UK regulator: ‘Any measurement of fan engagement in sports should explicitly exclude use of fan tokens’

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A U.K. regulator recommended that the U.K. Government “explicitly exclude” using fan tokens to measure fan engagement. A bipartisan parliamentary committee also warned about the risks of non-fungible tokens (NFTs), which they say enable copyright infringement in art and culture.

In its report, the House of Commons Culture, Media and Sport Committee concluded that minting an NFT from a creative work infringes the creator’s rights unless they give their express permission. Additionally, it’s almost impossible for the creator to seek recourse, limiting them to using the ‘notice-and-takedown’ procedures of NFT marketplaces.

NFT marketplaces need to do more to address the scale of copyright infringement on their platforms.

We've published our report on "NFTs and the Blockchain: risks to sport and culture".

Find out more: https://t.co/4pYE6gAngw
Read our report: https://t.co/XIj0LYlcrX@cj_dinenage pic.twitter.com/GTbtOJCM8m

— Culture, Media and Sport Committee (@CommonsCMS) October 11, 2023

Since the digital tokens gained mainstream appeal, NFTs and copyright infringement have been a common debate. While an NFT owner has exclusive rights on the blockchain, there has been widespread criticism over the ease of reproducing the tokens. Some, like Elon Musk, have dismissed NFTs, claiming they are fungible.

There have been several lawsuits on copyright infringement involving NFTs, some of which have involved major global brands like French luxury designer Hermes. However, regulators are yet to catch up and issue a legal framework for the sector.

“We recommend that the Government engages with NFT marketplaces to address the scale of infringement and enable copyright holders to enforce their rights,” the committee says. It also called for a code of conduct “that protects creators, consumers and sellers from infringing and fraudulent material sold on these platforms.”

Fan tokens come with real financial harm

The lawmakers also attacked ‘crypto’ fan tokens, which they say come with “a real risk of financial harm to fans and reputational harm to clubs.”

Fan tokens have surged in popularity in sports, with many of the world’s biggest clubs jumping aboard. The biggest football clubs in the U.K. have launched fan tokens, from Arsenal and Manchester City to Everton and Aston Villa. The latest to join the bandwagon is London-based Tottenham Hotspur, which partnered with fan token platform Socios last month.

“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 fail to materialize,” commented Dame Caroline Dinenage, the MP for Gosport who chairs the committee.

“Fan token schemes must not be used as a substitute for meaningful engagement with supporters,” she added.

In its report, the committee recommended that “any measurement of fan engagement in sports, including in the forthcoming regulation of football, should explicitly exclude the use of fan tokens.”

The football clubs have defended the fan tokens, claiming they don’t market them as speculative investments.

Tottenham, the latest to launch its token, claimed they “build on the many benefits of our existing membership scheme.”

Socios, which has partnered with over 100 clubs to release fan tokens, also dismissed the allegations.

“Fan token holders received more than 24,000 matchday tickets and over 1,000 items of merchandise last season, and continue to engage with their club in a unique new way,” the company said in a statement to the media.

“Fan Tokens offer new and complementary benefits to clubs’ traditional fan engagement beyond the boundaries of geography, and unlike NFTs (non-fungible tokens), are regulated by the FCA (Financial Conduct Authority).”

Watch A Way with Words: NFTs with Cash Flows