A select committee proposes stricter regulations for technologies based on cryptocurrencies.
UK MPs have stated that by offering blockchain-based digital goods like support tokens and non-fungible tokens (NFTs), sports teams and federations run the risk of harming their reputation and putting fans through financial hardship.
NFTs provided clubs and athletes with a new revenue source with relatively little financial risk, according to a report from the media, culture, and sports (CMS) committee, but crypto-based products have proven to be “inherently risky” for fans.
Although NFTs are frequently sold as collector digital goods, many are tacitly presented by sellers or seen as investments by buyers. Since the market’s high in early 2022, the value and quantity of NFT sales have fallen precipitously; according to one source, 95% of them may now be worthless.
The committee also criticized fan tokens, which grant holders the ability to enjoy membership perks like discounts, voting privileges, and special events. It said that with the incorporation of additional usefulness beyond collectability, tokens for fans were failing to live up to their marketing claims of being comparable to actual club memberships.
The research also mentioned examples of dishonest and fraudulent marketing, a lack of adequate regulation, and copyright violations in the industry.
It advises the UK government, among other things, that any advertising of cryptocurrency assets explicitly convey the associated financial risks and that any future independence soccer regulator not recognize fan tokens as a legitimate metric of engagement.
According to Dame Caroline Dinenage, chairwoman of the CMS committee, “Traditional laws and regulations have failed to safeguard both creatives and customers caught up in the unpredictable new crypto environment.
“Artists run the risk of having the results of their labor stolen and promoted without their consent, and investors in a field that is already fraught with risk face further danger from dishonest and deceptive advertising. The government must ensure that all participants in the crypto chain are working diligently to uphold creators’ and consumers’ rights.
“In the world of sports, teams are promoting unstable cryptocurrency-asset schemes to extort more money from devoted fans, frequently by making false assurances of privileges and rewards.
The market for digital currency (NFT) has likely reached its pinnacle, and more fans are now aware of these scams. However, this does not lessen the financial suffering some fans have experienced or absolve sport of its moral obligation to look for new funding sources.
Blockchain technology has the potential to enhance sport, but for that to happen, there has to be stricter regulation and a higher sense of accountability.