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How football jumped on the crypto hype

The value of fan tokens has little to do with performance on the pitch

Football clubs around the world are desperate for cash. The pandemic has forced grounds to close, competitions to be cancelled and broadcasting fees to decline. That might explain the appeal of Socios, a crypto firm, which has signed partnership deals with around 60 football teams. The company produces “fan tokens” and sells them to supporters, sharing the proceeds with the clubs. Holding tokens is supposed to bring people closer to their teams by giving them a chance to vote on, for example, the music that is played in the stadium or the name of new training facilities. Paris Saint-Germain fans can buy one of 3m recently released tokens and have their say on such crucial matters for the equivalent of around $14 per token. Each gives its owner the right to take part in an unlimited number of polls; those with more tokens have greater influence.

Fan tokens cannot be bought with fiat currencies, such as dollars or pounds. Instead, supporters must convert their cash into Chiliz, a cryptocurrency also run by Socios. Although the advertised sale price of the tokens is not affected by the value of Chiliz, as with most cryptocurrencies, Chiliz’s value can fluctuate wildly: for example, over the past year a single coin has been worth as much as 77 cents and as little as 17. Some shifts in the value of fan tokens appear to be linked to teams’ fortunes. The value of Manchester City tokens rose by 40% over three days in the summer of 2021 when it seemed the club was going to sign Cristiano Ronaldo, a Portuguese star player, before immediately dropping when Mr Ronaldo instead joined Manchester United. But the vast majority of the time, performance on the pitch has little to do with token values. Manchester City are on track to win their fourth English Premier League title in five years. But since the start of the season in early August last year, the club’s tokens are down by more than 50%.

Socios claims there is no correlation between the performance of Chiliz and the movements of fan tokens—although over the past fortnight both Chiliz and fan tokens have performed poorly. Moreover, the vast majority of Chiliz trades have nothing to do with fan tokens. They are carried out by other customers with traditional currencies, notably the dollar, euro and Turkish lira, and with other cryptocurrencies, such as Bitcoin and Tether. On a typical day in January, trades involving all of Socios’s fan tokens represented just 9% of the total volume of Chiliz movements. Because fans have to use Chiliz to buy or sell tokens, the value of the cryptocurrency inevitably affects that of their tokens.

Alexandre Dreyfus, Socios’s CEO, says tokens exist to boost fans’ engagement with clubs, not to make them money. “Fan tokens are tradable in non-meaningful ways on Socios.com, but that's not what we are promoting and it is not what the clubs are promoting,” he says. But Britain’s Advertising Standards Agency ruled in December 2021 that an advert by Arsenal football club, in which players encouraged fans to buy tokens, breached its rules because it did not adequately explain that the tokens were crypto assets. The Football Supporters Association, a British fan body, has come out against any such form of “consultation with supporters that requires the payment of a fee to participate” (Socios.com says that season ticket holders are entitled to a free fan token).

Clubs will face mounting pressure to demonstrate responsibility to their fans, says Martin Calladine, author of “The Ugly Game” and an expert on the links between football and cryptocurrencies. Many fans, Mr Calladine adds, “have bought into these tokens without understanding that speculators, rather than football scores, will determine the future value of their holdings.” Demonstrating allegiance through tokens is more like placing a bet than buying a shirt.

Editor’s note (February 2nd 2022): This story has been revised since its first publication on on January 21st. The original chart and text erroneously said that Manchester City tokens had fallen in value since launch. This has been corrected.

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