Formula 1 has since announced a sponsorship deal with Crypto.com.
The Arsenal Fan Token website currently states: “We are developing our plans on what alternative engagement opportunities the Club will provide to token holders as and when our partnership with Socios comes to an end.” Arsenal may well be considering a better way of engaging with fans that appeals to a wider audience, but it is likely that the current Fan Token holders will be left out of pocket when the licensing ceases.
Item one in the Premier League Owners’ Charter states: “We understand the vital role of our fans and we commit to listening to their views.” The Premier League and its Member Clubs are pushing through with Fan Tokens at a time when the clubs’ fan groups are highlighting concerns and the NFT market is in decline. As highlighted by fan groups, there appears to be an issue with the lack of education around the benefits and risks of purchasing cryptocurrency; from example, how many Fan Token holders realize that capital gains taxes may be payable on profits?
With the lack of FSCS protection, substantial price movements, and exposure to cryptocurrency risk, these Fan Tokens appear to be more suited to sophisticated investors rather than a product to be marketed to fans looking for club engagement.
Fans need to be aware that these partnerships are not for perpetuity and that when they end fans may be left out of pocket. Fans contribute huge sums of money into the sport through match attendance and purchase of official merchandise and TV packages. Clubs, and leagues, should assess the most appropriate fan engagement platform; with official fan supporter trusts pushing back on NFTs, it may be more appropriate to follow the American model and find alternate forms of engagement.
 David Shariatmadari, “Get Your Crypto at the Ready: NFTs Are Big in 2021,” Collins Language Lovers Blog, 24 November 2021, https://blog.collinsdictionary.com/language-lovers/get-your-crypto-at-the-ready-nfts-are-big-in-2021/.
 “FCA Reminds Consumers of the Risks of Investing In Cryptoassets,” Financial Conduct Authority, 11 May 2022, https://www.fca.org.uk/news/statements/fca-reminds-consumers-risks-investing-cryptoassets.
 “Manchester City Suspend Partnership with Cryptocurrency Start-up 3Key,” The Guardian, 19 November 2021, https://www.theguardian.com/football/2021/nov/19/manchester-city-suspend-partnership-with-cryptocurrency-start-up-3key.
 “Consultation Outcome: Government Response to the Call for Evidence on Loot Boxes in Video Games,” Department for Digital, Culture, Media, and Sport, 18 July 2022, https://www.gov.uk/government/consultations/loot-boxes-in-video-games-call-for-evidence/outcome/government-response-to-the-call-for-evidence-on-loot-boxes-in-video-games.
 “SEC Must Clarify Which NFTs Will Be Regulated, Says Commissioner,” Financial Times, 17 October 2022, https://www.ft.com/content/e8df6ea4-e9fb-4058-9a36-cef9c12f4726.
 “Fans Face Big Cryptocurrency Losses After Platform Goes into Liquidation,” The Times, 26 January 2022, https://www.thetimes.co.uk/article/fans-face-big-cryptocurrency-losses-after-platform-goes-into-liquidation-czxpcwd60.
 “$AFC Fan Token: Everything You Need to Know,” Arsenal Football Club Website, 6 August 2021, https://www.arsenal.com/news/afc-fan-token-everything-you-need-know.
 Premier League, Handbook: Season 2022/23 (London: The Football Association Premier League Limited, 2022), PL_Handbook_2022-23_DIGITAL_13.12.pdf.