Football 'cryptocurrencies' for Manchester City and Arsenal slammed for 'ripping off' fans as token values plummet
CRYPTO tokens offered by football clubs such as Arsenal andManchester City, Barcelona and AC Milan have been slammed as a "rip-off" for investors by experts.
Many football clubs have jumped on the trend of offering blockchain-backed fan tokens and crypto partnerships - but our investigation shows that values have fallen drastically in recent months.
The main player in this space is Socios, which works with more than 50 football clubs including Arsenal, Manchester City, Barcelona and AC Milan to launch fan tokens and provides a platform for fans to buy and sell their holdings.
The first token is usually free for loyal fans with extra ones costing £2 each initially.
Fan tokens aren't a cryptocurrency but are classified as utility tokens because they give an owner access to a digital product or service.
The more tokens you have the more "voting power" you have - but to buy more you need to sign up to Socios platform’s own cryptocurrency called Chiliz (CHZ).
Many fan tokens have dropped in value since launch and while Socios says these are not investments, there is still a secondary market where they can be traded.
Some fans from around the world have been complaining on social media about losses.
An Arsenal fan revealed on Twitter that he purchased the club's fan tokens to show support but described it as a "trash can".
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A response from a Turkish Twitter user to a post by Socios founder Alexandre Dreyfus said: "You said 2022 will be the year of the fan token. My loss is 60%."
Investment experts warn these tokens are "ripping off" fans who may not be aware of the risks of purchasing cryptocurrencies to access tokens.
Independent investment commentator Adrian Lowcock told The Sun: "Offering votes through cryptocurrencies seems hugely inappropriate.
"Cyrptos are complicated and many of them are extremely volatile.
"Add into the mix the sporting element and it is a recipe for disaster.
"Most fans will jump at the opportunity to get involved with their clubs and share their views - their focus is on the sporting element and are unlikely to be fully versed in the risks and rewards that crypto might offer."
Another risk emerged this week after the Argentine football association, which already had a fan token agreement with Socios, unveiled a new supporter coin with rival exchange Binance.
Socios has said it will take legal action for breach of contract.
But this shows another risk of fan tokens as clubs could ditch one brand for another, making your holding worthless.
How a fan token works
Fan tokens are among the latest form of cryptoassets.
They let supporters feel more involved with their team by letting them own a branded virtual token and take part in votes about how the club is run.
The main provider Socios has partnerships in football, motorsport, basketball and tennis and says it has more than 1.3 million active users around the world.
The idea is that fans, typically registered club members or season ticket holders, get a dedicated token that can be used to vote on polls such as the design of the team bus or a song to play when someone scores.
Cryptocurrencies or cryptoassets are labelled as high risk and unregulated investments.
How tokens are offered to fans
MORE than 50 football teams have partnered with Socios to launch fan tokens.
For example, Arsenal fans were given a non-tradeable token for free when the AFC token first launched in October 2021.
Token holders can vote through the Socios app on team mottos and kit designs and regular users can earn rewards such as player meetings and VIP access
Like other fan tokens, Arsenal’s has a dedicated webpage on the Socios website that says fans can participate in rewards with just one token, but adds: “some unique rewards may require more than one to enter.”
The Arsenal Supporters Trust (AST) questioned the launch of the AFC token with Socios when it was first announced in August 2021 and called for more risk warnings about cryptocurrencies being an unregulated activity.
The AST said: “Cryptocurrencies are a high risk and unknown activity and there is a potential for this partnership to have an adverse impact on Arsenal’s reputation and the financial wellbeing of its supporters.”
It is understood that Arsenal changed the wording in response
Arsenal fan Daniel Keen, a writer for the She Wore blog and a crypto investor, said he is not keen on fan tokens as they introduce people to the crypto market without them fully understanding it.
He told The Sun: ‘It took me six months before I invested in cryptos so I knew what I was getting into.
“If I go and open an eToro account I have to read questionnaires and the terms and conditions before I invest, but there doesn’t seem to be any due diligence.
“It’s my choice whether to invest in cryptos but this is forcing it on people who may not want to invest.”
Some fan groups have managed to fightback.
West Ham United fans managed to get the club to cancel its partnership with Socios in 2019.
The West Ham United Independent Supporters Association had described the partnership as a “fan opinion exploitation scheme.”
The Football Supporters Association has said it doesn’t like attempts to “monetise fan engagement which the leagues and clubs have committed to doing for free.”
The Financial Conduct Authority (FCA) has warned that investing in cryptos is risky and consumers should be prepared to lose all their money.
The CHZ cryptocurrency is described as a utility token used solely to access products or services and the FCA has previously said in policy documents that this type of virtual currency falls outside its regulatory remit.
Socios is registered and regulated in Estonia but told The Sun that it has received legal opinions that it doesn’t require regulatory permission in the UK.
This is because the utility token isn’t technically seen as an investment asset and should only be used to access a product or service.
However, investors can still buy CHZ coins on exchanges such as Binance and CoinTiger, while fan tokens can be bought and sold through the Socios secondary market.
Pricing, like with all cryptoassets, can be volatile.
Some fans could make a profit if they sell their fan tokens but there is no guarantee as values have been shown to be unpredictable.
How token values have plummeted
Anyone who purchased extra tokens, such as if they wanted to have a larger influence on votes, saw the value rise to $6 when the AFC token first went live in October 2021 before dropping to $2 at the start of this year, according to CoinMarketCap data.
Similarly, Premier League leaders Manchester City’s fan token launched with a value of $22.9 in May 2021 and hit a high of around $33 but is now worth closer to $8.
The Barcelona fan token was worth $6.3 when it first launched in 2020 and rose to close to $55 last year but is now valued at $5.7.
Similarly, the Paris Saint Germain fan token had a value of $5.6 when it launched in 2020 and went above $55 last year before falling to around $12.4.
The Leeds United fan token hit $4.7 when it first launched in November 2021 and spiked to $20.6 at the end of last year. It is now worth $2.88, according to CoinMarketCap.
The AC Milan fan token rose from $6.4 to $19 when it first launched in early 2021 but is now worth $3.83.
The Sun asked Arsenal last year if it was worried about exposing fans to cryptocurrencies.
An Arsenal spokesperson highlighted that Arsenal members received a free token when it launched and there was no requirement to spend any money.
The spokesperson said: “We have been clear in all communications regarding Socios.com that fan tokens are a means to engage with the club, vote in polls and access a wide range of benefits.
“One fan token is enough to access these benefits and we advise fans not to spent more on fan tokens than they can afford.”
A club spokesperson for Leeds United said: "We take our responsibilities with regard to marketing to our fans very seriously.
"We carefully considered the communications to fans regarding $LUFC fan tokens and provided information regarding the financial risks.
"All 18+ season ticket holders and members were offered one free token, which is all they need to take part in the polls, competitions and other activities on the Socios app."
Manchester City, Barcelona, PSG and AC Milan didn't respond to requests for comment.
Cryptos and football clubs
It comes as increasing numbers of clubs are getting involved with crypto firms such as trading platforms.
Brentford announced crypto trading platform CoinJar as a “platinum partner,” in 2021, while Manchester City ended a partnership with a little-known crypto startup called 3Key Technologies earlier this week after just two months when it emerged that its backers have little online presence.
Critics question whether unregulated cryptocurrencies and exchanges should be associated with sport where they could be seen by fans who are under age or vulnerable.
The GamCarecharity, which runs the National Gambling Helpline, has taken calls from people who have recovered from gambling and are registered on self-exclusion sites, but are now investing in cryptocurrency instead.
Its helpline has received increased calls about people who havetraded higher risk unregulated options like cryptocurrencies.
Socios insists that under-18s are restricted from purchasing fan tokens and added that these should not be seen as cryptocurrencies.
The platform said it has never predicted a rise in the value of fan tokens and has only anticipated increased adoption.
Socios said it provides a platform for fans to engage with their clubs, influence decision-making processes through fan polls and earn exclusive rewards.
The platform said in a statement: "This is the primary focus, with more than 5000 VIP experiences offered last year and 300 polls.
"In this platform fans can also buy and sell tokens."
Alexandre Dreyfus, chief executive of Socios, told The Sun: “Fan tokens are digital utility assets.
“Fans use our native digital currency CHZ to acquire fan tokens only. There is absolutely no exposure to other cryptocurrencies on Socios.com.
“It’s certainly true that crypto is becoming more mainstream. You only have to look at the wallet services being offered by the likes of PayPal, Revolut and many more major banking and payment services to see that.
“But, that is not what we are about at all.
“We are about using blockchain technology to build a closer relationship between fans and clubs on a global scale.”
The FCA did not respond to repeated requests comment.