‘Nothin’ but net gain?: NBA Star seeks to turn contract into a digital investment vehicle.

As a guard for the NBA’s Brooklyn Nets, Spencer Dinwiddie is used to making giant leaps. However, as originally reported by The Athletic, Dinwiddie’s plans to tokenise part of his $34.36 million contract represents a huge jump forward for blockchain adoption — and one which may revolutionise sport as we know it.

By converting his contract into a digital investment vehicle, self-confessed “tech guy with a jumper” Dinwiddie anticipates being able to receive a large lump-sum up front — which he can then invest immediately.

Investors can expect the digital bond to pay principal back, with interest — which would come from the money actually paid by the Nets.

As well as the potential monetary gain, some token holders will also benefit from what the Nets guard calls “the Spencer Dinwiddie experience” . Currently, this appears to include an invitation to the NBA all-star game — should Dinwiddie make the cut.

Jumping through hoops

Dinwiddie announced in a 10th January Twitter video, that his ‘SD8’ tokens would be made available to buy on 13th January. Sold through the DreamFanShares.com platform, the tokens will be backed by Dinwiddie’s actual contract and would be launched on the Ethereum blockchain.

The New York Times reports that the initial offering would be open to accredited investors only, and would include 90 tokens with a minimum investment of $150,000.

At the time of going to press though, the anticipated launch has not yet taken place. Given the turmoil many blockchain projects have faced attempting to launch regulated digital securities, it comes as somewhat of a surprise that it seems to be the NBA’s regulatory hoops that are holding up Dinwiddie, rather than governmental ones.

As Bloomberg reported the NBA is currently reviewing a modified version of Dinwiddie’s proposals to “determine whether the updated idea is permissible under league rules.” For his part, Dinwiddie has already told Bloomberg he “does not wish to go to war with the Association” — so it’s fair to say that the actual launch might not yet be the ‘slam dunk’ it had originally appeared to be.

Off the court?

In 2013, NFL running back Arian Foster mounted a failed attempt to list himself as a private stock under a company called Fantex Inc. This is the closest a sports star has ever come to turning their future earnings into an investment vehicle. Not only would Dinwiddie become the first to successfully do so — should his SD8 tokens launch — but he will also of course be the first to do so using blockchain technology.

The main risks to investors though, appear to come from real-world issues, rather than digital ones. For example, what would happen should Dinwiddie suffer a career-ending injury, or breach conduct-related stipulations in his contract that would allow the Nets to cancel it?

The move also has potential to cause seismic repercussions in player-club relations across not just the NBA, but all sports.

While one could argue that many sports stars have chosen to move to teams for financial reasons rather than their chances of winning, would those holding tokenised contracts feel obligated to chase the cash rather than sporting glory, in order to provide value to their investors?

Would team owners invested in a player’s tokenised contract be incentivised to pay that player more than others?

Undoubtedly though, there are many potential positives. Bringing players and fans (albeit ones with a spare $150,000 burning a hole in their pocket) closer together for one. It also provides greater liquidity for players with incentive-stacked or multi-year contracts.

For blockchain technology as a whole, this could also be a watershed moment. If nothing else, Dinwiddie’s move will make an interesting test-case in how tokenised securities hold up to promises of enhanced liquidity and settlement — and how regulatory and custody issues are dealt with when it comes to high-profile cases. With the eyes of the world watching, if the experiment fares well, it would surely only be a matter of time before other highly-paid, high-profile figures seek to unlock instant access to the equity in their contracts using blockchain technology.

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