The emergence of non-fungible tokens (NFTs) and fan tokens in the world of professional sport has led to increased scrutiny on these “cryptoassets” and how they are used, particularly given the somewhat unique relationship between clubs and their loyal fans. Whilst the initial growth trajectory may have slowed down, the prevalence of NFTs has also led to widespread IP infringement challenges for rights holders across creative industries. So, where are we now in a sporting context?

Following an inquiry launched last year, the Digital, Culture, Media and Sport (DCMS) Committee has now published its report on “NFTs and the blockchain: risks to sport and culture” (available here). In short, the report: (i) highlights that promotion of cryptoassets in professional sport is putting supporters at risk of financial harm (and also potentially damaging the reputations of clubs); and (ii) recommends that measurement of fan engagement should explicitly exclude the use of fan tokens.

As a brief recap:

• NFTs are essentially pieces of data stored on a digital “ledger” which act as a unique identifier for an underlying asset (such as images, videos and art). These assets have offered new commercial opportunities for athletes, clubs, and leagues, as well as giving fans new ways to engage with and support their clubs. High-profile examples include Manchester United’s range of digital fan collectibles and “NBA Top Shot”, an NFT marketplace allowing fans to trade video clips of their favourite basketball moments. 
• Utility tokens (known as “fan tokens” in a sporting context) offer access to certain privileges and rewards for holders, such as voting on certain club decisions, merchandise designs and unique fan experiences. A significant number of professional football clubs have entered into partnerships for these schemes (including Premier League teams).  

Fan protection issues

The latest recommendations from the DCMS Committee highlights the careful balance that needs to be struck between allowing clubs and other stakeholders to capitalise on new commercialisation opportunities in today’s increasingly digitalised market, whilst ensuring that: (i) fan token schemes are not seen as a substitute from actual and meaningful engagement between clubs and supporters and (ii) there are adequate safeguards in place for fans investing in these assets. This goes alongside the much broader plans of the UK government to improve standards of fan engagement and establish a new, independent, regulator for men’s elite football to adequately protect clubs’ and fans’ interests (see here).

IP issues

NFTs have also given rise to some high-profile IP disputes in the sporting arena. Earlier this year, an Italian court issued a preliminary injunction to prohibit the minting and marketing of NFTs that reproduced trade marks owned by Juventus football club. Despite securing permission from former Italian star Christian Vieri to use his image, Juventus had not granted consent to use the club's marks for the NFTs. This was the first ruling at European level on such infringement issues. 

The IP challenges posed by NFTs extend much wider than the sporting community and the DCMS report highlights the impact on art and culture in particular. To tackle these issues, the report recommends that the UK government: 

• Introduces a code of conduct for online marketplaces operating in the UK, that protects creators, consumers and sellers from infringing and fraudulent content. This recommendation is intended to address the impact of the safe harbour provisions granted to certain online intermediaries in the UK (including NFT marketplaces), which can allow such “hosting” platforms to avoid direct liability for infringement.
• Engages with such NFT marketplaces to address the scale of infringement and enable rights holders to adequately safeguard their IP.

It will be interesting to monitor the practical response to these DMCS recommendations and how the sports sector (and the wider UK market) continues to adapt to the legal challenges posed by NFTs and fan tokens.