Contact our team for assistance with your tax matters and learn how our knowledge of jurisdictional laws and regulations can help lower your overall tax risk and yield sizable tax benefits. We offer services to clients in the US, Canada and around the world. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll free at (877) 275-4792.
NFTs Open Doors To New Revenue Streams For AthletesJune 4, 2021
written on behalf of Feigenbaum Law
For the last few years, the financial world has been inundated by news related to Bitcoin and other cryptocurrencies. This has been a topic we have frequently blogged about, as more and more people, including individual investors, are looking to cryptocurrency as a way to invest. Non-fungible tokens, or NFTs, are a new form of digital assets that have recently made headlines and have also provided economic incentives for athletes, artists, and others.
What is an NFT?
A non-fungible token is a digital asset (think of a picture, or a song, or a document) that contains a unique digital identifier, not unlike a serial number, which allows it to be bought and sold with the ownership tracked on a blockchain, which is the same technology used to track the exchange of cryptocurrencies such as Bitcoin. For example, the NBA has partnered with the trading card manufacturer Topps, to produce a product called Top Shot, in which people purchase digital card packs that they store in a digital wallet. Owners of Top Shot cards can buy and sell them with one another. The only difference between traditional cards and Top Shot cards is that the former can be physically held. Of course, some people criticize NFTs, arguing their lack of physical tangibility means someone could just make a copy of a file and enjoy it the same way the owner of an original could. That’s true, though the same could be said about traditional artwork, such as paintings that also exist as prints.
NFTs as income generators for athletes
Athletes, artists, and even journalists have been able to create digital pieces of art to sell. Trevor Lawrence, who was recently selected first overall in the 2021 NFL draft was one of the first athletes to jump into the mix. While fans had to wait a few months before his physical trading cards became available, he partnered with Topps to create physical cards. Those sold out quickly, so as a response, Lawrence and Topps released NFTs of five cards which sold for $200 each. While these were available to many people (there were multiple copies of each card, each with a unique identifier) a special one-of-a-kind signed card was also auctioned off, with it eventually selling for close to a quarter-of-a-million dollars, with the funds going to charity.
Trevor Lawrence isn’t alone in his pursuit of digital revenue. Rob Gronkowski, who won Super Bowls with both the New England Patriots and Tampa Bay Buccaneers, released an NFT as well.
NFTs tied to cryptocurrency
One of the more interesting aspects of NFTs is that they are bought and sold using cryptocurrency such as Ether, which is what Rob Gronkowski’s were tied to. That means that the money someone receives from the sale of an NFT can swing wildly in terms of how much money someone makes off the sale. One day, $5,000 in cryptocurrency can be worth many times that in dollars and fall to much less the next day.
For example, when the Golden State Warriors released an NFT set, they had made about $2 million after converting the cryptocurrencies into dollars. However, they would have had more money in hand if they held onto the digital currency before converting it into dollars. The team was reported to have cashed out, choosing to focus on basketball rather than investing.
The rise of NFTs is bound to give athletes access to more revenue streams than they have ever had available. We will be sure to keep our eyes on this growing market and update our readers on any developments.