Wednesday Special Feature | NIL Meets NFT
A free segment by Optimum Sports Consulting- the Wednesday Special Feature. OSC provides valuable, actionable NIL resources for athletes, administrators, agencies and sport professionals.
By: Alex Kaczynski
Over the past year it appears that the world has become dominated by 3 letter words, whether it be the NIL discussion in college athletics, the 3 letter tickers of various stocks and cryptocurrencies, or, perhaps the most confusing of all, NFTS. Although NFTS have been around since 2014[1], made popular by the famous rainbow cat image, over the past year they have exploded into mainstream society with numerous professional athletes, artists, and celebrities taking part in the fun. It would seem only natural, almost fated, that the rise of NFTs should help aid the rise of NIL for college athletes.
What are NFTs?
Despite the letters NFT having become part of the public consciousness, it is still a concept that is relatively unknown and confusing. After all, unlike the physical trading cards NFTs often get compared to, it is hard to understand the uniqueness of an NFT and what it means to have “possession” of one.
NFT stands for “non-fungible token”, which acts like a certificate of authenticity for a certain item [2]. Although the image or clip might be what is appearing to possess the value, the NFT acting as an authenticator is actually the store of value (explaining why a screenshot of the image is not worth the same as the NFT). To explain in the trading card analogy, a collector would be willing to pay more for an autographed baseball card if it came along with a certificate of authenticity as opposed to one without.
NFTs have recently gone through an explosive bull market aided by the increased popularity and interest in the cryptocurrency market. Like cryptocurrency, NFTs are stored on the blockchain, making the ability for collectors to authenticate ownership extremely simple and efficient (more so than authenticating signatures and certificate of authenticity) [3].
NFTs in Sports
Although NFTs became famous with cartoony pictures/art, such as the rainbow cat and the bored apes NFT line, NFTs have moved into the sports realm [4]. Perhaps the most successful of the sports NFT lines right now is the NBA Topshot NFT, which had seen over $230 million spent by March 3rd, 2021 [5]. However, companies like DraftKings, OpenSea, and Candy Digital (MLB NFTs) have explored the sport NFTs landscape.
Sports NFTs can be in mainly two different styles. The first style is that of caricatures and posters, relying on the brand of the athlete to make the NFT valuable. The second style, which is seen on websites such as Dapper Lab’s NBA Topshot, is a clip of a play (ranging from a dunk, an assist, a steal, a block, etc.) of an athlete. There are other versions of sports NFTs offering some unique aspects, such as Zed Run which employs digital racehorse NFTs where owners can then race their “horses” against each other for cash prizes, and as NFTs evolve there certainly will be more to come. There are also pushes to create video games based off NFTs owned by collectors.
How NFTs can Help College Athlete’s NIL
NFTs essentially act as trading cards, collector’s items, of athletes and their moments. As college athletes continue to grow their brand through NIL, the desire to have a collector’s item of that athlete will also rise. The use of NFTs for professional athletes, as seen in NBA Topshot, shows that no longer will collectors restrain themselves to autographs, jerseys, and trading cards, but now there is a brand-new avenue for athletes to profit off their NIL. Already, conferences have begun to aid college athletes with NFTs, as seen with the Pac-12 sponsoring with Recur and Veritone, but it is still relatively in the toe-dipping stage for NFTs in college sports [6]. NFTs can also offer college athletes the freedom to choose their own avenues for profit with NFTs, taking more control of their NIL.
One avenue that college athletes can use to profit off of NFTs is to enter into agreements with NFT minters, such as the ones mentioned above, that will share in the revenue made off the NFTs. An example of this is the revenue agreement between the NBA/NBAPA and Dapper Labs to create the popular NBA Top Shot [7]. This could be done through collective licensing of college athletes, or by individual student-athletes approaching these companies to enter into NFT agreements with them. The benefit to such an arrangement is that these companies are more experienced in producing, marketing, and administering NFT marketplaces than a typical college athlete would be.
That being said, since NFTs are done on the blockchain, which at its core is meant to be accessible for everyone, college athletes can “mint” (create) their own NFTs. If student athletes create their own NFTs for their NIL (such as a virtual trading card of the student athletes, a poster of the student athlete, or clips of them performing their sports), it will allow them direct access to the marketplace[8]. Additionally, if collectors know that the NFT is being minted directly from the student-athlete the value of the NFT might increase. However, the actual minting, marketing, and other administrative tasks (such as making sure there is no illegal use of marks) might be more difficult than if the student athlete partnered with an NFT producing company.
Conclusion
The world of sports collectibles has changed drastically over the last year and a half. No longer are the only avenues for collectors trading cards, jerseys, and signed pictures. The entrance of NFTs into this realm, as seen by companies like NBA Top Shot and Zed Run, have created another outlet for athletes to profit off their NIL.
NFTs also provide the opportunity for college athletes to profit off something that NFTs can capture better than pictures and trading cards: moments. Think of Vince Young’s iconic game winning run in the 2006 National Championship game, Chris Davis’s game winning kick return in the 2013 Iron Bowl, or Kris Jenkin’s game winning buzzer beater in the 2016 NCAA National Championship game. Collectors being able to own these moments, and to actually watch them, creates value that cannot be seen in other forms. By utilizing this new technology offered by NFTs, the NIL era might get that much more profitable for student-athletes.
[1] Cascone, Sarah (2021-05-07). "Sotheby's Is Selling the First NFT Ever Minted—and Bidding Starts at $100". Artnet News. Retrieved 2021-11-12.
[2] Dean, Sam (2021-03-11). "$69 million for digital art? The NFT craze, explained". Los Angeles Times. Retrieved 2021-04-08.
[3] Id.
[4] Kastrenakes, Jacob (September 9, 2021). "A bunch of ape NFTs just sold for $24.4 million". The Verge. Retrieved October 29, 2021.
[5] https://www.cnbc.com/2021/02/28/230-million-dollars-spent-on-nba-top-shot.html
[6] https://www.sportspromedia.com/news/pac-12-ncaa-nil-nft-marketplace-college-athletes/
[7] Id.
[8] https://decrypt.co/resources/beginners-guide-to-nfts-how-to-mint-a-non-fungible-token-on-ethereum describing the minting process for NFTs
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