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Intro Notes, Plugs & Amendments 🔌🔧

My first week back at my desk and the ‘More sports crypto stories & things to put your radar’ is probably the longest it’s been since I started this newsletter.

This week brings a topic that I’ve written about before, but something that I’ve probably developed my opinions on a bit.

This week also brings me, a few speaking engagements, which I do very much enjoy doing, so thanks to everyone who’s invited me to these panels.

🔌 If you're interested in sponsoring the newsletter - feel free to reach out to me on Twitter or LinkedIn, or email me back at this address!🔌 If you would like me to come to an event and speak about Sports & Crypto / NFTs, please reach out on the above platforms.🔌 I’m speaking at Sheridan’s Sport Masterclass this week! Please say hi if you’re there :)

🔌 I’m also speaking at the Proof Of People NFT festival for art & culture on the 6th of July. If you’re there, please come and say hi!

This Week’s Deep Dive: Why DAOs DAOn't Work in Sports Right Now

Apologies for the pun. But let’s be honest, it could have been worse.

DAO stands for Decentralised Autonomous Organisation.

The reason I’m writing about this today is that there’s continued interest in the sporting world to see teams run in a decentralised way.

To give fans ownership, theoretically.

In practice, it’s not been executed well.

And I think there’s a lot of naivety to the thinking that blockchains overnight, can solve the complex formula involved in being the custodian of a sports team.

Some of it is actually predatory in that it’s dressed up as a decentralised setup that incorporates fan ownership, but is still primarily done to make the instigators of said DAO the most money.

This piece was inspired by a report written by Chain Analysis on the state of Web3, of which I’ve screenshotted this extract.

This list of notable DAOs sparked a series of thoughts for me, especially in terms of the implications for Sports, or lack thereof.

There’s a reason why the DAOs in the list above have been successful in operating the protocols or orgs that they’ve instigated.

What do they have in common?

• The contributors are digitally & crypto native

• They are governing or coordinating things that are distributed by design, inherently. AKA - A protocol like Uniswap - is decentralised. So running it in a decentralised way makes sense.

• They are coordinating capital to fund other crypto native things internally or externally.

And whilst there are some common themes across all of the DAOs in that list, that span from social clubs and charities to investment clubs and accelerators, this way of coordination is so early that there's no really one set rule back.

As Jess, instigator of Seed Club, an accelerator that runs as a DAO, puts it best: there will be many ways to do this right. 

But what is clear is that so far, when it comes to sports teams that are in existing federations and leagues, those teams being run as DAOs is very, very difficult if not impossible short term.

There are leagues that are being built ground up, and teams starting in non-professional settings that will no doubt be started or run in a decentralised manner.

And I’m curious to see how well they pan out.

But for now, in a professional environment, it’s difficult in many, many ways.

Before we discuss why let’s rewind and take a step back and explain what a DAO is.

What this boils down to is essentially:

1. Is it decentralised? - i.e. are the tokens that govern the DAO sufficiently decentralised, and are those tokens created on a sufficiently decentralised blockchain?

2. Is it Autonomous? - i.e. do smart contracts and on chain governance and management of resources and people mean that there are fewer human decisions required for the DAO to operate smoothly

3. Is it Organised? - i.e. does the DAO actually do things in an organised fashion, as, or better than, a traditional org would?

So why is this hard, almost impossible to do for a sports team?

Before I run through a thought experiment using a European football club as an example, I also want to state that there are regulatory constraints (from the governing leagues) to decentralised ownership in both the NBA and NFL, to my knowledge.

But the European football club thought experiment is pertinent because a lot of groups have tried to create ‘DAOs’ to take over football clubs and give ownership to fans via governance tokens.

There are three key areas that I want to address in this thought experiment:

1. Football club finances & commercials

2. The Fans

3. Putting the O in DAOs

1) Football Club Finances & Commercials

Football clubs are bad at making money.

Many are riddled with debt.

The commercially successful ones are owned by billionaires for the most part to hopefully sell on at a higher price at some point, or as a way to store large amounts of wealth. Of course, there are some clubs that are commercially successful and run in a more co-op model, in Germany for example.

But from a commercial standpoint football clubs are really hard organisations to run.

90%+ of the money is pointed toward the pitch, no matter how much money is brought in through sponsorship or other means.

It’s generally very difficult to turn a profit.

Having governance tokens, or tokenised equity, whichever phrase you want to use, that is given to fans to decentralise the ownership, doesn’t change this fact.

In fact, it could actually make life more difficult should a club look for bridge loans from their owners, which in this case, would be a DAO.

Now DAOs can, in a lot of ways, make money through a protocol, NFT sales, investments, tokens from incubated projects etc. - but in this case - the *thing* is the football club. So unless the DAO has another source of revenue that doesn’t water down the tokens, then it’s difficult to envision how this is more commercially viable.

Now, FWB (Friends With Benefits), a social community, got investment from A16Z - one of the worlds leading venture capital firms.

You could of course have a situation where the token holders vote *for* a proposal in which a wealthy billionaire or consortium wishes to purchase 5% of the token supply.

But any way you look at it, the commercials don’t look prettier because there’s a DAO running the football club.

2) The Fans

I think DAOs can democratize ownership.

I don’t think they can do that in a sporting context currently in the mainstream.

The main reason is that this is very complex for your average fan.

If I asked my Manchester United supporting uncle in his 60s to set up a crypto wallet, to hold tokens that give him part ownership of Manchester United, that he then has to use to vote on proposals in a Discord or website about who their next CEO will be, he’d put his glasses on and ask me why his phone isn’t connecting to the Wi-Fi.

More seriously, this world is still very complex.

Crypto is fraught with security risks for people that are not technically savvy.

Even those who are, and very well protected from a security standpoint, have been hacked.

I think this will change over the next few years with both developments from the actual protocols like Ethereum, and also the wallets themselves. But right now, my uncle would crap himself if I told him the tokens he has to use to vote on Manchester United-related proposals could be lost if he ever told anyone these 12 random words.

There’s a lack of intuition but also familiarity for the average person, with the systems that crypto native people use every day.

Could this be the future? Maybe.

But right now the idea of creating governance tokens for a football club (in this thought experiment) probably actually just makes your commercial margins thinner and your operational structures more complex, without enough benefit. Even if you think about the fact that anyone globally could buy these tokens, even if they’re not a fan, it in itself creates a huge issue. The permissionless wild west that is crypto…sometimes has its cons!

The reason why NBA Top Shot took off was due to its simplicity.

It was panini sticker collecting in another medium; video.

And you could only truly verify your ownership if these videos were on a decentralised database.

It’s not totally analogous, but DAOs bringing ownership to fans is not the first solution I’d think of in this context.

3) Putting the O in DAOs

A decentralised football club running an organisation in an organised way would be incredibly difficult.

What is the sweet point of a) fans feeling like they are making a meaningful impact on the club’s future and b) fans feeling fatigued that they are asked to vote on too many proposals?

How much of a football club run in a decentralised way, would actually run better?

Probably not very much of it.

Operationally, not many DAOs are excellent.

I’m not even sure what combination of skillset would be required to create something fully functional…and that is probably the crux of the issue anyone thinking about this seriously needs to fully explore.

As mentioned before, I’ve been funded by DAOs and been in amongst them.

They’re not ready organisationally for something as big and complex as a sports team.

The Conclusion

I really do think that DAOs are cool.

I’ve been funded by them, participated in them and have seen decentralised communities create, fund and innovate in ways, levels of excellence and speed that I’ve never even come close to seeing from a traditional org in my short career.

But creating a DAO that gives meaningful ownership to fans, in a way that is easy to digest and understand, is secure, can juggle and execute complex operations, govern a football stadium, a football club’s comms and media team…and so on and so forth is very difficult.

I don’t want to say impossible, but incredibly difficult.

If anyone thinks they've cracked it, hypothetically, I’d absolutely love to chat.

DAOs are real things and are very likely to impact the governance of organisations in the future.

But that doesn’t mean they’re not being used as the latest buzz word.

More sports crypto stories & things to put your radar

• The EPL are pressing forward with their NFT plans despite a huge downturn in crypto markets.

• The Martian Premier League, MPL, have executed the first on-chain penalty shootout.

• DraftKings have dropped Conor McGregor NFTs

• The NBA have announced their own 'Metaverse’ called ‘AllWorld’. The trailer looks pretty cool!

• eBay are dropping Muhammad Ali NFTs. After acquiring KnownOrigin - it seems eBay are really serious about cracking the NFT market.

• Footium are the new sponsors of Leyton Orient’s shorts! 

• An article here by Joey D’Urso on just how badly EPL teams have managed their crypto partnerships and offerings. The lack of due diligence is quite worrying.

• Sorare have partnered with the one and only Kylian Mbappe. He is a now Sorare ambassador, investor and social impact partner. Sorare were built in a bear market, and it looks likely they’ll withstand one as well.

• WAGMI United, Owners of Crawley Town, have partnered with Adidas to create a new NFT collection.

• WAGMI’s following tweet though saw plenty of backlash from football fans. 

Great reads, great tweeting and more general ‘stuff’ that could impact you

• Facebook are testing Ethereum and Polygon NFTs on their platform. 

• As the bear market comes and law enforcement has time to catch up…expect far more of these. 

Thanks!

Thanks for reading the latest edition of the Sporting Crypto newsletter. I’m really happy to see so many people enjoying it and sharing it with their networks. If you enjoyed this, please tell your friends who might be interested - and share it on social :)This newsletter is for informational purposes only and is not financial or business advice. These are my thoughts & opinions and do not represent the opinions of any other business or entity.