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Freshfields TQ

Technology quotient - the ability of an individual, team or organization to harness the power of technology

| 2 minutes read

Football, Fan Tokens and Financial Services Regulation – A very 2023 phenomenon

As readers of the TQ blog may have seen in the recent post on 6 February 2023, the UK Treasury has published a consultation paper which proposes extensive changes to the regulation of cryptoassets in the UK.

For those in the sports sector, that fan tokens should fall within the scope of the proposed regulatory regime will be of interest. The broad nature of the Treasury’s proposals has the somewhat surprising result that operating a platform for trading fan tokens, or arranging deals in fan tokens, would be a regulated activity within the scope of the Financial Services and Markets Act (FSMA). Such a role for financial services regulation would have seemed extraordinary in the days of trading football stickers in the playground or baseball cards on eBay.

Fan tokens have become a hot topic in recent years, allowing sports fans to feel a greater and more personal degree of interaction with their favourite teams. But with that rise in popularity has come increased media scrutiny, and a growing call for regulation. Critics have emphasised the risk to consumers if, as they see it, fan tokens are being used as an ostensibly harmless guise to lure consumers with little investment experience into making speculative cryptocurrency investments without a meaningful appreciation of the attendant risks.

We have written an article for LawInSport (available here) examining the impact of the new potential regulation on sports clubs, looking at:

  • What fan tokens are;
  • Why the UK Government is calling for regulation of fan tokens; and
  • What the proposed regulatory solution might look like and what it could mean for sports organisations.

Whilst we expand on these areas in the article (and would encourage those interested to read the full piece!), a summary of the key points is as follows:

  • Why should fan tokens be regulated? There have been a number of calls in recent months to bolster the legal framework around fan tokens, including at a debate on cryptoasset promotions in sports in the House of Commons on 8 November 2022 and at an evidence session held by the Treasury Committee on 7 December 2022. The key argument is that fan tokens implicitly act as a gateway for unsophisticated investors to enter into speculative cryptocurrency investments, trading on fans’ love for their club and the susceptibility of some fans to “get rich quick” schemes.
  • What does the proposed regulatory solution look like? The UK Treasury’s proposal is to bring cryptoassets (including fan tokens) within the scope of the existing financial services regime set out by FSMA. This could mean that sports clubs carrying on certain activities in relation to fan tokens (e.g. arranging deals in fan tokens or advising on fan tokens) by way of business could become subject to FCA regulation.
  • Our view. That business relating to this sort of asset could become subject to some form of consumer protection requirements may be seen as a positive development. But query whether the traditional financial services regime is the appropriate route; it will likely create additional responsibilities and compliance burdens for the sports teams who are partnering with crypto providers. Whilst FSMA will be well-understood by most financial institutions, it is a less familiar territory for sports organisations and some will be less well-resourced than others to meet new regulatory obligations. There is also a recognition in the consultation that this is new territory – indeed, one of the questions on which the consultation is seeking evidence is whether the proposed treatment of utility tokens (which would include fan tokens) is clear.

The Treasury’s consultation – which closes on 30 April 2023 – provides an opportunity for interested parties to register their views on what is likely to be an increasingly topical area over the coming years.


cryptoassets, financial regulation, sports