We recently spoke to Martin Calladine, author of The Ugly Game and Fit and Proper People, about the emerging relationship between football and cryptocurrencies. The interview was conducted before UEFA announced its partnership with Socios.

FSE: To begin with, Martin, could you tell us why you’ve become so interested in the connection between football and cryptocurrencies?

MC: I’ve always been interested in the financial landscape of football and how it impacts fairness on the field. Off the back of that, I encountered Socios and their idea that you could be “more than a fan” by owning their fan tokens. This, in turn, opened me up to the world of cryptocurrencies and their ongoing incursions into football. I’ve been trying to educate myself, and more recently others, about the potential dangers cryptocurrencies pose to our game.

FSE: For those who are somewhat bewildered by this subject, could you explain what a cryptocurrency is, what a fan token is, and how they’re related?

MC: Cryptocurrencies are often described as digital alternatives to fiat currencies (i.e., currencies backed by governments, such as the euro or pound sterling). They’re not controlled by any principal authority such as a government or central bank; rather, they’re issued and managed on a decentralised basis through computer networks. The most famous cryptocurrency is Bitcoin, but there are thousands of others.

Anyone who has a passing familiarity with Bitcoin will know that its value rises and falls dramatically and that it’s not the easiest currency with which to buy everyday items. So, the idea that cryptocurrencies are realistic alternatives to established currencies has begun to ebb away. What’s left, then, is a speculative investment asset. That’s why you hear certain people saying that they’ve made hundreds of thousands of euros by investing in crypto. It’s also why many people are so interested in it—not because they think it will fundamentally change the global economy, but because it supposedly creates opportunities to get rich quick.

Beyond cryptocurrencies, you have these things called fan tokens, and that’s where things get slightly more complicated. These are digital assets that allow holders to access a range of benefits. The headline benefit is that they allow holders to vote on club business through online polls.

The biggest and most famous of these fan token companies is Socios, which has partnerships with clubs across the world, with many in Europe, including PSG, Barcelona, Inter, AC Milan, and six Premier League clubs. There was another company called IQONIQ that went out of business in January.

At the abstract level, Socios has quite an intriguing and appealing pitch. Here’s this new technology that gives fans who feel alienated from their clubs a chance to get involved and have a say. But that’s really as far as it goes. In fact, when you examine how fan tokens work in practice, the alarm bells start ringing immediately.

“Most of the time, the polls cover ludicrously trivial matters. There was even one I saw that asked token holders to vote on which players’ wash bag they wanted to see the inside of, as if anyone would care.”

For one thing, the polls themselves are largely meaningless. The most consequential one I’ve seen is where owners of the tokens could vote on Juventus’ goal music. Most of the time, though, the polls cover ludicrously trivial matters. There was even one I saw that asked token holders to vote on which players’ wash bag they wanted to see the inside of, as if anyone would care.

So, the utility of fan tokens is questionable. Where it gets more problematic is that there’s no limit to the number of tokens people can buy and no limit to the number of clubs in which they can hold tokens. This means that anyone can vote on any club’s business, and that’s a strange way to approach fan engagement. Moreover, the more you pay, the more say you have. This undermines the core principles of membership democracy, which is based on the idea of one member, one vote, and that only those affected by decisions should be permitted to vote on them.

When you look at engagement with the polls themselves, turnout rarely surpasses 20 percent. Sometimes turnout is in the single digits. Now, if fan tokens were really a way to engage fans—and a more effective way to engage fans at that—then how could it be that only 10 percent of people who own a PSG token want to vote on these questions? It doesn’t make sense.

What clarifies everything is when you realise that the price of the tokens isn’t fixed. It fluctuates with supply and demand, and people can buy and sell the tokens on the Socios app. This is the simple truth about Socios and similar fan token companies: They’re cryptocurrency recruitment schemes disguised as fan engagement businesses. They mint tens of millions of fan tokens per club—far more than there are match-going or casual fans. You think to yourself, well, why would they do that? And the answer is that to buy fan tokens people have to buy Socios’ own cryptocurrency, which is called Chilliz.

To make sense of this, imagine that Panini said that to buy their EURO 2024 stickers people first had to buy Panini Pounds. And what are Panini Pounds? Something that the person at Panini head office is running off on the photocopier, writing Panini Pound on each piece of paper, and telling people that it has an actual and specific monetary value.

Back to Socios: They get people to buy Chilliz so those people can then buy and sell the fan tokens. Around that, they’ve created a trading game. I mean, if you just gave everybody only one token, then it would work as a straightforward membership democracy, and Socios would go out of business. But by creating a trading game around fan tokens, which requires everybody to hold Chilliz, they inflate the value of Chilliz, and that makes Socios rich. In addition, the traders who hold fan tokens—professionals looking for profit—can take advantage of unwary fans, because every cryptocurrency scheme is different.

“If fan tokens were really a way to engage fans—and a more effective way to engage fans at that—then how could it be that only 10 percent of people who own a PSG token want to vote on these questions? It doesn’t make sense.”

The system is one where football clubs are encouraging their fans to invest in a scheme that they might not properly understand so that professional traders and Socios can make money of the back of it. The fans, meanwhile, are left with these items of uncertain worth and very little use.

That’s the whole thing in a nutshell. I believe that if clubs understood that they wouldn’t get involved with fan token companies.

FSE: Why are football clubs getting involved, then?

MC: It’s a combination of ignorance and the allure of money.

A lot of clubs have huge holes in their finances, and they’re desperate for anything that might fill them. By coincidence, crypto has exploded into the mainstream, with a lot of companies seeking legitimacy in an unregulated industry that is awash with fraud and bad actors. It’s a marriage made in heaven. About 90 percent of Premier League clubs have crypto sponsorships now. Six have partnerships with Socios. I think the sponsorship deals are what you’d probably call crypto-washing. The advantage from the clubs’ perspective is that they don’t have to do much and in return they get money—Socios, for instance, is paying for Inter’s shirt rights.

That’s sponsorship. With the fan tokens, the companies will come to the clubs and say, we’ll sell these tokens on your behalf, we’ve built the app, we’ll do the marketing, all you need to do is sign on the dotted line. And then they split the proceeds of the initial token sales 50/50 with the clubs. It’s the closest thing to a one way bet you’ll find in football. It’s pure profit for the clubs.

That said, it has been apparent from the way that some Premier League clubs have marketed Socios fan tokens that they don’t understand them or are wilfully deceiving their fans. When there was opposition to Leeds United’s deal with Socios, the club put out a sort of explainer on their website which said in no uncertain terms that the tokens were not designed to be traded—fans are supposed to buy them, vote, and that’s it. Now, if you spend any time looking at Socios’ marketing it quickly becomes evident that this isn’t true because they repeatedly say that the main benefit of buying fan tokens is that they’re tradeable. The Socios app even has a trading section called ‘Marketplace’, which shows users the rise and fall of prices and identifies buying and selling tokens as its main purpose. 

Leeds obviously didn’t appreciate what they signed up for and have tried to sanitise it, misleading their fans even further. It’s clear that a lot of clubs haven’t done due diligence. The thing is, clubs aren’t making massive amounts of money from token sales—certainly not enough to balance their books. So, I hope that, given the obvious drawbacks of these crypto partnerships, they might recognise what a bad idea they are and back out of them.

FSE: What are the risks to fans of investing in fan tokens?

MC: Cryptocurrencies and fan tokens seem to be the only unregulated business that football clubs are willing to endorse to their fans. If clubs are sponsored by and promote a chocolate bar, for example, that chocolate bar will be tested and regulated by the UK Food Standards Agency or its equivalent in other countries. More to the point, consumers will be protected by the law. The same goes for cars, for banks, and everything else. There’s nothing like that for crypto.

If Socios collapses tomorrow, there’s no recourse for fan token holders. Nobody is going to help them get their money back. If Socios accidentally transferred your tokens to someone else, and for whatever reason decided they didn’t want to help you, there’s no regulator to step in. That’s what we mean when we say that crypto and fan tokens are unregulated. They’re high-risk products and it’s very easy for people to lose their investment, in addition to which they are completely at the whims of the business running the schemes.

“Cryptocurrencies and fan tokens seem to be the only unregulated business that football clubs are willing to endorse to their fans.”

We recently saw, for instance, that Socios had their contract with the Argentine FA terminated, who subsequently signed a deal with another fan token company. Socios disputes the validity of this action, and there are various ongoing legal proceedings. But the point is that, unless Socios win their case, the fan tokens cease to exist, leaving everyone who bought them out of pocket because they’re not legally recognised: If Socios goes under, the tokens vanish; if Socios’ contract comes to end with clubs or governing bodies, the tokens vanish.

On top of all this, because fan tokens are often built around a trading game, some people will recognise that there’s a possibility to make money from them. And we’ve seen coordinated efforts to misuse fan tokens to make profits at fans’ expense. You could see situations like Football Index, where people begin to perceive fan tokens as a money-making opportunity—and, of course, in any money-making opportunity, there’s also an opportunity to lose lots of money. Manchester City have won twelve league games in a row, but their tokens are worth 50 percent of what they were when that run began. The danger is that people will get involved to make money, spend more than they ought to, and then lose it. That can be disastrous for personal finances and people’s mental health.

FSE: What steps can fans and fans’ groups take, first, to educate themselves on the subject, and second, to challenge the relationship between fan token companies and their clubs?

MC: It seems to me that people can be interested in cryptocurrency and think that it has potential value and utility, while still finding it problematic in this context. One point that we all should be able to agree on is that fan tokens, if they exist, should incorporate meaningful democratic norms. So, at the very least, they should be limited to fans of the relevant clubs.

Beyond this, we must ask clubs and national associations why they’re promoting something that is completely unregulated. One message could be: Stop selling this until it’s properly regulated by European governments.

West Ham were one of the initial clubs in England to sign a fan token deal, but in the end, they never went to market. There was sufficient protest from the fanbase, leading the club to abandon the partnership. We’ve also seen Crystal Palace fans engage in banner actions. Fans at Leeds and Everton, meanwhile, put pressure on their clubs, which forced them to think about the way fan tokens are advertised and take responsibility for that.

“If you know people who are investing significant sums in fan tokens, speak to them and let them know about the risks.”

On a one-to-one basis, we have to educate ourselves and look after one another, just as we would with other potentially harmful products. If you know people who are investing significant sums in fan tokens, speak to them and let them know about the risks.

There’s other stuff that can be done, too, including reporting false advertising. Many businesses in the crypto space aren’t regulated, but most advertising authorities have the power to regulate adverts. The only major blow to fan tokens in the UK was in December, when scores of people complained to the Advertising Standards Authority (ASA) about Arsenal’s marketing of their fan tokens. The ASA ruled that the club had engaged in “misleading” and “irresponsible” advertising. As a result, all six clubs in the Premier League that sell fan tokens have changed the way they describe them to include proper risk warnings.

People should be writing to their political representatives to demand regulation, too. Governments across the world are thinking about cryptocurrency regulation and, to me, fan tokens seem like a good example where consumer protection is needed.

At the bottom of all this, there’s an unspoken idea that you can get money for nothing—easy as that. In a way, modern football is built on that idea, but we need to challenge it.

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