Is crypto here to stay, or will it be an own goal for sport? - Keith Anderson
Would you consider being paid in bitcoin instead of Sterling?
That’s the question some of the world’s top sporting stars are considering now. And some are saying “Yes, sign me up”.
While still regarded as niche and undoubtedly bringing additional risks, the soaring demand for and value of digital currencies offers an attractive proposition for elite sports stars, many of whom are focused on growing their earnings sufficiently to sustain their lifestyle after their top flight playing careers are over.
Sports clubs, too, are looking at cryptocurrencies and digital ‘tokens’ – known as NFTs. Last month, Bradford City FC reportedly rejected an offer from a group of American investors to purchase the club. The offer relied on NFTs as the significant funding source.
A small Turkish club completed the first transfer of a player using Bitcoin in 2018 and, in November last year, Australian basketball league side Perth Heat claimed to have become the first professional sports team to fully adopt bitcoin and offer to pay players their salaries in the digital currency.
Is crypto here to stay, or will it be an own goal for sport? The English Commercial Court has recognised crypto as legitimate moveable property. However, the market is forging its own path, and regulators, tax authorities and the legal community are having to work hard to keep pace.
Why is cryptocurrency so attractive in the global sporting arena? Professional sport has always attracted big money advertisers, as a surefire way to engage with audiences. We’re starting to see English Premier League clubs agreeing large sponsorship deals with a variety of digital currencies and crypto broker houses, so there is huge potential for additional revenue streams in a traditional advertising market.
Another reason is the potential link to mass market fund-raising for supporter ownership of clubs. Here, in Scotland, the Foundation of Hearts is regarded as a blueprint for other clubs to follow, the most successful supporters’ movement in UK footballing history.
Unlike the Foundation model, owning a digital ‘piece’ or token of a club doesn’t automatically bestow voting or owning rights. Some argue digital tokens would give fans something ‘collectible’ that doesn’t exist in today’s sports world. That may be sufficiently attractive to supporters of their local club.
However, last month the UK’s advertising regulator banned promotions for ‘fan tokens’ from Arsenal FC, saying they were misleading supporters over the risks of investing in cryptocurrencies.
For athletes wishing to have a portion of their salary paid in crypto, the first issue to be aware of is that tax will still apply.
In the UK, HMRC has issued guidance making it clear that if an individual receives cryptocurrency as income, it will be subject to income tax and NI contributions. In addition, if tax on this income is not paid by the player’s club, the player could be liable for that tax.
Furthermore, Capital Gains Tax (CGT) could be payable upon the sale of that bitcoin in the future. So athletes could be liable for both income tax when they receive bitcoin, and CGT when they sell.
My advice to any sporting club or athlete is: consider cryptocurrencies by all means but tread carefully.
They may be legal but they are unregulated so make sure you understand what you are signing up for, and seek advice before making any firm decisions.
Keith Anderson is a Partner, Gilson Gray
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