Selling Your Future? Spencer Dinwiddie’s Digital Tokens Explained

One of the more innovative and perplexing pieces of NBA news of late is Brooklyn Nets guard Spencer Dinwiddie’s notion to sell “digital tokens” on his future earnings. Reading through the tweets on this topic, I’m struck by how many are still saying, “I still don’t understand what this is all about.”

So here’s a primer on it, answering some essential questions:

  1. What exactly does he want to do it?
  2. Why does he want to do it?
  3. Why would anyone invest?
  4. Why doesn’t the NBA want him to do it?

What exactly does he want to do?

The whole idea isn’t as complicated as it sounds: Investors get a digital coin called variously “$D8 coins, SD8 coins, and Professional Athlete Coins.” But it’s like a rose, whatever you call them, it’s the same.

Each coin represents a percentage of Dinwiddie’s future earnings, and investors get a monthly payment, plus interest.

So in one sense, the coins are just a kind of bond or IOU, but there’s another layer to it.

According to Shlomo Sprung of Forbes:

If all goes according to plan, Dinwiddie will open SD8 to the masses in a year. The original 90 coins will be tradeable, and he’ll offer a flat bond that opens up the security to roughly another 10,000 investors. And next year is when he expects other players to be able to join in with their own digital coins based off their contracts. He said there are double-digit athletes and entertainers willing to join in, but are waiting to see how Dinwiddie’s test case fares.

So now it’ not just a kind of “bond” he wants to create, but something akin to a stock, plus a sort of “athlete stock market” to go with it.

That’s where things get interesting.

Imagine hundreds of players in different sports, each selling coins for future earnings, to thousands of investors. Then those investors either selling or swapping coins to other investors, all essentially “betting” on the future success of athletes.

Why does he want to do it?

Jan 10, 2020; Brooklyn, New York, USA; Brooklyn Nets guard Spencer Dinwiddie (8) drives to the basket against the Miami Heat during the second half at Barclays Center. Mandatory Credit: Andy Marlin-USA TODAY Sports

There are two reasons to do this. The first applies to the coins, and the second applies to the potential “stock market.”

Getting paid everything upfront gives Dinwiddie more money to invest now, and he’s betting that the investments are going to outpace what he’s giving up in interest. It’s the same principle as a lottery winner taking the lump sum instead of the regular payouts.

The other thing he gains is the pathway to open up this possibility to other athletes on his platform, DREAM Fan Shares.

Imagine this works. Imagine that other NBA players start utilizing the platform. And then other players from NHL to NFL (the guaranteed portion of their contracts) to worldwide soccer players.

Any athlete with guaranteed contracts could theoretically do the same thing. Hundreds of millions or even billions of dollars worth of coins could be bought and sold and traded on this pseudo-stock market, and Dinwiddie would own that.

The money-making potential here is vast.

Why would anyone invest?

Jan 7, 2020; Brooklyn, New York, USA; Brooklyn Nets guard Spencer Dinwiddie (8) at the free throw line against the Oklahoma City Thunder in the fourth quarter at Barclays Center. Mandatory Credit: Nicole Sweet-USA TODAY Sports

There are a few incentives. First, it’s borderline zero-risk. The only way the athlete is not going to get paid is if they violate the morals clause. A guaranteed, 4.95 percent return on your investment is a good reason to invest.

But there are other incentives too. It’s a way for fans to engage with and partake of their favorite athlete’s success. For instance, Dinwiddie has promised to take eight of his investors to the All-Star Game with him.

Beyond that, there’s actually something to be said about having a literal kind of stock in your favorite athlete’s success. It’s like fantasy sports on steroids.

Why Doesn’t the nba want him to do it?

The NBA’s stated concerns are essentially twofold. First, the CBA prohibits athletes from transferring their contracts.

The other fear was that there is an element of something like gambling involved when Dinwiddie’s option year comes into play. However, Shams Charania of the Athletic reported:

Dinwiddie maintained that his player option is simply a performance-based incentive that has been tied to thousands of players — not a gambling angle — and that his investment vehicle actually encourages him to play as much as possible and perform well.

So Dinwiddie edited his investment vehicle again, and instead of tying investors to his basketball-related income that option year, it would simply be a flat bond with no performance incentives. The NBA came away from meeting with Dinwiddie satisfied that his career and the Nets are his primary priorities.

What the NBA is not saying, (though it could be a realistic fear), is what this could mean for the future of the professional game: How will this kind of “market” affect free agency, player movement and so on?

Will it make things even more tilted towards the major markets?

Or it could have a positive impact, energizing the league with such an original way for fans to participate?

As to the players, it’s not uncommon for rookies who suddenly get big money all to squander it. What happens if they get even more money, and spend it all before their contract is up?

Unfortunately, the most difficult questions are impossible to answer at this time. It’s typically a total cop-out to end an article with “we’ll just have to wait and see”, but this is one of the rare times where it’s the only responsible thing to do.

This could be a great thing for the league and players. Or it could be a disaster. Only time will tell.