Club Necaxa, one of Mexico’s top soccer league Liga MX teams, becomes one of the first sports teams to auction a non-fungible token (NFT) for part ownership in the club. The auction will occur on the OpenSea marketplace with an opening bid of $1.3 million.
The NFT represents a 1% stake in Club Necaxa. This stake is currently owned by Al Tylis’ group of investors, who collectively own 50% of the club as of ten days ago. Tylis was formerly CEO of Northstar Asset Management.
A novel feature of owning the club’s stake as an NFT is the ownership is permanent and transferable. This means if the current investors’ equity in the club becomes diluted, the NFT owner will still have a 1% stake in the club, according to a Bloomberg report. Additionally, although the winner will reap the benefits of owning shares, they do not have to make further investments in the club.
There are some key differentiators between the NFT ownership in the club and being a regular shareholder. If they wish to transfer the token, they don’t have to offer it to existing stock owners. And every time the NFT is sold, Tylis’ investors will get 10% of the sale. The NFT owner will have no voting rights.
Selling a stake in a company is conventionally through security tokens, which are usually fungible. According to Tylis, the idea to auction the ownership through NFTs is to generate interest in the club, especially from tech-savvy individuals who might not know Liga MX at all. By surfing the NFT press wave, the auction is likely to bring some attention to Necaxa.
It is worth noting that the auction will take place in Mexico, which has different legal requirements for securitization than the U.S. or Europe. Despite the sale being conducted in the form of an NFT, if American and European teams follow the trend, they will likely face different and more complex legal requirements.
Whether the auction of Club Necaxa’s 1% stake as an NFT is just to generate press or not, it marks a significant step in the sports NFT industry. Until now, most digital collectibles represented an abstract ownership of digital art or video moments in sports but did not provide much value to the owner beyond the satisfaction of actually owning the NFT or potentially re-selling it. For sports entities, this initiative brings a new perspective to the implementation of NFTs in sports to potentially raise capital. For fans and consumers, especially skeptics of digital collectibles, the initiative demonstrates that NFTs can generate tangible value.
UK-based blockchain consultants B9Lab assisted the investors.
Meanwhile, Liga MX has a partnership with Bondly for auctioning the league’s digital collectibles.