The NBA told Brooklyn Nets player Spencer Dinwiddie on Friday that he will not be permitted by the league to tokenize his contract, per a report in the New York Times.
Earlier this week, Dinwiddie had shared plans with multiple news outlets of creating an $D8 token that would see the player sell a portion of his contract to accredited investors in $150K or larger allocations. The "tokenized security" would be backed by Dinwiddie's contract and pay back the principal amount plus a few percentage points of interest.
The player had planned to issue a security token on the Ethereum blockchain and raise between $4.95 million and $13.5 million in the offering. The token structure was novel in that it had the potential to pay more than the base amount of the contract if Dinwiddie achieved certain performance thresholds and was either paid bonus money or secured a new free agent contract of significant value.
As Dinwiddie told the sports publication The Athletic:
What better way to be invested in a player as a fan than to have some level of skin in the game. With the way mine works, if I play well in that player option year and we split the profits up the first year of my new deal, it greatly appreciates the return on this investment vehicle.
However, the NBA did not see Dinwiddie's efforts the same way, telling the New York Times:
According to recent reports, Spencer Dinwiddie intends to sell investors a ‘tokenized security’ that will be backed by his player contract. The described arrangement is prohibited by the C.B.A., which provides that ‘no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract.’
The sale of shares in future pro athlete earnings has been attempted in the past by companies such as Fantex, which sold shares of multiple athletes including the NFL's Vernon Davis and Alshon Jeffery. However, Dinwiddie's deal would have been the first pro athlete contract issued on the public Ethereum blockchain.