Cryptoasset Promotions in Sport

Martin Docherty-Hughes Excerpts

Tuesday 8th November 2022 Westminster Hall

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

It is good to see you in the Chair, Mrs Cummins. I thank the hon. Member for Newcastle-under-Lyme (Aaron Bell) for securing the debate, which is important not only because it dovetails with the debate that I secured two months ago, but because I agree with most, if not everything, that he said.

I began my speech two months ago by declaring my interest as chair of the all-party parliamentary group on blockchain, which has done a most excellent job of examining and understanding the blockchain—or, as I like to call it, distributed ledger technology. I remind Members who were not in that debate—the hon. Member for Strangford (Jim Shannon) was—that cryptoasset promotion in sport was one of the first things I touched on.

Something of a watershed was reached during the January Super Bowl in the United States, as cryptoasset ads took up a large chunk of the lucrative half-time advertising. The adverts starred such Hollywood luminaries as Matt Damon and Larry David. A cross-platform, cross-interest advertising nirvana was reached as some of the most trusted personalities were crossed with some of the most trusted brands in American life. The cryptoasset companies that paid for those lucrative spots surely hoped that would impress the hundreds of millions of viewers in the United States and across the world.

Although I used the Super Bowl as my example in my previous speech, I could have gone for other examples closer to home. After the National Football League, the most lucrative sports competition is the English premier league. As the hon. Member for Newcastle-under-Lyme alluded to, there is no shortage of crypto sponsorship there, either. Most if not all clubs have tie-ins as a secondary or main sponsor. Quite simply, sports teams provide perfect synergies for advertisers. Unlike most institutions that command national and international respect, they are open to commercial partnerships, exchanging the cachet that their brand commands among millions of people for handsome pecuniary rewards.

It would be fair to say that issues of morality or due diligence have not always come to the fore when making commercial partnership decisions, as exemplified by the hosting of the world’s largest sporting tournament this month in a tiny yet fabulously wealthy sliver of the land in the Persian gulf, or in the way that one of English football’s most traditional clubs was purchased last year by a group close to the Saudi royal family. I would not ask Members to just take my word for it. The Financial Times, in an article examining the relationships between sports and crypto, said that

“the love affair between sport and crypto appears to be a perfect match, as franchises can deliver a wider audience within the demographic that digital asset players want to reach.”

The article also came up with the astonishing figure of $600 million spent by crypto firms worldwide on sports sponsorship last year, which is up from just $25 million the year before. That is an incredible growth that really demands further examination by anyone interested in issues of consumer protection and good governance, as the hon. Member for Newcastle-under-Lyme mentioned. The risks are obvious, and I will quote the Financial Times article from 27 May one last time to demonstrate that.

“Ronan Evain, executive director at Football Supporters Europe, a prominent fans group, pointed to the risks of ‘an unregulated financial product’. He said teams and players backing crypto assets were ‘considerably irresponsible’, as such tie-ups were aimed at ‘building the legitimacy of the product for an audience that wasn’t necessarily familiar with it’.”

That essentially gets to the nub of my debate in September —the grey areas that are allowed to flourish in the regulation vacuum, the lack of clarity around so many of the products that are being offered, and then the resulting fertile ground for the outright scams that will inevitably follow.

To give just one example, the—how shall I put this—lack of attention to due diligence given by many sporting brands has already resulted in pretty shocking examples of fraud. Take the example of Sportemon Go, something that described itself as an

“NFT-augmented reality sports trading platform”

when it signed deals to appear on the kits of two Scottish Premiership teams, Rangers FC, which I know the hon. Member for Strangford supports, and Hibernian FC, which I know my right hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) is a big fan of. The company collapsed earlier this year after seeing the value of its proprietary “SGOX” token reduced to zero.

That is far from the only example of bizarre cryptoassets being lent a sheen of respectability by our own beloved sporting brands. The Guardian reported last year a press release from English champions Manchester City that trumpeted:

“We are excited to partner with 3Key”,

which I think the hon. Member for Newcastle-under-Lyme already mentioned,

“in their journey to simplify the decentralised finance (DeFi) trading analysis user experience through the power of football to engage with our fans with a range of content and activations.”

While that sounds like the marketing babble that most sports fans are used to, the real story was that 3Key lacked what could be called a digital footprint. It was unclear what services and products it sold, and where it was regulated. Websites associated with the company then went offline, and the club had no choice but to suspend the partnership. I could go on, but we have also heard plenty of examples from elsewhere today. I think there is a broad agreement that something needs to be done.

The Financial Services and Markets Bill, which has just finished in Committee—I was on the Committee myself—could have been one such avenue for regulation. However, to go back to the arguments that I made in my own debate two months ago, there is no legislation needed to clamp down on the worst excesses and sharp practices employed by some of those companies. That said, particularly when it comes to sports clubs—and individual athletes, a subject I have not really mentioned—there is plenty of evidence to suggest that the Government could be doing a lot more to protect institutions that ultimately command so much respect in our communities from the worst excesses and temptations that these sorts of bubbles can bring.

There is only one professional sports team in my constituency of West Dunbartonshire, Dumbarton FC—or the Sons, as they are commonly known—and they are celebrating their 150th anniversary this year. There used to be two, but my hometown team of Clydebank FC folded in 2003 after poor financial decisions were taken by the previous owners, so I know, at first hand, the importance of these brands to communities. Thankfully, the Bankies are now climbing up through the leagues and got into the Scottish cup last year, for the first time since they folded, and I was delighted to be there.

We need to make sure that our communities and constituents are protected from the worst excesses of what I would call unregulated capitalism. When the Minister, whom I congratulate on coming back into Government—I know he is all over this and crypto is way up there at the top of his agenda—rises to his feet, will he therefore highlight the broad range of existing legislation that can deal with fraud and advise how the Government intend to work with sporting bodies across these islands to better understand why they are falling for this fraud and these scams? If necessary, as mentioned by the hon. Member for Newcastle-under-Lyme, perhaps the Minister could also lay out whether existing regulations need to be improved or new regulations need to be added to the statute book to protect consumers. I know that Members on the Opposition Benches would at least support him on that.