Cryptocurrency exchange Binance is the newest major sponsor of the Argentine Football Association (AFA). The sponsorship agreement is currently set for five years and besides sponsoring the National teams, Binance will also manage AFA’s official fan token and will become the naming sponsor of the association’s top-tier league. However, in June last year, Chiliz / Socios signed a three-year deal with AFA, including naming rights and a fan token that has already been issued. A Socios spokesperson told Ledger Insights that it views this deal as a breach of contract.
Fan tokens are a kind of cryptocurrency. Issuing another fan token with Binance could severely dent the value of tokens already bought by fans through the Socios partnership. However, oddly enough, the Socios $ARG token price is up 25% today, but crypto markets are very choppy.
Socios issued the following statement:
“We are thoroughly outraged by AFA’s recent actions. AFA has issued a press release announcing a new Fan Token partnership, Sponsorship and Naming Rights with a different provider barely 9 months into a 3 year contractual relationship with Socios.com that remains in full force.
They pretend to grant the same rights we currently enjoy to a third party and we will be doing everything in our power to defer AFA from proceeding and to protect the rights of the fans who have purchased $ARG Fan Tokens. This is a direct breach of contract and we will be taking all necessary legal actions, in every forum and jurisdiction, to protect the rights of Socios.com, the fans and to ensure AFA comply with what they have agreed with.”
These tokens usually give fans the right to participate in community activities such as voting on decisions. Certain jurisdictions, such as the United States, view fan tokens as controversial because some classify them as securities. So while Socios has several U.S. deals for fan engagement, including with 24 NBA teams, it has not issued fan tokens for U.S. sports teams.
Binance attracts controversy
Believe it or not, Binance was an early investor in Chiliz, the company behind Socios. In late 2020 Binance also announced a strategic partnership with the company. At that time, Chiliz CEO Alexandre Dreyfus said that “Binance has been a strong supporter of Chiliz since day one.” It would be interesting to hear his thoughts now. Dreyfus’ background is in online betting and poker.
Cryptocurrency is a controversial area, but Binance has attracted more attention compared to other operators. That’s in part because it’s by far the largest crypto exchange, but that’s most certainly not the only reason. Last year, the Protocol posted a long list of altercations that Binance has with regulators around the world. And Reuters recently published a piece about anti-money laundering lapses by the exchange.
There’s a parallel with the early days of the internet, when Amazon was accused of foul play after partnering with companies like Toys R Us and then using the intelligence to create its own toy store. More recently, this sort of behavior has attracted the attention of antitrust regulators.
Fan token popularity
Fan tokens have proven popular in Europe, particularly in soccer, with several high profile European football clubs such as Paris Saint Germain (PSG), Manchester City and Barcelona issuing them in partnership with Socios. Part of Messi’s PSG contract was paid in fan tokens. However, like other cryptocurrencies, the prices can be volatile. For example, PSG’s current token price is worth less than a quarter of its value in the first week of the season in August 2021. That’s despite the team being top of the French football leaderboard.
Socios claims that its net contribution to sports – the funds raised by sports organizations through fan tokens and the amount Socios has invested in sponsorships and partnerships – is more than $260 million. The question is whether the fans fully appreciate the token risks.
The Argentine attraction
Like many South American countries, Argentina seems to be one of the most prosperous markets for the expansion of cryptocurrency. Around 3% of the population holds crypto and that number has been steadily increasing since 2019. In 2021 there was an exponential rise in the popularity of crypto due to economic instability, high inflation, deflating local currency, and the crypto boom. Chainalysis ranks Argentina in the world’s top ten for crypto adoption.
Football culture is present in almost every household and even people not enthusiastic about football follow the National team. Hence the attraction.
“Soccer and cryptocurrencies are life in Argentina, so it makes sense for Binance to partner with the Argentine Football Association,” said Binance’s Chief Marketing Officer, He Yi. “Through this agreement, we hope to support Argentine soccer at all levels and introduce Binance, the crypto world and the blockchain to soccer fans across the country and the world.”
Meanwhile, Binance has launched a sports fan token with Italian football team Lazio.
