The boss of the biggest sports cryptocurrency trading platform has championed a business model that has generated millions of dollars in new revenue for soccer clubs and sports leagues, but criticized it for incentivizing fans to opaque and high-risk investments.
Alex Dreyfus, chief executive of socios.com, told Sky News that the crypto-based “fan tokens” his company is marketing on behalf of five Premier League teams offer a new form of digital engagement for supporters of the whole world.
Socios claims supporters spent $300 million last year on fan tokens issued by 120 clubs in the UK, Europe and the Americas last year, including Arsenal and Manchester City, PSG and International.
Mr Dreyfus said the tokens, which can only be purchased with the Chiliz cryptocurrency and provide the right to vote in polls and club competitions, are analogous to a membership program, with trading being a secondary concern for most supporters.
“What you’re buying is a sort of membership scheme, you pay £5 or £10 for a lifetime token, it’s actually like a membership scheme, but a bit more modern, a bit more digital,” did he declare.
“The value that is provided is not financial and never will be, the value is about the experience and the relationship between me, the fan and the club.
“We believe that 99% of sports fans are not in a stadium, and therefore clubs must offer more and more digital tools to these fans.”
Mr. Dreyfus said he would support tighter regulation of the crypto market.
“In Spain we are registered with the Bank of Spain, in Switzerland we are also registered, there are many countries where we are subject to a regulatory framework,” he said.
“In the UK, unfortunately, there are no regulations, so hopefully that will change in the next few months.”
His comments come as the Financial Conduct Authority (FCA) launches a crackdown on the marketing of cryptocurrencies to tackle the “hype and competition” that it says is pushing young people into complex digital products they don’t. not always understand.
Sarah Pritchard, head of markets at FCA, told Sky News: “We are seeing particularly among young people that there is a big mismatch between levels of understanding and the risk that is being posed.
“That’s our ‘Investsmart’ campaign slogan, we said we don’t want people getting played. We’re saying pause, do your research and don’t believe the hype.
“There are complexities [with fan tokens] and we want people to know the risks they face.
“As to whether there are more risks with football than other advertisements that other people might see on social media or elsewhere, I don’t know the answer.”
Mr Dreyfus has denied that fans are misinformed about his product and points to disclaimers that appear when trading on the socios app.
“It’s insulting to the fans to say they don’t know what they’re doing,” he said.
“They know what they’re buying. They know they’re buying a fun experience. They know they can trade, but that’s not the main attraction.
“It’s not fair to tell people, the million and a half users we have now or the millions we’re going to have in the next few years, to say they don’t deserve to have a sale, or to be part of a community.
“What we’re doing is just a loyalty program that’s a little more 2.0 or 3.0. It’s just a new way to engage.”
The risks inherent in this emerging market were illustrated this week with confirmation that rival crypto sports platform Iqoniq, which had deals with Spain’s La Liga and Formula 1 team McLaren, has gone into liquidation, leaving the tokens worthless.
Football clubs have nonetheless rushed to tap into a new revenue stream that appears to have created enormous value seemingly out of thin air and a way to monetize fans around the world.
The value of fan tokens ostensibly stems from giving its owner a say in club matters, often trivial such as which song will be played at half-time or which player will manage the club’s Instagram account during a day.
They are also creating a bespoke club cryptocurrency, however, whose value, according to Socios, is determined by supply and demand and fan sentiment.
With clubs holding the balance of tokens and deciding when to put them on sale, analysis has shown that the main driver of price fluctuations is not club form or fan engagement, but the coin market. broader and highly volatile cryptography.
Arsenal have sold $5 million worth of fan tokens since the product launched last year, but the value is now less than half that of launch, and last year the club was censored by the Advertising Standards Authority for marketing material that minimized the risks of crypto investing.
Tim Payton, director of the Arsenal Supporters Trust, said fans needed more protection.
“My concern is that cryptocurrency is totally unregulated, there are no rules and yet they are being forced on football fans with a promise of commitment,” he said. .
“Before fans buy all these tokens, I think the Premier League or the government needs to do more to put in place a regulatory framework so fans don’t end up losing their money.”
An Arsenal spokesperson said: “We take our marketing responsibilities to our fans very seriously.
“We have carefully reviewed communications to fans regarding our promotions and provided information on financial risks.
“We will endeavor to comply with ASA guidance regarding future communications in this rapidly evolving area, but we seek an independent review of the ASA’s decision to clarify the ASA’s current position.”
Fan tokens are one of many new sources of digital revenue that sports brands are exploring as they seek digital engagement.
Another are NFTs (non-fungible tokens) or digital collectables, analogous to cigarette cards or Panini stickers for the smartphone era.
The Premier League is expected to look into concerns raised by supporter groups that clubs are effectively selling supporter representation through supporter tokens which they should be offering consistently.
The league itself is considering producing its own NFTs, but no decision has been made yet.