Football clubs should be prevented from selling crypto-based "fan tokens" as part of engagement with supporters by the sport's incoming regulator, according to a cross-party committee of MPs.
In its report, the Culture, Media and Sport Committee (CMS) warns about the volatility of prices and the risk of financial harm to supporters who are convinced to buy the tokens for club access and rewards.
CMS committee chair Dame Caroline Dinenage MP said: "In the world of sport, clubs are promoting volatile cryptoasset schemes to extract additional money from loyal supporters, often with promises of privileges and perks that fail to materialise.
"Fan token schemes must not be used as a substitute for meaningful engagement with supporters."
Socios is singled out by the MPs as a sports cryptoassets marketplace to generate cash from fans in exchange for apparent access that does not always deliver on expectations.
The CMS committee report said: "The unique relationship between clubs and fans means that fan speculation on sport-based cryptoassets carries a real risk of financial harm to fans and reputational harm to clubs.
"We are also concerned that clubs may present fan tokens as an appropriate form of fan engagement in the future, despite their price volatility and reservations among fan groups.
"We recommend that any measurement of fan engagement in sports, including in the forthcoming regulation of football, should explicitly exclude the use of fan tokens."
The government is planning to legislate to introduce a regulator for English football next year.
The regulator system is being set up to force clubs to prove their business models are financially sound and that they have good corporate governance before being allowed to compete.
Socios says it has deals with more than 100 teams, including Premier League champions Manchester City and Arsenal.
The CMS committee said for "differing reasons" Socios, which has Lionel Messi as a brand ambassador, said it could not attend a session to provide evidence.
Socios did not directly address the criticism, but in a statement to Sky News it said: "Fan token holders received more than 24,000 matchday tickets and over 1,000 items of merchandise last season, and continue to engage with their club in a unique new way.
"Fan Tokens offer new and complementary benefits to clubs' traditional fan engagement beyond the boundaries of geography, and unlike NFTs (non-fungible tokens), are regulated by the FCA (Financial Conduct Authority)."
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The Socios website flashes up a variety of warnings now.
"Fan Tokens are a type of utility token," one states.
"They are obtained by exchanging them for the Chiliz cryptocurrency ($ CHZ), which can be purchased on the Socios.com app after downloading it.
"Before using crypto-assets (tokens), consider that: (a) their value can go down or up; (b) they are not regulated in most countries; (c) you may have to pay taxes on any profits made from their sale."
On crypto exchanges, the value of Chiliz has plummeted from 25 cents (15p) to around 5 cents (3p) in two years.
Source : Sky News / October 11, 2023