Fan Tokens from a Legal Perspective

Introduction

As fan tokens have developed into a tool that enables fans to demonstrate and strengthen the bond they have formed with their clubs, we are witnessing that many sports clubs, both abroad and in our country, have their own fan tokens.

In this article, we examined fan tokens from a legal standpoint.

What is a Fan Token?

In its simplest definition, fan token is a type of "utility token" that felicitates communication between sports clubs and their fans and allows fans to participate in voting on various issues by giving them a voice. Since fan tokens are directly related to the sports clubs in which they were issued on behalf of, factors such as sporting success, change of management, changes in value for those traded in the stock market can cause fluctuations in the value of these tokens.

The main purpose of the fan token is to provide owners access to voting privileges and further special privileges over the team they support. Although the matters on which the token owners may vote vary depending on the clubs, in general, we see that these matters are associated with the club's product design, ticket-related concerns, choice of match locations, and meeting the players. It goes without saying that these benefits and rights enable token holders to participate more actively in the operations of the club they support.

Legal Nature of Fan Tokens

To begin with, it should be emphasized that the "token" is a "crypto asset". Regulation on Not Using Crypto Assets in Payments sets forth the initial definition of crypto assets in Turkish law. According to this definition, intangible assets that are created virtually using distributed ledger technology or a similar technology and distributed over digital networks, but are not qualified as fiat currency, fiduciary money, electronic money, payment instrument, securities or other capital market instruments shall be deemed as crypto assets. 

In other words, in Turkish law there are three core principles for a digital asset to be defined as a crypto asset as follows: (i) being an intangible asset, (ii) created virtually using distributed ledger or a similar technology, and (iii) distributed over digital networks.

Depending on their use, there are several subtypes of tokens which are crypto assets, including security tokens, utility tokens, and payment tokens. We have mentioned that fan tokens fall within the category of "utility tokens". Through utility tokens, basically users can access the services offered by the project developers and benefits that they would not have with money. In the case of fan tokens, this benefit can be seen in different forms such as meeting team players, VIP stadium tours, winning various products signed by team players or voting rights in some decisions.

Legal Relationships Established Within the Framework of Fan Tokens

The first step of the public offering of the fan token is a cooperation agreement to be concluded between the sports club that issued the token and the company providing the platform for the token. The issuance procedure of the token and the responsibility of the parties are determined in this cooperation agreement. Within the framework of this agreement, the sports club presents its own brand value and its market share in the sports sector, depending on this brand value, to the partner company. In this context, the main obligation of the company is to manage the creation and listing procedure of the fan token.

Fan tokens can be offered to the public through various companies that provide platforms. If the legal relationship established with the fans is examined, it is seen that for the purchase of the fan token a terms of use text has been concluded between the fans and the company providing the platform for the token. In accordance with this terms of use, fans have a say in various matters concerning the sports club, such as the choice of slogan, the design of the team bus, by voting or may qualify for various awards. However, unlike the traditional public offering, fan token holders cannot have a stake in the sports club or receive a share of the profits through the tokens offered to the public.

Conclusion

It is an undeniable fact that fan tokens, which aim to bring sports clubs and their fans together in the crypto world, have become quite popular in the sports industry. There is no regulatory legislation for fan tokens and platforms providing fan tokens yet. The rights and obligations of the parties are determined within the framework of the contractual relations mentioned. However, legal regulations on crypto assets are already being conducted and studies are being carried out on this subject. Since fan tokens are becoming increasingly popular in the industry, it is expected that fan tokens will find a place in these legislative studies carried out for crypto assets.

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