Brooklyn Nets star point guard Spencer Dinwiddie is about to become the first professional athlete to “tokenize” his contract.
After months of legal wrangling with the National Basketball Association, Dinwiddie tweeted the news on Friday that he is set to launch a digital investment vehicle dubbed “The Spencer Dinwiddie bond” on Jan. 13.
The Spencer Dinwiddie bond launches January 13th. I’ll also be taking 8 fans to ASW with me. #NBAVote pic.twitter.com/dhXKt0qPqh— Spencer Dinwiddie (@SDinwiddie_25) January 10, 2020
Dinwiddie has a three-year, $34 million contract with the NBA. His idea is to sell enough tokens so he can get $13.5 million of that up front rather than spread out over the term of his contract.
Previously, the NBA opposed his original plan, announced in September. That called for the possibility of significant dividends for investors if Dinwiddie opted out of the final year of his contract in 2021 and signed on with a more lucrative deal. The NBA saw that as a violation of the the league’s collective bargaining agreement, according to a report in Forbes.
“Pretty much what they said was that the player option was gambling,” he told Forbes, “and that would’ve been cause for termination.”
Based on that, Dinwiddie went back to the drawing table. He removed the investment vehicle, turning the token into a flat bond with no performance incentives related to his player option. His contract is guaranteed, so being cut or injured isn’t a risk for investors.
Dinwiddie, who is 26, is converting his three-year $34 million NBA contract into a security token offered by the company DREAM Fan Shares. The company hopes to attract other athletes and entertainers who want to do that same. Tokens are launched on Ethereum.
Starting Monday, the basketball star will begin selling 90 SD8 tokens, named for Dinwiddie’s initials and number, for $150,000 each to accredited—that is, wealthy—investors, under the Security and Exchange Commission’s Regulation D, Rule 506 (c). After 12 months, the tokens will be tradeable.
If all goes well, Dinwiddie will receive millions of dollars upfront without having to go through a bank. The digital security will be a three-year bond that pays out 4.95% interest on a monthly basis, and fully pay out when it matures in 2023, according to Forbes.
Meanwhile, the NBA hasn’t actually given Dinwiddie a thumbs up on the idea yet. In a statement Thursday, the league said: “Spencer Dinwiddie’s advisors provided us today with new information regarding a modified version of their digital token idea, which we are reviewing to determine whether the updated idea is permissible under league rules.”