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Tokenizing Future Earnings of Athletes

There has been a lot of buzz about a Brooklyn Nets player (Spencer Dinwiddie) issuing a token that’s backed by a portion of his future earnings.

This general idea isn’t new.  For example, David Bowie issued ‘Bowie Bonds’ backed by his recording royalties in 1997.  Securitizing income streams into marketable securities, such as what Mr. Dinwiddie proposes, is a well-accepted financial transformation process. 

 With that being said, rather than following the David Bowie route in issuing a note, Mr. Dinwidde is issuing a crypto token with each transaction tracked on a blockchain. This would be a novel concept and drive the creation of a new class of investment products whose performance is independent of traditional financial markets.

Why is Mr. Dinwiddie interested in using a blockchain token rather than a traditional securitization structure? For many reasons.  Blockchain technology makes such transactions more efficient, reduces transaction costs, enhances trust, and allows for the establishment of a platform / marketplace that will benefit players, fans, and investors. The technology can also function as a system for distributing rewards, such as tickets, autographs, merchandise, and meet-ups.

Will the tokenization of future earnings of athletes become a thing?   This may be the start of a trend that other athletes follow — one that blends the passions of sports, the financial innovation of blockchain, and the financial benefits and returns of securitizations.  As a former athlete, crypto practitioner, and tax lawyer, I look forward to seeing how this plays out.

 

About the author: Roger M. Brown is Head of Tax & Regulatory Affairs for Lukka, Inc. His 27 years of experience has been spent as a tax attorney in the IRS national office, adjunct professor of taxation at Georgetown University Law Center, and partner in major law and accounting firms.