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Posted on Techdirt - 13 January 2022 @ 04:34pm

The Future Of Sports Can Be Changed By NFTs, Virtual Reality, And DAOs

One of the hottest gifts in Wisconsin over the holiday season was Packers “common stock,” allowing fans who buy in to hold a small percentage of ownership in the NFL franchise. The Packers are selling 300,000 shares of the stock priced at $300 to raise money for stadium improvements at Lambeau Field and sold more than 100,000 in the first week alone. Many are skeptical of why fans are spending hundreds or thousands of dollars on shares that, by rule, cannot provide them with any financial benefit. You can find an explanation by looking at a seemingly unrelated technology: non-fungible tokens. An examination of the market for NFTs not only provides insight into the “common stock” phenomenon, but may also provide a glimpse at a different future for how we support and even participate in the decision-making process of our favorite sports teams.

Packers Stock as an NFT

The Packers ownership structure is unique in the National Football League. The NFL has rules requiring that franchises be owned by an individual or a small group of owners. The Packers have an exemption to this rule, as the team has been owned by stockholders since 1923 when it sold shares of the organization to keep the team financially solvent and located in Green Bay. Stockholders were prevented from selling their shares to anyone but the team for a fraction of the purchase price in order to prevent the team from being sold to an individual and then moved to a larger market. The Packers held similar stock sales in 1935 and 1950.

After financially stabilizing the team, further stock sales were held in 1997 and 2011 to fund additions and redevelopment to their stadium. Previous stockholders were given large splits, essentially guaranteeing that they had an outsized role in leadership decisions of the franchise.

Shares sold in 1997, 2011, and 2021 provide minimal benefits to those who purchase them. They provide a uniquely numbered ownership certificate, the ability to purchase owners-only merchandise, an invite to the annual owners meeting, and votes to decide Green Bay’s board of directors and a seven-member executive committee that represents the team at league meetings. The maximum number of shares an individual can purchase is 200, and stock cannot be resold and may only be transferred to immediate family members.

Still, despite minimal benefits and the heavy restrictions, these sales have been enormously popular, with the offerings raising $24 million in 1997, $64 million in 2011, and a projected $90 million this time around. Today there are approximately 361,300 stockholders, including myself, who hold roughly 5 million shares.

So what does Packers stock have to do with NFTs?

NFTs face much of the same criticism as Packers stock. Created to provide scarcity to digital art and other online goods, the NFT market has increased rapidly in scope with many NFTs selling for millions of dollars in cryptocurrency. Many see NFTs as nothing but a scam on unsuspecting customers as NFTs provide little to no tangible benefit to those who purchase them — just like Packers stock.

But people who buy Packers stock or NFTs seem to value these commodities for the same reason. Packers fans are proud of their team’s ownership structure and want to display the part they play in keeping the Packers a fan-owned team. And as Techdirt’s own Mike Masnick recently noted in a podcast, owning NFTs is also a way to prove fandom. While NFTs do not grant a copyright on an image, the blockchain does provide a proof of ownership of the NFT for all to see.

Both provide a kind of status symbol of fandom for those interested in the industry to view.

While Packers stock shares traits with NFTs, it lags behind as the process of sending the stocks and verifying who owns them remains offline. Likewise NFTs have yet to contemplate what role they might play in sports beyond providing ownership of sports moments such as NBA Top Shot. The following will provide some ways in which these models might converge to bring both different experiences to fans and even provide for a decentralized governance model for sports team ownership.

Stock and NFTs as Fandom

Without a doubt, the most popular use of Packers stock isn’t attending the owners meeting or voting on the future of the team; it’s displaying the certificate of your share in your home or office. Many fans own stock from each of the major sales to display together and prove their extreme Packers fandom. In this way, Packers stock is most similar to NFTs, though the digital nature of NFTs lets them be displayed to the whole world rather than just those who can physically see the stock (photos posted on the internet notwithstanding).

There is no reason a marriage of the physical and digital couldn’t take place with Packers stock, or other forms of fan involvement.

Some of the most obvious venues are social media platforms like Twitter, which is working on integrating NFTs into the user experience. Fans of teams are often incredibly vocal on Twitter, and sometimes that gives them the chance to interact with players and other professionals on their favorite teams. If stock ownership could be converted into an NFT to be displayed on a Twitter profile, similar to the much desired blue checkmark, an owner’s praise or criticism of their team might carry extra weight. At any rate, making the stock verifiable and compatible for digital display would certainly make ownership more valuable.

Still, stock ownership of a professional sports team only applies to one major American sports team. There is no reason, however, the same principle couldn’t be applied to other ways of proving fandom. Many fans have season tickets which could easily come with an NFT recognizing the fan as a season ticket holder. For that matter, there is no reason a team couldn’t simply sell “fandom” NFTs serving a similar purpose.

Proof of fandom and displaying of NFTs certainly provides some promise, but there is far more that can be done to enhance the fan experience.

As previously noted, one of the benefits of owning Packers common stock is a yearly invite to attend the owners meeting in Green Bay. While the event is well attended, nowhere close to the more than 3 million shareholders attend the event. The fact that I live more than 1,000 miles away prevents me from attending the meeting in any meaningful fashion.

But virtual reality spaces could provide an opportunity for that “in-person experience” at the owners meeting without the need for travel. I could interact with fellow owners in specific rooms, attend panels or keynotes about the future of the franchise, and even take virtual tours of the new facilities or additions.

Once again, this concept need not be limited to NFTs denoting stock ownership. As a season ticket holder to the New Orleans Pelicans, I was invited to a private event with the team’s head coach, but I was unable to attend in person. If my season ticket purchase had come with an NFT that granted me access to such events in virtual reality, not only would I be a happier fan, but I’d also be willing to pay more for the season tickets rather than just purchasing them on a game to game basis. (Interestingly enough, due to the recent surge in COVID-19 cases, this event was held via video call)

There are any number of similar benefits that could be available to team shareholders, season ticket holders, or fandom NFT owners on social media or virtual reality. Events on Twitter Spaces could be available exclusively to those with the correct NFT. Virtual reality could host any number of events, such as an owners-only viewing party of a game, or access to exclusive opportunities to meet and talk to players and coaches. Like the physical merchandise only available to Packers shareholders, digital goods could be made exclusively available to certain fans.

There is little doubt that NFTs will continue to be intertwined with sports fandom for some time to come, but the potential for better fan benefits has only just started to be tapped.

NFTs as a Decentralized Ownership Model

NFTs’ capacity to showcase fandom is one thing, but what if they also offered fans the opportunity to have a real say in the future of the sports franchise they love?

As previously noted, one of the benefits of Packers common stock ownership is voting rights on the future of the team. With the cap of 200 stocks per person and the generous split offered to owners of the first three stock sales, the average fan is unlikely to cast the deciding vote in any decision, nor are they allowed to vote on big decisions such as firing and hiring of the general manager.

Nonetheless, marginal voting rights are still more powerful than the average sports fan has in making decisions about the team. They also prevent a single owner from having an outsized role in the future of the franchise. This is why so many fans of teams that have had little success often complain about bad ownership more than the players on the field. The Packers have been able to avoid this fate, and the lack of centralized ownership likely plays an important role in the team’s success throughout its history.

There are even some ancillary benefits to this model. For example, the Packers are the only NFL team to publicly report their financial status, giving fans of every team a glimpse into the rest of the league’s finances. This provides substantial benefit to fans and politicians when NFL owners come crying to politicians about needing taxpayers to pay for a new stadium.

But there is no reason the basic Packers structure couldn’t be updated for the digital age to allow fans to have a greater say in their favorite team. While the NFL has banned any other franchise from operating in this capacity (after all, what are professional sport leagues but cartels to enrich existing team owners), start-up leagues could borrow from this model. Furthermore, they already have a decentralized system for which to test this model of decision-making.

Decentralized Autonomous Organization (DAOs) could provide a vehicle for future ownership or decision-making for sports teams. DAOs are built with smart contracts, which are self-enforcing digital arrangements. A good way to visualize a smart contract is a vending machine. The contract is fulfilled when a user inserts the right amount of money and the correct item is automatically dispensed to the purchaser. In the DAO space, it would be inserting the correct NFT or other digital token in order to vote.

A recent example of democratic governance within a DAO was the Constitution DAO, where a group of people wanted to bid on purchasing one of the 13 remaining original copies of the U.S. Constitution. The donors of the project, who donated in Ethereum, were granted the ability to vote on what to do with the Constitution if they won it. Over $40 million worth of Ethereum was donated, though the bid ultimately proved to be unsuccessful. While deciding what to do with a document isn’t as complicated as running a professional sports franchise, it certainly provides some proof that large amounts of funds can be raised in a DAO.

While it might be impractical to put every decision of the team up to a disbursed number of owners, large decisions like a vote of confidence in the general manager or head coach could very well be possible.

The NFL or another major sports league would prove a poor test case for this structure of sports ownership, at least initially due to the size and scope of the organization as well as the rules governing operation. But there are any number of other smaller sports leagues where this could be tested.

The United States Football League, a league which previously competed against the NFL in the 1980s and even won an antitrust court case against the league, is planning a relaunch in 2022. Unlike the NFL, it is expected that the new USFL will operate as a single entity with all teams owned by the league. But instead of simply expecting fans to attend and watch games, what if the league offered them a real chance of ownership of the team by selling stock in teams as a form of NFT?

This ownership of the team could be used in any number of ways. Fan ownership of the team might be a way to give people a stake in their team and create loyalty with a new franchise. The league could even decide where to put teams by letting “owners” vote on where teams should be located. If the residents of New Orleans purchased stock NFTs of the New Orleans Breakers team and voted to move the team to New Orleans, the league might feel better about their location decision. What better way to prove a particular city has interest in supporting another sports franchise than by having citizens literally be invested in the team?

Additionally, without previous governing arrangements, these franchises could put far more decision-making power into owners. Everything from the large decisions like hiring or firing of general manager and head coach to choosing a starting quarterback, or smaller ideas like selecting a mascot, could be run through a vote of the DAO.

Decentralized ownership provides a few benefits beyond greater fan involvement. The dispersed ownership structure of the Packers can help prevent a bad owner from making bad decisions causing the franchise to suffer. A DAO could rather easily prevent an individual or group of individuals from amassing too much power. Just ask Washington Football Team fans how they feel about Dan Snyder. Additionally, it would prevent the problem of general fan polling, where teams end up with mascots like Dogey McDogeface—presumably, fans invested in the team would like to see it succeed.

This model of sports ownership could even be tried with independent baseball teams in America or as a way to support historic franchises, such as the second oldest soccer club Wrexham A.F.C, rather than relying on millionaires to pick up the tab.

Whether or not the Packers model can be replicated is a serious question, but that doesn’t mean that advances in technology aren’t well positioned to impact and potentially disrupt the professional sports world. Fan interest and involvement in the sporting world remains high, and the potential for crowdfunding and decentralized decision-making are improving all the time. Sports franchises are ultimately dependent on fan support to exist. Why not give fans a bigger say in how they root for, or even run, their team?

Eric Peterson is a contributor to Young Voices and lives in New Orleans. 

Posted on Techdirt - 30 July 2021 @ 03:33pm

Stop The Antitrust Gerrymandering

The social media app TikTok was reported to have passed more than 3 billion total downloads in July and was the most downloaded app in the first half of the year. This growth is impressive as it not only was banned in India but is the first app not owned by Facebook to pass 3 billion downloads. Yet in the recent antitrust cases from the Federal Trade Commission (FTC) and the states attorneys general against Facebook, there is little mention of the popular app.

This omission is reminiscent of politicians gerrymandering or drawing political lines to benefit their parties? candidates in re-election. Attorneys general and federal agencies have also relied on excluding competitors or narrowly defining markets to make their cases against Google and Facebook.

The FTC led lawsuit against Facebook provides a case in point. The lawsuit accuses Facebook of having a monopoly over ?personal networking services.? The FTC argues that products like LinkedIn or Twitter are different from Facebook and shouldn?t be considered as a personal networking service. TikTok with its 3 billion downloads fails to warrant a mention.

Even with these exclusions, the FTC contends that Facebook only controls approximately 60 percent of the market yet omits whatever company or companies control the other 40 percent. Unsurprisingly the judge was unconvinced of the claim that Facebook controlled 60 percent of the market and gave the FTC 30 days to amend the complaint to show their work.

As other cases against Google move through the process, they will likely face the same struggles at convincing judges due to their gerrymandering. The most recent case filed against Google for allegedly holding a monopoly on app stores in the Android mobile operating system is another example.

The lawsuit immediately fails to pass any logical test since Android is not the only, let alone the dominant, mobile platform in the United States. Apple?s iOS has the majority of users in America and is facing its own antitrust lawsuit from Epic games over its supposed app store monopoly. The states try to get around this by claiming the market is specifically “licensable” operating systems, which excludes iOS, but that only highlights how this is gerrymandering the definition to get to a desired outcome.

Even ignoring Apple, the Android system is extremely open allowing users to download a variety of app stores and even allowing for ?sideloading? or downloading apps directly from the developers without need of an app store. The ?Freedom Phone? which uses the Android operating system and purports to protect users from ?big tech? comes preloaded with its own app store for example.

The problem with these narrow definitions is that it asks judges to ignore the world in which we actually live for ones constructed for the purpose of showing targeted tech companies are monopolies.

Other lawsuits contend that Google holds a monopoly over search when Bing and DuckDuckGo are easily accessible to anyone with an internet connection at no cost. Or that Google faces stiff competition from Facebook, Amazon, and a host of other companies to say nothing of more traditional advertisements.

Like political gerrymandering, elected officials filing these cases seem to believe there is political gain for being tough on big tech. But as with poorly drawn political maps, judges are proving more skeptical. Judges play an important role in protecting a fair in neutral system from political pressure. This is true for both elections and antitrust.

Eric Peterson is the Director if the Pelican Institute for Technology and Innovation. He currently lives in New Orleans

Posted on Techdirt - 20 January 2021 @ 01:39pm

Inauguration Has Happened, Google And Facebook Should End The Ban On Political Advertisements

In light of the events at the Capitol, social media and other online companies have been reevaluating who they let speak on their platforms. The ban of President Trump from Twitter, Facebook, and various other platforms has sparked fierce debate over moderation and free speech. But Google?s recently reinstituted ban on political advertisements until at least inauguration day and the continued ban from Facebook are silencing voices that need to be heard the most ? those speaking about state and local political issues.

Before last November?s election, both Google and Facebook restricted the ability of political advertisers to submit and run new ads. This policy was implemented to prevent situations like those in 2016, when Russian agents were able to purchase $100,000 in Facebook ads related to that year?s presidential election. Although these ads did nothing to affect the outcome of the election, they gave rise to the spurious narrative that Russia ?hacked? the election.

But Facebook?s ban has continued far past election day under the stated purpose of preventing ads claiming the election results were rigged or that the election had been stolen. Google eventually returned to allowing ads and Facebook made an exception for the Georgia runoff. However, the companies? most recent bans leave many smaller speakers without two of their most important platforms, despite the policies? failure to prevent the spread of doubt over the 2020 election results.

Politicians like Alexandria Ocasio-Cortez and Ted Cruz, while certainly benefiting from social media, can reach an audience without these platforms. But many other speakers who want to speak to local audiences about important political issues have come to rely on them.

Before the advent of targeted online advertisements, communicating and organizing locally required going door-to-door or hanging flyers in your neighborhood. If you could find enough support, perhaps you could even set up a meeting in a public space. The old system was not only inefficient, but often costly in terms of time and money.

This is what makes advertising on Facebook and Google so valuable to those wanting to engage on important issues. Want to inform your neighbors about a city board meeting over a key issue for your community? Want to build a coalition of people to support or oppose an issue at your state capitol? Facebook and Google can do so more successfully, and at a fraction of the cost.

This is often the most important kind of political engagement – forming relationships with your fellow citizens to make your voices heard on issues that carry major personal impacts and are far too often under-reported and less understood.

And make no mistake, the last year has featured no shortage of critical state and local issues.

State legislatures are already in session dealing with important and contentious topics like education, budget cuts, and of course, the rollout of the COVID-19 vaccine. Local governments are still dealing with shutdowns and business closures as the pandemic continues into 2021. And as organizing in person gets increasingly difficult, if not impossible, digital tools are becoming even more important.

Key state and local issues are also too often drowned out by politics at the national level. Given the turbulent times we are living through, who can blame people for being glued to the events unfolding in Washington? That?s why Facebook and Google ads are important tools to draw attention to state and local issues.

Inauguration is over and the stated purpose of banning these ads has passed. But more importantly our federalist system of government means that politics don?t only happen at the national level. Rather, the political issues that most greatly affect our lives are those closest to home. Facebook and Google should recognize this fact and end its political ad ban which puts national politics ahead of state and local issues.

The internet is at its best when it informs and connects local communities on the issues that impact them. Blanket political ad bans lessen the opportunity for this kind of much-needed engagement while also failing to improve the national discourse.

Eric Peterson lives in New Orleans where he is the Director of the Pelican Center for Technology and Innovation

Posted on Techdirt - 30 October 2020 @ 01:35pm

Changing Section 230 Won't Fix Politicians' Issues With Section 230

In the week leading up to a potentially extremely consequential election, Congress is once again setting its sights on its favorite whipping boy, Section 230 of the Communications Decency Act.

Section 230 clarifies that users are responsible for the content they post online, not the websites that host it. Yet, this simple law was the subject of a hearing which brought the CEO?s of Twitter, Google and Facebook to the hill to be questioned over the law. These companies have been blamed for everything from increasing hate speech online, promoting election disinformation, and censoring conservative speech.

Seemingly sensing the winds of change are blowing against them, some of the companies brought to the hill have acquiesced that Section 230 will be reformed and will support some changes to the law. What exact changes to the law they will support remains unclear, but what does have clarity is that this tactic is a monumental mistake.

The problem is supporting the reform of Section 230, or even changing the law, will do nothing to get Congress off their back, as any change to the law will fail to address the concerns of those demanding reform. If anything, changing Section 230 will only exacerbate those problems, leading to further scrutiny and calls for reform.

Examine the standard Democratic and Republican complaints. Democrats are concerned that there is far too much hate speech, disinformation, and fake news allowed on various platforms. They want the websites to proactively remove more content they believe is poisoning the civil discourse. Republicans, meanwhile, are upset that websites are removing too much content. Twitter blocked the posting of the Hunter Biden laptop story for days, leading to claims of election interference. Similarly, posts from the satirical Babylon Bee have also been subject to removal. These actions place no doubt in the minds of many on the right that big tech is out to censor them.

Listening to these complaints, it seems Section 230 is the cause of both too much and not enough content being removed? How can this possibly be? One thing is certain–the problem is not Section 230. The problem lies with the fact that platforms aren?t conforming to one side or the other?s content moderation preferences. But rather than admitting that, both sides are using Section 230 as a pretext to haul the companies before Congress and question them on moderation decisions.

It?s likely that our political leaders already know this. If, by chance, they were able to agree and Section 230 disappeared tomorrow, websites would be left with two choices. They can moderate at an incredibly high rate to attempt to avoid liability, thus angering Republicans. Or, they can choose to not moderate at all, leaving any conspiracy theory, offensive speech or disinformation up, which would certainly anger Democrats.

Any other proposal that attempts to cut the baby in half will similarly fail to leave both sides happy, and we will be stuck right back where we started. Giving in to these political demands is a mistake. The Congressional approval rating remains dramatically low, while technology companies are more popular than ever in wake of COVID-19. The general public does not care about this issue, and reforms will not fix the problems of those that have a bone to pick with certain tech companies. Any changes to Section 230 will not only fail to get Congress off their back, but they also threaten the very internet ecosystem that has made them rich and enriched the lives of people across the globe.

Congress should leave Section 230 alone, and tech companies should be prepared to fight back against the disinformation spouted about the law.

The law is working exactly as intended.

Eric Peterson lives in New Orleans where is he the Director of the Pelican Center of Technology and Innovation

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