A fan token is a cryptocurrency created for a sports club, national team, racing team or other brand with a large following. Holders can usually vote in polls on minor decisions, such as a goal celebration song or a message printed on a shirt, and may receive rewards, discounts, competitions and access to events or merchandise. The tokens are bought and sold on crypto platforms, so their price rises and falls with demand like that of any other token.
Fan tokens became widely known from 2020, when European football clubs began issuing them through the Socios.com app, which runs on technology from the company behind the Chiliz (CHZ) token. Other platforms, including some large exchanges, have since launched their own. Fan tokens are a form of utility token: they do not give ownership of the club, a share of profits or control over important matters such as transfers or ticket prices.
Fan token in plain terms
A fan token is something like a membership card for a supporters' club, except that it lives in a phone app and can be bought and sold on a market. Holding it lets a fan take part in club polls, enter prize draws and collect perks, and the more tokens someone holds, the more votes they usually get.
The difference from a normal membership card is that its price can change every minute. A fan who buys tokens for the experience may find they are worth much less a few months later, because their value depends on how many other people want them, not on the club's results or finances.
How fan tokens work
A club signs an agreement with a fan token platform, which designs the token, sets the initial supply and sells a first batch to supporters, often in a token generation event or "fan token offering". The club typically receives a share of the proceeds and of later revenue. After the initial sale, tokens can be traded on the platform's own market and, in many cases, on outside exchanges.
Holders use the platform app to take part in polls, often called votes, where each token usually counts as one vote. The results are binding only on the matters the club has chosen to put to a vote, and the platform and club decide which questions are asked. Many tokens are held on a dedicated blockchain run by the platform, although some can be moved to other chains or wallets.
Uses and benefits
- Engagement for fans. Supporters abroad, who rarely attend matches, gain a way to interact with the club and other fans.
- Revenue for clubs. Clubs earn money from token sales, trading fees and sponsorship deals with platforms, and gain data about their global audience.
- Rewards and access. Tokens may unlock prize draws, meet-and-greet events, discounts or digital collectibles such as non-fungible tokens.
- Brand partnerships. Fan tokens have spread beyond football into esports, motorsport, combat sports and other entertainment, sometimes as part of wider esports sponsorship.
Risks and criticism
Critics say fan tokens turn loyalty into a speculative product. Prices have often jumped around launches or major tournaments and then fallen far below their peaks, leaving fans who bought at high prices with heavy losses. Because each token is linked to one club and one platform, trading volume can be thin, and a small number of large holders, or whales, can move the price, a concern familiar from pump-and-dump schemes.
The "voting" offered is usually limited to marginal issues, and supporters' groups have argued that it gives an illusion of influence while real decisions stay with owners. There are also questions about what happens if a platform shuts down or a partnership ends, since the value of the token depends almost entirely on the issuer continuing to support it. Like other crypto assets, fan tokens have no deposit insurance and can be lost if a wallet or account is compromised.
Regulation
Fan tokens are generally treated as crypto assets rather than securities, because they do not promise a share of profits, but the treatment depends on each token's features and on national law. In the European Union, crypto assets that are not stablecoins or financial instruments fall under the Markets in Crypto-Assets (MiCA) regulation, which requires a white paper and fair marketing. Advertising rules also apply: in 2021, the UK advertising regulator ruled that promotions for a Premier League club's fan token had failed to make the risks clear. Sports leagues and clubs have also faced scrutiny over sponsorship deals with crypto firms, and some have reviewed or ended such agreements. Buyers are advised to treat fan tokens as a high-risk purchase rather than a way to support or invest in a club.