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How Tokens Could Help Your Local Football Club

How Tokens Could Help Your Local Football Club 101
Source: iStock/skynesher

Digital token-based fundraising has emerged as the most popular way for blockchain startups to fund their ventures. Token sales enable a company or project to raise funds in a relatively easy manner, which is why non-blockchain ventures are also venturing down the route of issuing a digital token to raise capital.

This financial innovation could also become a valuable new method of fundraising for small football clubs who struggle to compete with their larger competitors as they do not have the funds to expand their youth academies, improve their stadiums and pay for high-quality players and coaches.

Football and money (or the lack of)

When looking beyond the Premier League, the German Bundesliga and the Serie A to less internationally popular football leagues, it quickly becomes apparent that there is a huge financial divide between the large clubs that play in the Champions League year in and year out and those that barely make the Europa League if at all. Despite efforts to rein in exuberate transfer fees, money talks in football largely remains in the hands of a handful of large clubs.

Money is even more of an issue when looking at second or third division clubs who often struggle to stay afloat as they do not receive the kind of TV deal and sponsorship funds their more prominent counterparts do. At the same time, generating an income through player sales, merchandising, and ticket sales is also difficult for many smaller clubs. Hence, new fundraising models should be something of interest for small clubs.

How a club could raise funds

For a token sale to succeed and benefit both the club and its fans, it would need to be structured in a specific way. Historically, football club stocks have not performed well, which would suggest that issuing a security token that provides fans with a digital share in their club is most likely not the right way forward. Furthermore, issuing a standard ERC20 token with little to no use would likely end up in fans losing most if not all of their invested capital, which would end in strife between the club and its fans.

A possible solution to create a win-win scenario for both parties would be to issue reward tokens that provide the fans that invest with monetary benefits such as discounts for match tickets, merchandise, food and drinks in the stadium, etc.

The reward tokens would need to be pegged to the local fiat currency to avoid price fluctuations that could adversely affect their value. As long as the club accepts the reward tokens as one-to-one to the local currency, it would not need to hold fiat currency reserves to back the token.

For example, if fictional lower league club “Cryptonews United” would like to raise funds to expand its stadium by building a new stand to fit 2,500 fans, it could set its funding target at EUR 5 million.

Then a reward token is developed that enables fans to receive a 10% discount on purchases of match tickets, official club merchandise, and food and drinks in the stadium. Tokens will have their own mobile wallet that connects to the club’s POS (point of sale) system for payments and can also be used for online purchases. The price of one token will be one euro and it will retain this value as the club will accept the token on a one-to-one basis with the euro.

During the token sale period, fans can purchase as many tokens as they would like with the primary intention being to want to financially support the club in the building of the new terrace while benefiting from the discount. The more tokens a fan purchases, the more discounts he or she will receive until all their tokens are spent.

“Cryptonews United” runs the token sale until all five million have been raised and concludes the project when all tokens have been cashed in. After the new stand has been built, the club can benefit from more ticket sales and an improved atmosphere in its stadium.

Should “Cryptonews United” have other funding needs or specific projects in mind, it could launch another token sale using the same or a similar format.

Digital currency is not new in football

Several football clubs have already implemented digital currency solutions for cashless in-stadium purchases.

Austria’s championship record-holder Rapid Vienna, for example, launched the “Rapid Mari€” in 2016 when it opened its new stadium. The “Rapid Mari€” - a digital currency pegged to the euro - is the only accepted currency in the stadium on match day and is used to purchase food and drinks in a cashless manner using designated smart cards that can be bought and topped up using euros in the stadium.

Hence, the concept of paying using digital tokens in the stadium is not entirely new for fans, which would suggest that a club-issued reward token could be well-received by the fanbase.

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