Late Friday, after the Nets completed Media Day, the NBA ruled that Spencer Dinwiddie’s plan to create a “digital investment vehicle” based on his contract violated the Collective Bargaining Agreement and thus would not be permitted.
Marc Stein of the Times
The NBA tells @NYTSports that "the described arrangement is prohibited" by league rules because "no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract." More: https://t.co/8P3Qyb5imp— Marc Stein (@TheSteinLine) September 27, 2019
Dinwiddie responded by challenging the league’s assertions.
I love the @NBA it is the greatest league in the world. And it is an honor to be their partner. But to put this quite simply I’m not assigning my contract and have been explicit in that when I’ve spoken to them.— Spencer Dinwiddie (@SDinwiddie_25) September 27, 2019
The news tonight is disappointing because all it does is inspire #FUD in the birth of a previously unrealized asset class under the assumption that I’m breaking a rule that I’ve been clear I’m not breaking in multiple conversations.— Spencer Dinwiddie (@SDinwiddie_25) September 27, 2019
Dinwiddie had been pushing the proposed “digital investment vehicle” in the days leading up to the league decision, trying to explain how letting investors —including fans— take a risk on his performance would permit them to have some “skin in the game.”
Approval of the plan was always a long shot.
“What better way to be invested in a player as a fan than to have some level of skin in the game,” Dinwiddie told The Athletic. The collateral in the deal will be his three-year, $34.4 million contract,
In essence, investors would have provided Dinwiddie upfront money, then reap the rewards in the third year of his deal, which is a player option. Assuming his first two years were gang busters, Dinwiddie would opt out and go for a bigger, long term contract, rewarding his early investors.
“With the way mine works, if I play well in that player option year and we split the profits up the first year of my new deal, it greatly appreciates the return on this investment vehicle. It allows you to get up in that 15-percent range in a return, like a growth stock, and that’ll be something most guys won’t beat.
“And you’re going to be invested in watching your favorite player. It’s something with a floor, guaranteeing you a floor, and obviously the cap on the return would beat most stocks in the economic climate that we’re going into. To make it as simplistic as possible, the real growth is for the third year, just like my contract is. You have the guaranteed premiums. You have the big-time fluctuation in the third year, with a floor. Everyone can appreciate it and make money.”
The advantage for Dinwiddie is that he would get more money upfront in investments that he would normally wouldn’t have access to. Of course, like any investment, there are no guarantees.
The digital side of the plan should cut down on costs, he added. Instead of a bond, investors will get a token, cyber currency. Dinwiddie has been advocating investing in cyber currency for a while. He calls his digital investment vehicle both a “new asset class” and “a real fantasy sport” that “enhances the real fan engagement. It enhances the NBA.”
Dinwiddie also said he would set aside a reserve to provide a level of security: $1 million in cash flow, $1 million in a public Bitcoin entity and $1 million in physical gold.
As every Nets fan knows, Dinwiddie is one of the smartest players on the team, in the league. Moreover, he exhibits the confidence most entrepreneurs have in their new product. No word on when the league and union will make their decision.
- Nets’ Spencer Dinwiddie Can’t Sell Shares in His Contract, N.B.A. Says - Marc Stein - New York Times
- Still confused about Spencer Dinwiddie turning his contract into a digital token? We talked to him and got him to explain - Shams Charania - The Athletic NBA