Clarification to media coverage following CMS Select Committee report
There has been a lot of media coverage following the CMS Select Committee report published earlier this week and we wanted to clarify important information.
As we posted in our response on the 11 October, we want to make it clear that all crypto assets, including Fan Tokens are not regulated in the UK. It is the promotion of Fan Tokens that is subject to new regulatory restrictions and supervised by the FCA.
We want to clarify on record that crypto assets, including Fan Tokens, remain unregulated in the UK. They are not regulated investments and we were not insinuating that the FCA in any way regulates or endorses them.
Original response posted 11 October can be found here: https://www.socios.com/response-to-cms-select-committee-report-on-nfts-and-blockchain/
We are disappointed that the Select Committee has produced a report that contains factual errors. Fan Tokens, like all utility tokens, are not the same as NFTs.
The marketing rules of Utility Tokens, including Fan Tokens, are now being regulated under the FCA’s new financial promotions rules. It is disappointing that the Select Committee report makes no reference to these new important regulations that are designed to answer the call for protection of fans. NFTs, which the select committee incorrectly confuse with utility tokens are not regulated under these new marketing rules of cryptoassets.
Socios.com works hard to comply with all applicable regulations and engages with regulators in all the markets in which it operates to stay transparent and shape the crypto assets sector from a regulatory perspective. Socios.com is for example registered with OAM in Italy as a virtual asset service provider and regulated by the bank of Spain for the provision of virtual currency exchange services and for the provision of digital wallets custody. Socios.com has also started preparations for the incoming MiCA regulation of crypto assets in the EU to show its compliance when the new rules come into force at the end of 2024.
Socios.com Fan Tokens deliver rewards and benefits to fans. This is beyond doubt. Any suggestion otherwise is a false assumption, or worse, a willful inaccuracy. Last season alone Socios.com gave away more than 24,000 matchday tickets and more than 1,000 items of merchandise and memorabilia to fans who own Fan Tokens and engage with their teams through the Socios.com app.
The sources that the select committee highlight in their report have been offered the opportunity to witness first hand the rewards and opportunities that Fan Tokens holders are receiving. Unfortunately those individuals declined to engage with us and take the opportunity to better understand and learn about the product. It is also highly disappointing that the individuals quoted in the report do not have any background in blockchain technology, or this burgeoning new sector, yet their opinions are presented as fact. In addition, the example of a fan poll given in the oral evidence is completely false and not a poll that has been offered. As part of the engagement opportunities available on the Socios.com platform there are many examples of polls including choosing kit designs, choosing the name for new stands at club grounds, and choosing the squad number of new signings, and more light hearted examples such as seeing inside player’s kit bags (which proved popular with fans).
We recognise and understand that crypto assets are a new technology that at this time is not for everyone. That is why Socios.com has been calling for regulation around the promotion of crypto assets and welcomes the new FCA rules.
Fan Tokens are not designed to replace traditional forms of fan engagement with highly engaged parts of a club’s fanbase and socios.com agrees with the Select Committees sentiment that fan engagement through fan tokens should not be counted as the required fan engagement as part of the new regulations for football. Fan Tokens are designed to add fun and rewarding opportunities for global fans, not to replace supporter governance. Premier League football clubs have fan bases all around the globe with more than 51% of their TV revenue coming from outside the UK, and their success on and off the pitch has become reliant on their ability to engage and connect with fans outside of the UK as well as inside the local areas where their fan bases started and traditional supporters groups represent. Sports teams are looking for new ways to reach and engage with those fans. Not in order to run the club or make decisions that change the operations of the clubs, but reach them in ways that make those fans on the other side of the world feel recognised and part of the global community.
A recent research report by Deloitte reported that interest in digital fan engagement products is rising among younger sports fans with around 40% of Gen Z and Millennial sports fans saying they were very, or somewhat, familiar with the use of Fan Tokens in sport, and almost 75% expressing interest in Fan Tokens providing chances to win valuable rewards.
We strongly believe, and so do our partner clubs, that Fan Tokens can provide a new way for fans to be part of a global supporters community and be rewarded and recognised for playing a role in a way that complements existing membership programs and brings something new for fans who can’t be in the stadium or even the country.
We regret not being able to attend a Select Committee oral evidence session and did provide written evidence the omission of which has led to inaccuracies. We would be happy to attend and engage with the Select Committee in the future as we remain committed to continuing to invest in developing new products and services to help the more than 80 sports clubs on the Socios.com platform to continue to engage with their fan bases and reach new fans.