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Tokenization of NBA Contracts

Professional sports organizations are seeing major changes involving not only players’ intellectual property, but also contract and compensation structures. Spencer Dinwiddie, a guard for the Brooklyn Nets, is attempting to revolutionize the structure of NBA contracts.

According to Forbes, Dinwiddie is using a blockchain-based investment platform, where he will sell 90 SD8 coins (backed by his own contract) that will enable him “to collect $13.5 million of his guaranteed three-year, $34 million contract upfront, as a business loan.” Dinwiddie plans to sell each coin for $150,000. The coin is structured as a three-year bond, expected to pay a monthly “coupon” of 4.95%. Although the NBA is struggling with the idea of a “crypto-based” athletic contract, they retained a prominent law firm for assistance, implying they are at least considering the idea.

How does this coin offering benefit Dinwiddie? Currently, Dinwiddie has a three-year, $34 million contract, equivalent to about $11.3 million per year or $.94 million per month. During the initial coin offering, Dinwiddie will be paid up to $13.5 million, depending on how many coins sell. Basic time value of money principle states that receiving money at the present time is worth more than receiving the same or lower sum in the future. Therefore, receiving an upfront payment of $13.5 million in a single day is more beneficial to Dinwiddie instead of receiving the same payment over the course of a year.

Properly assessing the value of any contract, whether a bond, token or licensing deal, is imperative to long-term success. We have assisted in valuing cryptocurrency revenue streams, and licensing structures for numerous clients, in and out of the sports industry.