As cryptocurrency and blockchain technology continue to make their way into the mainstream, a key industry that stands out for its adoption of blockchain technology is professional sports. Professional leagues and teams were among the first business owners to realize the potential use of Blockchain technology and its ability to create a unique fan experience. Just last month, two of the world’s largest sports leagues, the UFC and the NBA, launched several cryptocurrency initiatives designed to enhance the fan experience. And the path they have begun to take could provide useful guidance for entrepreneurs in all industries, as they consider how to properly integrate crypto and blockchain into their businesses.
UFC and NBA lead the way
Mixed martial arts promotion the Ultimate Fighting Championship (UFC) has begun paying its fighters bonuses in Bitcoin payments through a partnership with UFC cryptocurrency partner Crypto.com. Bonuses are paid for through a voting process in which fans chose the three main fights of a PPV called “Night Fan Bonus” and began earlier this month at UFC 273.
Meanwhile, the NBA Playoffs are underway and many of the series have been very exciting. The playoffs are the first season of the NBA, and this year the NBA coined NFT from the “Association” – unique digital assets registered in the chain of blocks indicating ownership over the asset – that look like digital basketball cards for every player in the playoffs. What’s really interesting is that these NFTs are marketed as “Dynamic” because the player’s image, as well as the background and frame of the NFT, will evolve based on the real-time performance of the player and the performance of their team.
2 Key Considerations for Entrepreneurs
There are two key considerations that these developments can teach employers in all industries: the consideration of the status of employee and independent contractor and the importance of collective bargaining when necessary.
Independent payment contractors v. Employees
While both new cryptographic initiatives should help create a more immersive and engaging fan experience, these projects also highlight issues that entrepreneurs should consider. First, there is no doubt that paying employees in cryptocurrency has been a hot topic in 2022 as employers and businesses are working hard to understand what they need to know about this relatively new practice.
UFC fighters, however, are not considered UFC employees. In contrast, the UFC, like the WWE and many other conferences, leagues, and competitive professional sports teams, is known to use independent contractor agreements for its competitors.
Paying freelance contractors in cryptocurrency can provide several unique advantages for both the company and freelance contractors over their typical payment system. For example, if a company pays an independent contractor in cryptocurrency, the independent contractor will pay faster. Paying in cryptocurrency is not only cheap, but almost instantaneous, which can serve as a significant hiring benefit that allows a company to hire the best talent. Given the growing global remote workforce and especially the diversity of talent in different countries, the introduction of cryptocurrency can be a hassle-free and cost-effective payday solution.
In addition, in the typical business environment, hiring independent contractors can provide massive savings in labor costs, unemployment insurance, workers’ compensation, taxes, and benefits. It may also reduce potential liability related to most laws and issues regarding wages and hours and discrimination under the Occupational Health and Safety Administration (OSHA) and immigration laws.
Despite these benefits, the risk of misclassification is significant. It has been a hotly contested issue for litigation in both individual and class actions. Employers evaluating whether to pay independent contractors in cryptocurrency or fiduciary dollars should consider the following: It is the law of the state in which you operate that defines whether someone is actually an independent contractor, not the contract you signed.
Depending on where you operate, the elements of legal proof that determine the status of the contractor may be slightly different. However, a misclassification finding, no matter where you are, will expose you to the same set of problems: unpaid pay claims, break and meal violations, unpaid overtime, and related penalties. In some cases, these issues can also become complicated collective actions that will undoubtedly place a financial burden on your team.
If you have independent contractor relationships, whether you pay for them using cryptographic or traditional methods, you should consider consulting with your employment attorney to make sure the agreement is legally correct in your area.
Collective bargaining considerations
Another key issue for many entrepreneurs that can be drawn from these developments concerns collective bargaining obligations. Like almost every professional sports league in the country, many employers have employees represented by a union. The National Labor Relations Act requires leagues to negotiate with their players’ union any changes in the salaries, hours, or other terms or conditions of employment of players. These categories are interpreted broadly in favor of a collective bargaining obligation.
Understanding the scope of this obligation is crucial, as a lack of bargaining can lead to a charge of unfair labor practices and a lengthy trial before the National Labor Relations Board. Outside of professional sports, the same requirements exist for employers when trying to make changes in these categories.
In some cases, collective bargaining is relatively straightforward, with each party making proposals and eventually engaging in one direction or another. In the context of professional sport, as well as general labor negotiations, negotiations can be prolonged and contentious. In the field of professional sports, it is not uncommon for there to be a strike or closure of players by the league. For the past 20 years, each of the major professional sports leagues in the United States has suffered a strike during collective bargaining.
Elements such as NFTs, which can affect revenue generation, receive additional attention at the negotiating table. The key question is usually how the revenue will be shared between the players (or workers) and the owners. For sports that use a salary cap linked to league revenue, the parties must also decide whether to include the revenue generated by the NFT. In a typical relationship between employers and unions, this could include questions such as salary increases, paid additional free time and improved retirement, health insurance, or other benefits.
The NBA, on the other hand, was one of the first professional sports leagues to develop NFT. He has been working with blockchain company Dapper Labs since 2019 on the popular NBA Top Shot. Although NFTs are not specifically defined in the current NBA Players Association collective agreement, the league has the right to market “media” (defined broadly to include, among other things, “digital” media). But any use of any “player player attribute” in promotional activities must be jointly authorized by the NBA Players Association. In accordance with these provisions, the NFT “The Association” for this year’s playoffs is jointly licensed by both the league and the players’ union.
As far as collective bargaining is concerned, ensuring that there is meaningful bargaining on any change in the wages, hours or other terms or conditions of employment of an employee is crucial. You should pay special attention to the terms used in your CBA, especially in areas of emerging or changing technologies or practices such as crypto and blockchain. Again, the best way to determine your legal obligations in this regard is to consult with your employment lawyer before embarking on this journey.
Although the law surrounding NFTs is still unclear, NFTs are undoubtedly transforming the future of sports memories.