NBA Star Launches Token Offer Based on Contract

Spencer Dinwiddie is a unique player. Besides his steady rise as an all-star candidate this year, the Brooklyn Nets guard has pushed the boundary of what a player can do with his contract.

In a first of its kind move, Dinwiddie officially launched an investable bond token attached to his contract on the Ethereum Blockchain last Monday (January 13).

The decision by Dinwiddie comes in spite of a warning from the league office to cease this action or risk facing a ban from the NBA and a previous failed attempt at offering a digital token.

Effectively, Dinwiddie is offering investors a chance to participate by way of buying bonds in his contract with the Brooklyn Nets. By way of offering the investment, the player would earn an upfront of US$13.5 million of his contract from the investors, who in return would also make a forecasted payout of 4.95 percent base interest on a monthly basis, according to Bitcoin.com.

The tokens are being offered through digital transfer agent Securitize, its CEO Carlos Domingo confirmed on Twitter (NASDAQ:TWTR).

At @securitize we are extremely excited and proud to be the digital transfer agent and technology partner for @SDinwiddie_25 and @DreamFanShares world's first Professional Athlete Investment Security Token. Innovation takes courage, kudos. https://t.co/F7STPJfWaw

— Carlos Domingo (@carlosdomingo) January 10, 2020

“Spencer Dinwiddie’s advisers provided us with new information regarding a modified version of their digital token idea, which we are reviewing to determine whether the updated idea is permissible under league rules,” the NBA said in a statement to Bloomberg on the day of the launch.

The Brooklyn Nets team is owned by Joseph Tsai, co-founder and executive vice-chairman of Alibaba Group (NYSE:BABA).

The player signed a rookie extension to his contract with the Nets for a total of three years and US$34.36 million. Dinwiddie holds a player option to extend the contract in 2021.

In a tweet, Dinwiddie confirmed the launch of the bond and said if the bond is successfully fulfilled he would give his teammates an unspecified amount of bitcoin.

Dinwiddie had previously planned to offer investors a stake in his contract, by way of a digital investment “$SD8” token. In total, 90 tokens would be offered, according to Forbes, which would net the player US$13.5 million up-front of his contract.

However, that’s when the NBA stepped in and prevented the unprecedented action.

In a report on the New York Times from September, a league official confirmed the arrangement Dinwiddie had in mind was prohibited by the NBA Collective Bargaining Agreement (CBA) in place between the players association and the league.

“The described arrangement is prohibited by the CBA, which provides that ‘no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract,’” the league official told the New York Times in a statement.

In an interview with NPR, NBA insider for The Athletic Shams Charania said Dinwiddie has been interested in cryptocurrencies for a long time.

“No one has taken their own contract and their own salary and turned it into investment and stock platform,” Charania said.

The design of the bond would make it so only accredited investors can participate in the offer of Dinwiddie’s contract.

According to Charania, the player sees this venture as a safe option for an investor given that his contract is guaranteed. Unlike the NFL, player contracts in the NBA are guaranteed outside of extraordinary circumstances.

This represents a bizarre first-time attempt by a player to offer a stake into his contract — a move that may lead to more athletes evaluating the success rate for it.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article. 

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