It’s hard to be shocked if you’ve spent the past 18 months covering football’s deepening ties with the world of cryptocurrency and non-fungible tokens (NFTs).
But nothing prepares you for sitting in the hallowed halls of the Palace of Westminster listening to a member of parliament talk about John Terry’s Ape Kids Football Club scheme.
“Those were cartoon monkeys being sold initially for an average price of $665 (£580) — that was the early peak,” explained Aaron Bell, MP for Newcastle-under-Lyne, in a debate on November 8. “They were literally cartoon images of monkeys.
“They are all slightly different, and buyers allegedly own their particular one, but, of course, anyone can just take a screenshot and claim that they own it too.”
These were images of monkeys in the form of NFTs, which to their advocates are the modern-day version of collectibles such as football cards and sporting memorabilia, and to their detractors are a financially speculative grift that transfers cash from gullible sports fans to wealthy investors.
The Athletic revealed how the Ape Kids scheme crashed, losing virtually all its value and bringing financial losses for those who bought the NFTs at the peak of a bubble that is now crashing spectacularly.
Though John Terry’s Ape Kids Football Club is the most absurd example of blockchain technology in football, you do not need to look hard for other examples of “digital assets” that have also completely tanked.
Bell’s speech in parliament outlined four interlinked problems.
First, the “widespread and often misleading promotion of crypto” that helped make it go mainstream while “minimising the risks involved in investing”.
Cryptocurrency companies like partnering with athletes and sports clubs because it is seen as the cheapest way of reaching young men, who form the bulk of buyers.
Of last season’s 20 Premier League clubs, all but one — Brighton & Hove Albion — have at least one cryptocurrency sponsor. Some have several. All cryptocurrency tokens promoted by football clubs reviewed by The Athletic have declined in value, and most have completely tanked.
🚨📉 Months of reporting in one place here. Almost every Premier League club has promoted unregulated cryptocurrencies to fans which have completely tanked in value, exposing fans to big losses. A club-by-club run down.https://t.co/n12erg47b2
— Joey D’Urso (@josephmdurso) June 28, 2022
The most notable is Socios, whose fan tokens are partnered with six Premier League clubs and countless others in Europe and further afield. The cryptocurrency tokens offer votes and polls on club matters, and can also be traded as a speculative digital asset.
The company says the tokens promote “fan engagement” and Socios has repeatedly argued that its tokens are not sold for financial investment.
Does fan engagement, though, really need cryptocurrency, blockchain technology and non-fungible tokens? Many would argue not.
The second theme in Bell’s speech was how the “unregulated nature of crypto” has left fans with little or no recourse if the scheme “collapses or is subject to fraud”.
If you lose money on crypto schemes there is essentially nobody to complain to. The Financial Conduct Authority (FCA) in the UK is taking an increased interest in cryptocurrencies but compared to conventional financial investments, there are few rules and little recourse if something goes wrong.
Bell’s third point was the “low quality of due diligence done by many football clubs”, with some teams signing deals that collapsed almost immediately. One recent example is Manchester City’s partnership with cryptocurrency firm 3Key, an institution that literally didn’t exist.
Bell also highlighted how clubs have “monetised fan engagement and replaced real consultation with deeply flawed pay-to-have-your-say models” through the use of fan tokens.
“Tellingly, when the decision is really important, clubs have recognised that a vote via NFT is not appropriate after all,” he said.
Bell used the example of Aston Villa — who have a Socios fan token that has lost 85 per cent of its peak value — and recently consulted fans over changing the club badge. The vote was for season ticket holders and members, not crypto token owners.
“That eminently sensible decision gives the lie to the idea that the tokens are primarily about engagement rather than speculation,” added Bell.
This year, the Advertising Standards Authority upheld a ruling against Arsenal for its promotion of Socios fan tokens in an advert. It found that the club “trivialised investment in crypto assets and took advantage of consumers’ inexperience or credulity”. Arsenal said they “carefully considered the communications to supporters regarding our promotions and provided information regarding financial risks”.
After Bell’s speech, other MPs chimed in, a rare example of politicians from rival parties largely agreeing with each other.
Jeff Smith, MP for Manchester Withington, called football’s involvement in cryptocurrencies a “worrying development for football fans” and called for more regulation.
It was up to the sports minister Stuart Andrew to respond.
He mentioned the government’s ongoing work into football regulation — a fan-led review into football governance authored by Conservative MP Tracey Crouch has been sitting on the shelf for months — that could incorporate cryptocurrency provisions.
But Andrew also said there is “a hugely positive potential for cryptoassets in a fan market” and that “fan tokens have the functionality of making fans feel more immediately involved in their clubs”.
The other regulatory avenue for clamping down on crypto is via the FCA, which has beefed up its regulation of cryptocurrency in recent months, though its critics argue it has not gone far enough to protect fans.
“The FCA has not been given regulatory oversight over direct investments in cryptoassets and NFTs,” the body said earlier this year. “There are no consumer protections for those who buy any cryptoassets and NFTs. As a result, if you buy cryptoassets you should be prepared to lose all the money you invest.”
It is encouraging that British politicians are taking an interest in these issues. A government minister has gone on the record to say it is being taken seriously. It may also be incorporated into legislation soon, by adding consumer protections into laws governing football and financial rules around cryptocurrency.
For now, though, there is very little to protect consumers, yet football clubs and players keep taking money to promote these products to fans.
(Top photo: Ape Kids Football Club)