NBA Blocks Brooklyn Nets Player Spencer Dinwiddie Shot to Tokenize His Contract to High Level Investors

Posted on: September 29, 2019, 01:00h. 

Last updated on: September 29, 2019, 09:42h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The NBA rejected a shot by Brooklyn Nets point guard Spencer Dinwiddie to “tokenize” his player’s contract to investors, saying the proposal violates the league’s collective bargaining agreement (CBA).

The NBA said no to Spencer Dinwiddie’s plan to tokenize his contract. (Image: NBA.com)

Dinwiddie, 26, agreed to a three-year extension with the Nets last December valued at $34 million. The team offered the Colorado product a four-year, $47 million deal, but he turned that down so he could become a free agent sooner, potentially landing a more lucrative contract down the road. His future free agency was one of the selling points behind the $D8 token, which references his jersey number, that Dinwiddie was pushing.

What better way to be invested in a player as a fan than to have some level of skin in the game,” said the Nets guard in an interview with The Athletic. “With the way mine works, if I play well in that player option year and we split the profits up the first year of my new deal, it greatly appreciates the return on this investment vehicle.”

The $D8 token, had it been approved, would have been aimed at accredited investors with at least $150,000. Presumably, investors of that ilk would have a higher tolerance for risk and a greater appetite for alternative investment vehicles. But the NBA still panned the idea.

“According to recent reports, Spencer Dinwiddie intends to sell investors a ‘tokenized security’ that will be backed by his player contract,” said the association. “The described arrangement is prohibited by the C.B.A., which provides that ‘no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract.”

A Different Spin On An Old Idea

Dinwiddie’s proposal to allow investors to take part in the potential upside of his NBA earnings isn’t a new idea. Fantex, a company founded in 2012, offers investment vehicles with exposure to athletes’ contracts, including several NFL players, such as Michael Brockers, Alshon Jeffrey and Mohamed Sanu.

What was unique about Dinwiddie’s approach was the tokenization aspect. Had $D8 been approved, the player would have commenced an offering aimed at raising $4.95 million to $13.5 million. $D8 was slated to trade on the ethereum blockchain. Blockchain is a centralized ledger on which digital currency transactions are recorded.

Another interesting aspect of the $D8 plan was that it was designed to be levered to performance clauses in Dinwiddie’s contract. For example, the token could have eventually become worth more than the player’s agreement it would have been tied to if he hit certain statistical milestones, became an All-Star, or won a championship.

Interesting Comparisons

The player compared to the $D8 token to investing in growth stocks, saying the digital asset could offer returns of 15 percent, “something most guys won’t beat.”

Over the past three years, the S&P 500 Growth Index, a widely observed basket of growth equities, has a compound annual growth rate of 15.7 percent and a total return of nearly 55 percent.

The Nets guard sought to alleviate some of the liquidity and volatility issues associated with smaller cryptocurrencies by promising to back $D8 with $1 million in cash, $1 million worth of gold, and $1 million worth of bitcoin stored in an unidentified public bitcoin vehicle.