Football has to beware of Crypto-mania

WE’VE ALL seen the advertisement on TV; the honest retired worker, sitting on a 40-year pension pot, exploited by a crooked “advisor” who promised huge returns on his savings. “He took the lot,” says the heartbroken pensioner. 

There are many other examples, such as the whizz-kid trader selling FX derivatives to honest working class people and promising unrealistic returns from what turned out to be a “Ponzi fund”. The buyers didn’t have a clue what they were getting into. It’s hard enough for City professionals immersed in the markets to keep up with the developments and mechanics of modern finance, let alone the earnest folk who drive taxis, install boilers or lay bricks.

The football industry has an insatiable obsession with money and get-rich-quick schemes. Just as clubs and leagues are happy to take money from the gambling industry, which has questionable values, the new snake oil in town is crypto currency. 

For years, financial technology (fintech) has been disrupting the status quo, trying to make banking and other services cheaper, more accessible and, ultimately, more nimble. There have been good and bad aspects of this sea change but the initial noise seems to have subsided. Take it a stage further and you have the creation of new forms of currency. Unregulated, virtual currencies that exist in the clouds. Given the value of these currencies can soar and plummet in a short space of time, they cannot possible be classified as “stable”. And in the age of high regulation and compliance demands, the fact that many products seem to be part of “the Wild West of Crypto”, investors should tread with extreme care.

Football clubs have been hit hard by the pandemic with more than £ 1 billion of losses incurred. They are always looking at new revenue streams and hence, they take money from the gambling sector and find owners from the most dubious corners of the globe. And no matter how many clubs become victims of irresponsible owners with shady back stories, the game doesn’t seem to learn very easily. Like the hapless and trusting investor, clubs will often bite the hand off anyone that promises riches with all the precision of Spielberg’s latex shark.

Clubs and players are lining-up to make friends with the travelling salesperson peddling crypto as the latest wonder elixir. The attraction for a crypto company is obvious; football is a global game, followed by hordes of people with little knowledge of blockchain, Crypto or distributive ledgers. They don’t always understand risk or that the genial salesperson, calling his clients “guys” and other examples of fake bonhomie, is not interested in the punter, selling is the game they are playing. How many people on the Clapham omnibus would understand what a “Decentralised finance trading analysis and advisory technology company” actually does?

Many clubs have already dipped their toes into this somewhat murky world. Issuing instruments like non-fungible tokens (NFTs) is a way for them to raise money without tampering with their corporate model through share issues or the creation of special purpose vehicles. Inter Milan, the Italian champions, have been so entranced they ended a 30-year relationship with Pirelli to put Crypto firm Socios on their famous blue and black shirts.

Barcelona, Juventus, Paris Saint-Germain and Manchester City have all taken the plunge, although City have suspended their partnership with 3Key after discovering that the company had no credible digital presence. Similarly, Barca ended their NFT agreement with Ownix less than a month after announcing the tie-up after so-called Crypto mogul Moshe Hagog, was arrested for alleged fraud and sex crimes.

Supporters groups, naturally, are concerned that fans who “invest” in these products will be the people that get will their fingers burned. Leeds United’s Supporters Trust believes fans will be forced to enter a cryptocurrency eco-system, something they have little, if any, knowledge of. Meanwhile, fan representatives of both West Ham and Arsenal have expressed their disapproval and lack of trust in Crypto tokens.

Yet in the first half of 2021, crypto brands have spent over US$ 100 million on sports sponsorship and 17 of the 20 Premier League clubs have already sealed some form of partnership. Since early 2020, Crypto assets have grown to around US$ 2 trillion. 

When will people learn that when something sounds too good to be true, it often is just that? The financial crisis of 2008-2009 demonstrated that, without due diligence and appropriate regulation, the system can cause ordinary people huge problems. This new form of finance may seem exciting, may be cutting edge, but it largely comes without the assurance of strong policing. The International Monetary Fund has warned of the possibility of financial instability caused by Crypto and there’s a good reasons why compliance professionals are among the most sought-after individuals in financial services these days. Never has the term, caveat emptor been more appropriate. 

More Coronation Street than Wall Street – Investing in non-league

IS IT purely philanthropy or is there something tangible about investing in a non-league football club? It is hard to justify investment in any sports club, let alone a non-league outfit, but all over the country, local football is short of money and struggling to live within its means.

“Just do the math” as they would say on an investment banking trading floor. Money in, money out. That’s how many non-league clubs run. Indeed, some Football League clubs are in the same position. For a game that is awash with cash, thanks to TV money, best-ever attendances and massive media exposure, the bottom line is generally very anaemic.

In the non-league game, wages are still too high, and in most cases, teams are making too many long journeys to play in front of a few hundred people. So year-in, year-out, clubs are always looking for “investors”. Most of these are not really investors at all but donors. Nobody is ever going to make a fast buck out of non-league football.

Fortunately, there’s a lot of good people in non-league football, terrific stalwarts and generous, well-intentioned sponsors that keep the game going at this level. Sadly, the wrong people can also turn up on your doorstep, promising the world and the next “snake-oil” remedy. In today’s environment, clubs have to be aware of money launderers and tax-dodgers and of course, the huge ego that creates an “Emperors new clothes”-style regime.

Property speculation is another reason why opportunists get involved in the non-league game. Often clubs are sitting on real estate that can be very valuable, so whenever a property man gets interested in a club, suspicion is aroused. Of course, a relocation can be a very lucrative project for a club, removing debt and legacy issues and offering the chance of rebirth on a new shiny site that offers broader facilities than those that existed at the original home of the club. But the problem is that the “investor” might look to leverage the property deal for his or her own benefit. Some might argue that if the club gets a new home, where’s the problem?, but non-league clubs are too often vulnerable to the sharp businessman.

Given that non-league doesn’t have the critical mass needed to make big money, the real estate angle is often the only way any investor could get something back in return. “And why not?”, some would say, as investment often comes in the form of propping-up woeful balance sheets.

Another avenue that could appeal to investors is in being given the chance to run the concessions and entertainment facilities at a club in return for a substantial cash sum. Some clubs franchise their bar and social facilities, which is usually a sign that the club cannot make a profit or devote the time to turning their clubhouse into a profitable venture. Of course, this demands a certain set of skills and often unloading the responsibility can come as a big relief to the club.

Invariably, people want something back in return for cash injections. But there’s one set of stakeholders that don’t seem to require a quick financial return – supporters. I’ve long been an advocate of supporters’ trusts and fan-owned clubs at non-league level. In truth, they are probably the least demand segment of the triumvirate of sponsor, investor and fan. In the non-league game, the idea of “involvement” and “engagement” appeals to the loyal supporter who has stood on the terrace for decades. Football fans claim that their club belongs to the people that watch it, but the fact is, clubs like Manchester United, Chelsea and Arsenal do not belong to the fans – they are the property of owners and shareholders. Whether we like it or not, the paying spectator is a customer – albeit a special type of customer that deserves to be repaid for loyalty.

Non-league clubs have the opportunity to offer something that fans of the behemoth clubs cannot hope to benefit from, acquiring a realistic stake in the club. It is not the only way for there are many models, and there are genuine people who are literally benefactors and philanthropists who want to connect with their local community. The message is clear, engage your “investors” carefully, make sure they know the limitations and, above all, manage their expectations. They need to be clear that non-league is more Coronation Street than Wall Street. Above all, be aware of theodolites turning up on the centre circle in the close season!

Photo: Matthew Wilkinson Flickr CC BY 2.0