UK MPs have warned that the promotion of crypto assets in professional sport is putting supporters at risk of financial harm and potentially damaging the reputations of clubs.

In a new report, the Culture Media and Sport (CMS) Committee said that sales of NFTs are popular in sports clubs as they offer a new revenue stream at minimal cost. The report said that while there is little financial risk for clubs, fans who invest in them could lose out.

The committee also highlighted the use of utility tokens or fan tokens which give holders privileges and membership perks. The report found that they do not always deliver and are often marketed as being the equivalent of other club memberships.

Away from the sporting world, the report also found that there are risks to both artists and consumers buying NFTs in the art world.

While NFTs can create new markets for artists and help them develop digital skills, the industry is harmed by copyright infringement and it can be time consuming for artists to enforce their rights.

NFTs are mostly unregulated, with the report saying that there is a significant risk to consumers even from legitimate products. The committee recommended that the government take steps to reduce the risks of harm to consumers form the marketing of NFTs. These include engaging with NFT marketplaces and creating a code of conduct.

“Traditional regulatory regimes have failed to protect both creatives and consumers caught up in the volatile new crypto world,” said Dame Caroline Dinenage MP, chair of the CMS Committee. “Artists are at risk of seeing the fruits of their hard work pinched and promoted without permission while fraudulent and misleading adverts add an extra layer of jeopardy for investors involved in what is already an inherently risky business. The Government must make sure that everyone in the crypto chain is working to properly protect consumers and the rights of creators.”

She continued: “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 fails to materialise. Fan token schemes must not be used as a substitute for meaningful engagement with supporters.”

Share Story: