Feb 8
DAOs and Sports
I’ve always wanted to be the owner of a sports team…
I mean what sports fan hasn’t wanted that. The idea of owning a sports team has always conjured up images of private box seats, behind the scenes access, decision-making, and voting rights. Even the idea of being a minority owner, while extremely exciting, has always seemed out of reach. But, does it have to be?
Lately, I’ve been reading quite a bit about DAOs or decentralized autonomous organizations. A bit of a buzz-word over the last year, DAOs have gained in popularity along with the rest of the greater de-centralized world. There are some amazing applications of this concept ranging from fundraising for charities all the way to music and art. Plenty of these opportunities are very exciting but the pairing between DAOs and sports have perked my interest the most.
I would be remiss not to begin by explaining what DAOs are to anyone that is unfamiliar. Conceptually, a decentralized autonomous organization is an entity with no central leadership. DAOs operate using smart contracts (code that automatically executes transactions when certain criteria are met). These smart contracts dictate the rules of the DAO. Those with a stake/ownership in the DAO get a say in how the organization operates through voting rights and can change or adjust the rules of the DAO. Proposals get voted on and pass when they reach a majority vote.
The way DAOs actually get started are as follows:
A group of developers initially create the smart contracts behind the DAO. After the DAO has launched they can only adjust the rules via the governance system so they have to be very sure about every detail before that point. The initial creation of the smart contracts can lead to the biggest room for error and overall risk, see: https://medium.com/swlh/the-story-of-the-dao-its-history-and-consequences-71e6a8a551ee
The next steps after the launch are to decide on how to begin governance and funding. Tokens are typically sold to satisfy both of these requirements. Owning a token represents a voting share in the DAO. The more tokens you own, the larger your voting share is.
The DAO is then finally deployed on the blockchain and the stakeholders are from that point on, fully in control.
My initial interest in DAOs stemmed from my background in the financial markets. Obviously, having voting power in a DAO reflects many similarities to owning shares in a company. The unique characteristics of DAOs began to draw me in and I loved hearing about various applications and creative organizations. This brings me back to some of my favorite applications of DAOs so far — sports.
The first DAO worth mentioning is LinksDAO. This organization is intending to buy and create a new golf and leisure club. This group raised $11mm+ through the initial NFT sale. Buyers included Steph and Seth Curry. This idea massively excited me as an avid golfer when I first heard about it. The idea of having some voting input into the construction of a new, future golf course is invigorating. The next step in the process for this group is determining which course to buy. Ownership in the DAO is key to entering this community, unlocking early perks, and eventually taking the first step to membership. The idea of being a potential owner and member of a new, community-driven golf course is amazing.
The next idea that stood out to me was the Australian Open art ball. While not a DAO in this case, the Australian Open Tennis Tournament sold 6,776 sections of the court represented as separate NFTs. When you bought a section of the court you owned that square in the metaverse. Official match data was collected from over 400 matches and match winning points in a specific square were updated to the corresponding NFT. The Australian Open also ran a promotion for the NFT owners — if the winning point of any of the 11 championship matches landed in the section of the court corresponding to the NFT you owned, you would win one of the balls used during that championship match. This was an unbelievably creative way to use NFTs in sports and all 6,776 spaces on the court sold out within 30 minutes of release, raising $1.7mm before royalties.
Lastly, I have to finish this short article with The Krause House DAO. This DAO is driven by the idea of a fan-owned NBA team. While this does raise some serious questions, the backers are presenting three possible options.
Option 1) majority ownership. This would involve shareholders having a vote on ownership decisions, team location, approval of key hires, and marketing / events.
Option 2) minority ownership. This would give shareholders the right to vote on team location and marketing/events while also providing partial voting power on key executive hiring decisions.
Option 3) social tokens. This would create social tokens that fans can own leading to NFT releases, player / social events, and limited access events.
The leaders behind this DAO want to push for option 2. They also believe aptly that option 3 will eventually becomes commonplace among all NBA teams, which I do agree with. I could absolutely see teams leaning in to fan engagement by offering some sort of NFT or token that allows for special opportunities. This DAO seems less realistic to me. I can’t imagine the NBA ever allowing something like this to happen but I do think the idea is incredibly exciting and could be the start of a fan-owned franchise in some professional sports league down the line.
Regardless of the application, DAOs and sports as a pair clearly have an exciting future ahead of them. Over time we will hopefully see more and more creative applications of this new technology bringing fans even closer to their favorite games.
