Shoot Your Shot, Dinwiddie

I'm convinced one of the top killer apps crypto will mainstream in the years ahead is the tokenized income share agreement.

An ISA is simply the securitization of a portion of your future income stream. Sellers receive cash (or in-kind services) up front, then agree to pay back a percentage of their income over a fixed period of time.

The instruments have become popular within the U.S. student loan market, as they’re generally considered less risky to the borrower than traditional, non-dischargeable debt (Lambda School has been a high-profile promoter of ISAs), while still offering good upside to the lender. In the UK, ISAs have even progressed to the point where they're now approved and governed by the top UK financial regulator, the FCA, and many are leveraging ISA products to underwrite the costs of post-graduate degrees.

Though ISAs are set for explosive growth this decade in education, some early - and high-profile - versions will inevitably look like toys.

That’s one of the reasons I’m so excited for NBA Nets guard Spencer Dinwiddie’s tokenized contract, a $13.5mm offering due to launch today that will securitize ~40% of what remains on his current three year contract. In addition to offering some financial upside to investors, the offering includes perks for super fans (i.e. the offering's wealthy investors), such as an invitation to join Dinwiddie as a guest at the upcoming NBA All Star weekend.

It’s a simple, effective starting point to boost the profile of ISAs:

• Professional athletes’ contracts are huge, so it's easier to bootstrap liquidity and interest in the tokenized instruments;
• The contracts are also usually fixed in length. Since careers are relatively short, the payback timeline is short, and the benefits of issuance and investment generally accrue over the same period;
• There's a non-financial “feel good” element to backing token offerings for entertainers, namely that super fans want to spend time with the athletes (or actors or musicians) they admire, but wouldn’t really ever get the shot, absent a financial relationship.

I’m a net buyer of tokenized athletic contracts as a precursor to widespread ISA adoption, and view the Dinwiddie bonds as merely the first in a coming slew of high profile contracts that leverage a much more efficient technology (crypto) than previous attempts at similar structures through the legacy securities markets (Fantex).

Dinwiddie tokens might spark a new form of fan engagement. One that caters to wealthy benefactors at first, but ultimately trickles down to everyday die-hard fans of all types. And one that ultimately opens the door for lower profile individuals and brands to offer similar "brand" tokens.

The irony is that some have equated the ISA concept to a modern day form of indentured servitude. In reality, ISAs seem to be empowering Dinwiddie to make the most of his time in the NBA.

If tokenized entertainment contracts succeed at scale, it could bring much needed exposure to an instrument that might help a new generation of borrowers identify alternatives to crippling, lifelong student debt, and equip a new generation of freelancers to bootstrap personal brands in the global gig economy.

Seems like a worthy experiment. Shoot your shot, Dinwiddie.

-TBI

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