• Toby Newton-Dunn, Juan Crespo Ruiz-Huerta

Fan Tokens: Success or Scandal?

In the latest article for The Legal Pitch, Toby Newton-Dunn assesses the rise of fan token company Socios, which has attracted various criticism since its inception in 2018. Spanish sports lawyer Juan Crespo Ruiz-Huerta also offers a cross jurisdictional comparison with Spain analysing the effects of fan tokens and what legal intervention could be required to better regulate crypto assets in the sports industry.

In 2018, Socios’ CEO Alexander Dreyfus had a vision to bring fans from all around the world closer to the teams they support through the use of ‘fan tokens’ (FTs) which can be acquired after purchasing the company’s own cryptocurrency ‘Chillz’ (CHZ), a subsidiary business to Socios. Dreyfus recognised that major companies, such as Microsoft, PayPal and Starbucks, started accepting cryptocurrency as a means of payment and saw an opportunity to bring this to the sports industry. Socios, a Malta based company, has since grown exponentially, forging over 120 partnerships with sports teams and leagues, nevertheless their success has serious prompted questions about their business model and the utility of their FTs after various misleading marketing campaigns have been advertised to people who may lack the awareness surrounding crypto-investments risks, notwithstanding the inexistence of current regulation. This article offers a cross-jurisdictional analysis uncovering:

  • The concept of FTs

  • Who can buy FTs?

  • Can FTs be traded?

  • What legal intervention is there?

What is a fan token?

In a nutshell, FTs are ‘digital assets’ which give the owners of the tokens voting rights to polls to certain club related activities, competitions, VIP experiences and also monetary rewards. Socios pitch the tokens as a “fan engagement business” as it allows fans from all around the globe to feel more connected to their favourite club through a new loyalty program. This innovative idea has allowed Socios to partner with UEFA Champions League, La Liga, six Premier League clubs (Arsenal, Manchester City, Aston Villa, Leeds United, Everton and Crystal Palace) and other European heavyweights such as Barcelona, PSG, AC Milan and Inter Milan. The FT is not a share in the club, nor are they a form of cryptocurrency themselves as they can only be obtained after purchasing the cryptocurrency ‘CHZ’ via the Socios app.

You cannot spend the tokens in the same way you would buy a coffee, instead the idea is to give fans more recognition and influence at their preferred clubs. Socios recognise it would not be sensible to allow fans to vote on tactical and/or business decisions therefore fans are allowed to vote on matters such as: “What inspirational message shall we put on the captain’s armband?” or “What song shall the players walk out to on a matchday in the stadium?”. Given that only a certain amount of people can attend a match live, the FTs are designed to bring distanced fans closer to the matchday experience and feel more involved in the running of the club. Socios’ objective is to turn a ‘passive’ spectator into an ‘active’ fan who engages with club decision making and enters competitions. This is because more engagement provokes more rewards - given that the more you vote, the more you connect with the club, giving you more loyalty points and enabling you to unlock VIP experiences.

Socios and CHZ are both underpinned by Blockchain technology which permits transactions to be stored on a ledger facilitating the movement of money without a central authority (such as a government or a bank) in order to convert CHZ into cash. Unlike a bank transfer, where only the sender, the recipient and the bank can view the transaction, Blockchain transactions are visible to anyone and it shows that Socios has been moving vast amounts of CHZ into Binance (the online platform that converts crypto into cash). A Socios spokesperson revealed “we liquidate at the optimum time so the clubs benefit. It doesn’t mean profit for the company, rather revenue for the clubs. Figures are then declared and any tax is paid on any profit”. This explains how Socios provides a flat revenue (euros/pounds/dollars etc) for their partners and the same goes for fans who wish to cash in on the value of their tokens.

Who can buy the tokens?

The short answer is anyone. Socios impose no restrictions when buying fan tokens of certain clubs as their business model is about the easy accessibility of fans without the barriers that would have traditionally existed for overseas fans in the past. Anyone can buy as many tokens for as many clubs as they wish, all that is required is to download the Socios app, purchase an amount of CHZ and then use the CHZ to acquire the FTs of the club(s) of their choice. Hypothetically, a Manchester United fan could invest a lot of money into CHZ and buy Manchester City’s tokens and have an influence on how their club is run. Interestingly, it makes little sense to have a fan engagement business that does not ensure that only the fans of the relevant club can buy these tokens to vote.

When Socios signed their partnership with Arsenal, they gave every Arsenal season ticket one free token as a gesture of their ‘hardcore loyalty’, but in Arsenal’s initial sale 30,167 users bought 2 million tokens (valued at the time of £2 per token) meaning the average holder has 66 tokens meaning a season ticket holder’s single token will not count for much. An Arsenal spokesperson stated “one token is enough to access the benefits of fan tokens and we advise fans not to spend more than they can afford”. In that case, if all you need is one token to access all the benefits, why would a person need 66? Essentially, due to the value of the CHZ crypto currency and FTs fluctuating, it gives the owners a chance to monetise and profit from their investment if the FT value increases, however it also imposes huge financial risk to investors. For example, Arsenal’s token shot up in value when it publicly traded but steadily declined in value to less than half its peak five months later. Nevertheless, it seems the only reason to acquire more tokens is to make money from this, rather than actually engage in club related activity given that the influence afforded to FT holders is on minor issues that fans are not that passionate about.

Graph taken from

Additionally, it should be noted that Socios, somehow, aims to capture the spirit of the pre-Spanish Sports Act of 1990 sporting landscape (Ley 10/1990, de 15 de octubre), which forced all Spanish professional sports clubs to convert into public limited sports companies (Sociedades Anónimas Deportivas or SAD). Before this legal innovation, all clubs in Spain were ruled by their ‘socios’ (spanish word for members), who voted for the most important decisions affecting the entity. However, except for four professional sports clubs (Athletic Bilbao, FC Barcelona, Real Madrid and CA Osasuna), which were allowed to retain their status as non-commercial sports associations as all other clubs were forced to become companies following traditional governance structures. The four clubs that retained their ‘socios’ had and were expected to achieve a positive financial balance prior to adopting the Sports Act in October 1990. It seems now that Socios, the company, seeks to give the power back to the ‘socios’.

Can FTs be traded?

Without limits to acquire tokens, it creates opportunities for ‘savvy’ crypto traders to invest, manipulate the price and then dump the tokens on genuine fans. For example, amid speculation that Lionel Messi was about to sign for PSG, the “$PSG” fan token surged with traders encouraging others to pile into the market. Yet, the tokens plunged in value the moment Messi became a PSG player which indicates traders were pushing others to buy their coins to bank a quick profit for themselves. Another example was when Atletico Madrid were close to winning La Liga in May 2021, the “$ATM” fan token rose tremendously until the moment they were confirmed as champions when the value sank immediately. Consequently, fans are becoming the victims as they lose money after good things happen to their teams which makes no sense. Although clubs and governing bodies may have been seeking to maximise the amount of sponsorship deals after the pandemic, it seems they have turned a blind eye to this issue and, as a side effect, adds another stumbling block to the sports industry’s continual battle with gambling.

Graph taken from

Furthermore, Binance has no link whatsoever to football. Its price is determined by traders worldwide, rather than those strictly buying CHZ to acquire FTs, which is why they are subject to volatile price movements. The Financial Conduct Authority’s (FCA) advice around cryptocurrency, referring them to ‘crypto assets’, is “if consumers invest, they should be prepared to lose all their money”. Added to this, CHZ produced a white paper (guidance) in 2018 recommending those considering to invest in CHZ should be “professionally advised”, further stating they are marketed for “financially sophisticated persons” rather than casual traders unaware of the risks of crypto. This was recognised by Britain’s Advertising Standards Agency (ASA) in its ruling against Arsenal Football Club stating “the club trivialised investments in crypto assets and took advantage of consumers’ inexperience or credulity” in a promotion for Socios that featured three first team players. The issue here was that Arsenal failed to mention that any profits made must be subject to Capital Gains Tax (CGT), reaffirming the complexities surrounding crypto investments that the casual fan would be unaware of.

Photo taken from

What is even more concerning is that a recent investigation by Off The Pitch has revealed that CEO Dreyfus has been controlling the value of CHZ by withholding crypto payments to staff, worth potentially millions. Considering market manipulation of traditional stocks and securities falls within the scope of fraud in many jurisdictions, it raises fresh questions about the legitimacy of Socios and CHZ. In 2018 and 2019, Dreyfus recruited a number of tech experts that were to be paid in the cryptocurrency itself, rather than a FIAT currency (government issued currency such as pounds/dollars/euros), however a number of employees never received any payment. Dreyfus has the power to release more CHZ currency into the market at the touch of a button, however, he was cautious in doing so as saturating the market could affect the FIAT price of CHZ on the exchanges. He stated “when you give free tokens, people can sell at any price (sic)... it doesn’t matter for them; so it makes the price going down… and the REAL investors who bought are losing money because (sic.) of that.” Evidently, Dreyfus refused to pay employees contractually agreed sums of cryptocurrency that he invented to control and maintain the high price of CHZ and as a consequence, benefit his own investors. What is worrying is that, because the crypto market remains so unregulated, no existing legislation specific to crypto assets prevents the manipulation of the market (nor any employment legislation to regulate remuneration payable in cryptocurrency and access to any necessary compensation), leaving Dreyfus’ actions without any significant legal consequence.

This has subsequently led to some Premier League clubs reviewing their multi-million pound relationship with Socios. Arsenal have enquired to Socios and CHZ for more details surrounding this matter to understand more about the allegations. A spokesperson from the club added “the club had conducted due diligence through independent specialists which is normal practice before entering into any partnership”. The Football Supporters’ Association (FSA) said the investigation highlighted the need for Premier League clubs to vet potential commercial partners in the crypto industry. The FSA added “Clubs have been too quick to enter into partnerships which seek to monetise fan engagement that promotes misleading products and trivialises crypto investments”.

The same legal issues and questions problems are being asked in other jurisdictions. The Spanish Treasury Agency (Hacienda) started its 2021 taxation campaign in April 2022 and began to receive tax returns from Spanish citizens, including cryptocurrencies. Many taxpayers in Spain have entered the crypto market, so the Hacienda was forced to modify its tax declaration model to integrate virtual currencies and crypto-assets in a generic taxation section.

Only time will tell if FTs will be considered crypto-assets. Of course, one can think that if FTs can be monetized and sold, they would have sufficient financial value to be taxed by Hacienda or any other tax administration across the globe. Lawyers should therefore consider these elements before allowing their clients, whether athletes, individuals or clubs, to purchase or trade with FTs.

What current legal intervention is there?

At the time of writing, no legal framework regarding crypto assets exists in the UK, as well as in many other jurisdictions. The only intervention so far has been the ASA ruling against Arsenal which, although provides some helpful guidance, does not carry the strength of an Act of Parliament.

This means consumers are not adequately protected as investors, whether clubs, athletes or intermediaries, for instance, must prepare to lose all their money and are unlikely to receive compensation. However, this is where Socios have complicated things once again as they claim their FTs are utility tokens for the purposes of the UK’s financial regulatory regime and do not require any previous authorisation from the FCA when issuing and distributing FTs. A Socios spokesperson commented “we do not promote fan tokens as a way of making money, but as a tool to engage with sports organisations that were unimaginable a few years ago”. Yet this appears to be another contradiction given the volatile nature of FTs, with traders buying low and selling high. Added to the fact ASA’s ruling confirmed that Arsenal failed to mention any profits made from trading the FTs are subject to CGT, this clearly implies FTs are being advertised as a mechanism to make money. Given the crypto industry’s recent emergence and the lack of education that surrounds these products, it is clear that these adverts pose a huge threat for consumers who are not conscious of what they are buying, especially when marketed to those that are not ‘financially sophisticated’, such as the average football fan.

On the 18th January 2022, the UK Government published a news story stating their intention to strengthen the rules on misleading cryptocurrency adverts in order to offer protection to consumers, confirming:

  • Plans to legislate to address misleading crypto asset promotions

  • Adverts will be brought into line with other financial advertising, ensuring they are fair and clear

  • New rules will increase consumer protection while encouraging innovation

The consultation response sets out the government’s plan to bring crypto assets promotions within the scope of financial promotions legislation, and therefore will be subject to the same FCA rules as stocks, shares and insurance products. This will be done via secondary legislation to amend the Financial Promotion Order, which sets out the investments and activities to which the financial promotion applies. Under the Financial Services and Markets Act 2000, a business cannot promote a financial product unless they are authorised by the FCA of which said promotion must be fair, clear, and not misleading. This would mean Socios would have to rethink how they describe their product to consumers as it would almost certainly fall within the new FCA rules once published.

Any legal reflection would be voided if we do not talk about what happens when FTs are not given a proper legal framework. Recently, a few media outlets have reported an ongoing FT-related scandal. Iqoniq, a company that proposed a promising FT crypto platform, sought to involve fans in the decisions of these sporting entities (just as Socios have done). The idea gained support from several sporting organisations, but Iqoniq entered into liquidation after various issues which resulted in the accumulation of debts in the millions. Among those affected is the Spanish top-flight side Real Sociedad, to whom they owe (almost) EUR one million.

As we have been detailing, the FT fever easily conquers clubs who are always looking for more profits amidst all the losses incurred from the pandemic. It seems the growing popularity of cryptocurrencies such as Bitcoin or Ether is genuinely starting to influence the sporting industry. For instance, Formula 1 recently signed a $100m deal with to be the main sponsor of each Grand Prix and furthermore, the former Staples Center, home to NBA title-record holders Los Angeles Lakers, is now called Arena, thanks to a USD 700 million deal.

Regarding the Iqoniq saga, the company had reached agreements with LaLiga and sponsorships with Real Sociedad, Bayern Leverkusen, Crystal Palace or Olympique de Marseille, and sporting governing bodies such as the Euroleague, the European Handball Federation (EHF) or the McLaren Formula 1 team. However, things were not the way they seemed. Iqoniq’s fan tokens’, advertised as cryptocurrency through sports clubs, gave its holders access to benefits such as voting on club decisions, such as future endorsement deals or special benefits. Theoretically, the Iqoniq tokens formed a sort of “private social network” for each club’s respective currency. They were bought, sold, or exchanged with Bitcoin or Ether, and after that step, Iqoniq would issue tokens. In the beginning, these tokens were worth EUR 0.19, quickly plummeting to EUR 0.0036.

Naturally, the clubs that signed agreements with Iqoniq felt as if they were scammed. Crystal Palace cancelled its agreement when the company failed to make an expected payment in February 2021, but still, Iqoniq managed to reach other agreements, such as the shirt sponsorship contract with Bayer Leverkusen, which would also be cancelled after just two months. Eventually, all other agreements entered into with Iqoniq gradually became null and void.

Regarding legal measures, these need to be assessed, approved and implemented not only by national legislation but also, individually, by each sports governing body whose members are entering the FT industry. If international federations such as FIFA, FIA, or FIBA were to issue standard regulations, national or continental bodies will be able to harmonise their regulations and many international disputes will be better controlled.


Despite the many uncertainties surrounding Socios’ FTs or the legal problems faced by clubs, how they can be acquired, their purpose/importance for fans, their financial value and how they can be used effectively - one aspect remains critically clear - Socios’ business model is very misleading and full of contradictions and inconsistencies which must be promptly addressed if the industry intends to benefit from these new financial mechanisms.

Considering Socios market their FTs as a ‘fan engagement’ tool, they often receive a low turnout of votes in certain polls, they fail to ensure that only fans of that club acquire the tokens and they fail to engage fans with aspects that they are truly passionate about. Firstly, if their goal is to bring overseas fans closer to their clubs, how is a fan from China going to feel more connected to their club in England by voting on what motivational message should appear on the captain’s armband? Secondly, if the same fan acquires tokens for every football club partnered with Socios, how is he/she going to feel more passionate towards any of them? Therefore, it makes total sense to ensure only the fans of the respective club can acquire FTs.

Socios’ marketing is misleading as it fails to successfully engage fans whilst also trivialising crypto assets by advertising their products to football fans who may not be financially sophisticated to buy their product and unaware of the risks imposed. Therefore, it is no surprise that fans have been victims of savvy traders who look to exploit and influence the market and, as a result, become susceptible to losing all their money, strengthening the argument as to why only fans of the club should be able to buy FTs. Not to mention the actual CEO of Socios also manipulating the market, which would be considered fraudulent if stocks and shares were concerned, leaves fans at greater risk of losing money and the CEO free from any consequences due to the current lack of regulation. It begs the question whether there is any need to use crypto at all to enhance fan engagement through FTs. Would it not be safer for fans to pay for FTs using FIAT currency to vote on certain matters using existing technology in order to minimise the risk of losing any money?

The Government’s proposals to enact legislation surrounding misleading advertisements for crypto assets to enhance consumer protection is a welcomed step and will hopefully have a positive influence if FTs remain associated with Premier League football clubs. Although the sports industry has clearly recognised the potential that cryptocurrencies offer to attract new sponsors and engage untapped markets, the value of these crypto assets remains volatile whilst the regulatory landscape is uncertain.

It is unknown what will happen for those clubs and partners outside of the UK as the governments in their respective jurisdictions will have to enact legislation that corresponds to these issues; however the more worldwide transparency, coherency and education surrounding crypto assets, the more likely they can be used safely to protect consumers. One thing is for certain, sports governing from all over the world would have to regulate the matter together with ordinary legislative bodies as the sports industry cannot let the administration take control of these precious assets without their consultation.

Overall, there is clearly great interest with FTs and cryptocurrencies and the powers they have for the future of sports with many teams, clubs and sporting bodies innovating to survive the new digital age and meet fan expectations. Despite their potential longevity, Socios’ FTs in their current format have many flaws that need addressing in order to actually engage fans successfully.

This article was written by Toby Newton-Dunn, supported by Juan Crespo Ruiz-Huerta, and edited by Adam Smith.

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