In recent years, non-fungible tokens (NFTs) have experienced significant growth and have transformed some industries such as art, gaming, music, and sports. Billions of sports fans around the world have encountered numerous use cases for NFTs. How exactly are these digital tokens impacting the sports industry?
What are NFTs in sports?
Blockchain-based non-fungible tokens (NFTs) are a type of digital asset often referred to as crypto-collectibles. Each NFT is a unique asset that can be entirely digital or a tokenized version of a physical product.
Sports are one of the latest industries to adopt NFTs. They offer fans new ways to interact with and support their favourite teams. NFTs in sports can be compared to traditional trading cards for football or basketball players. By using blockchain technology, these physical cards are transformed into a range of NFTs that sports fans can purchase, such as souvenirs, gifs, video highlights, game badges and more.
According to Research and Markets, the global fantasy sports market is expected to grow at a CAGR of 5% between 2020 and 2025. There are many opportunities for fantasy sports leagues to expand, especially with the proliferation of internet connectivity and 5G networks. Fantasy Sports is forecast to reach $48.6 billion by 2027, with a CAGR of 13.9% between 2021 and 2027.
The popularity of NFTs in fantasy sports.
INFTs have taken on a major role in fantasy sports, and companies are making millions by releasing new maps on their platforms.
Sorare has developed a special strategy for its NFTs and its fantasy football platform. The company has created a fantasy sports league based on the purchase, accumulation, and exchange of NFTs on the Ethereum platform. 180 football clubs, including top European clubs Real Madrid, Liverpool and Juventus, are among the company’s partners. Sorare makes money by releasing new cards through auctions on its platform. These cards can also be sold on marketplaces such as OpenSea and Rarible.
NBA Top Shot has generated $500 million in basketball-themed NFT revenue and attracted more than 800,000 users since it opened in October 2020. NBA Top Shots creator Dapper Labs is now valued at $2.6 billion and has a who’s who of well-known investors, including Michael Jordan, current NBA players and Hollywood celebrities. Subscribers can buy, sell and trade officially licensed video highlights of their favorite players, just as they do on other sites. Customers only acquire ownership of the NFT and not the copyright to the image.
She has taken it a step further with the newly formed Ultimate NFT. It has created a platform for fantasy sports that combines NFT and fantasy football with a play-to-earn mechanism. By using smart contracts, Ultimate NFT ensures that players can earn money without interference from “centralised powers” and enables cross-border transactions. Players use their NFTs to create fantasy dynasties and earn points based on the success of the real players represented in them.
Legal questions about NFTs, Fantasy Sports and Leagues
Blockchain, traceability and smart contracts.
Blockchain is critical for tracking NFTs through smart contracts stored on the blockchain. They can be used in conjunction with conventional contracts to maintain NFT-related rights. On the Blockchain network, there are special, irrevocable, automatically executed contracts called “smart contracts.” They enable transparent, traceable, and irreversible transactions. Ethereum is the leading network for smart contracts, especially NFTs, and the Ethereum Virtual Machine is used to execute smart contracts (EVM). Basically, they are designed to prevent fraud, such as illegally inserting cards into platforms, copying players’ NFTs, or infringing on the intellectual property rights of card creators.
- The legal environment for licensing sports images has changed as a result of the NFTs.
- Granting a license to a third party
- how and whether the player or creator is paid
- how the buyer can use the NFT, e.g. in a commercial context
- May the NFT owner reproduce and sell the map, and if so, how will the proceeds be divided between the owner, the creator, and the player?
- May the NFT owner modify the map or develop derivatives of it, and if so, how can these be used? Any purchaser of NFTs should carefully read and understand the scope of their rights before considering actions such as copying or splitting NFTs into parts. The assets that are transferred with the NFTs are defined in the licensing agreements between the respective sports league and the NFT fantasy sports companies.
Name, image and likeness rights
In addition to the use of their name, image, or likeness (NIL), often known as the right of publicity, as well as trademarks, copyrights, and contract rights, professional and collegiate players can earn money through NFTs. Professional athletes’ image rights can be negotiated with NFT companies or NFT creators. The image rights a player retains that the league controls and the rights he can negotiate with other companies are often specified in his contract.
A sporting event is shown in a video or image on NFT. The images that sports photographers capture during a game may be the sole owners of those images. Professional athletes may use the images they have to create NFTs. Or, as the NBA, Dapper Labs, and the NBA Players Association have done for NBA TopShop, the NFT company, league, and players’ union may negotiate rights in the NFT licencing agreements previously mentioned.
Participants and investors in NFT-based fantasy leagues should also be aware of the gambling regulations in their respective jurisdictions. Fantasy sports leagues are often subject to gambling regulations and laws governing games of skill. Online sports betting, which may be prohibited in some jurisdictions, is often confused with Fantasy Sports. Fantasy sports leagues specifically fall under the prohibition of Internet gambling under the Unlawful Internet Gambling Enforcement Act of 2006 because they are considered skill-based activities and not games of chance. However, state laws handle the regulation of fantasy sports in different ways. If allowed in their state, participants in a fantasy league may bet on fantasy sports contests, but not on real live contests.
Fantasy sports The multibillion-dollar sports business is now on the blockchain thanks to NFTs. Tokenization raises the bar for interactions between sports teams, athletes, and spectators. In addition, NFT-based fantasy sports allow sports organisations and teams to reach beyond local sports communities, and the digital asset market gains access to another fascinating speculative asset class to explore and invest in.
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