The 27th season of the Premier League kicked off earlier this month with the revelation that global investment and trading platform eToro had signed first-of-their-kind sponsorship deals with seven high-profile English Premier League clubs.
Significantly, the press release confirmed that eToro will not pay for the sponsorship rights in regular ‘fiat’ currency, but in Bitcoin – thereby requiring the teams to set up Bitcoin wallets to receive the funds.
Following public announcement of the deals, a number of clubs have released buoyant statements pledging to “learn more” about the potential that cryptocurrency and blockchain technology can have in football, and “better understand” the “true potential” offered by blockchain.
Yet aside from the novelty appeal, are these partnerships likely to lead to anything tangible?
eToro has stated that it hopes to address ticket touting, transparency issues, and provide guarantees of authenticity for merchandise. Such efforts are not being conducted alone: indeed, earlier this month news outlets reported on UEFA’s first implementation of a ticket distribution technique based on blockchain technology.
When combined with so-called smart contracts – programmable complex scenarios – the potential advantages for blockchain in this space are even further reaching. Smart contracts could be used to limit the resale price of tickets to no more than, for example, 25% of their original price. Likewise, tickets could be programmed to automatically refund on the cancellation of an event. By the very nature of blockchain as a distributed, unforgeable ledger, such tickets would also be insusceptible to counterfeiting.
One of blockchain’s defining features is that once data is stored, it cannot be altered: the fact that the transactions are immutable brings with it a host of benefits. On the other hand, the fact that data on the ledger is immutable could equally cause issues if any data or metadata being stored to complete, for example, a ticket distribution transaction were not to be encrypted, particularly if such data were sufficient to identify an individual’s personal details. This is especially relevant following adoption of the GDPR in May this year, which has made businesses and consumers alike more mindful than ever before of data and privacy matters. In that context, secure, untraceable, transactions are now a “USP” for some platforms.
By nature of blockchain ‘nodes’ being capable of being located anywhere in the world, jurisdictional issues will also need to be considered carefully. For example, which country’s laws would govern the purchase of a UK Premier League football ticket on the blockchain for a purchaser based in China, if the transaction was processed via a blockchain node in Switzerland? An exclusive governing law and jurisdiction provision may be required to provide certainty as to both the selected legal system under which each transaction is to be governed, and the selected forum in which disputes are to be resolved. Following Brexit on 29 March 2019, this is likely to be even more critical.
Furthermore, given the ‘decentralised’ nature of blockchain (which does not allow for a central controlling authority), the allocation of risk and liability in the event of a service malfunction will need to be carefully considered and negotiated. Neither sports clubs nor their ticket vendors will be enthusiastic to take on this risk; the legal relationship between all potential transaction participants must be carefully considered in each case.
A look ahead
Blockchain transcends cryptocurrencies, and as such it would be short-sighted to pin any future prospect of industry disruption or advancement on one cryptocurrency in particular. This is especially so given the often-volatile nature of demand for individual cryptocurrencies. While in the case of the new eToro partnerships, all seven clubs have been required to set up their own Bitcoin wallets to receive sponsorship payments, the press release has been careful to remain far broader than a focus on Bitcoin alone, instead focussing on the ability of “blockchain” to bring transparency and, in eToro’s words, improve the overall experience of everyone who loves the “beautiful game”.
Looking further ahead, the investment platform has put forward a belief that digital currencies could ultimately replace fiat currency when settling payments in the multi-billion pound player transfer industry. Whether such an approach could prove to be attractive to sports clubs in future, and whether blockchain technology could ultimately become the predominant method of ticket distribution will rest heavily on the global success (or lack of) digital currencies across other sectors, together with regulators’ approaches to digital currencies, over the next few years – which could either facilitate or suffocate widespread adoption.
Please contact Matthew Fox or Ronnie Preiskel with any queries.