NCAA Athletes & NFTs
Aligning incentives to allow college athletes to get paid through digital assets
The 2021 NFL draft was quietly one of the most groundbreaking NFL drafts in history. This has nothing to do with COVID or the players that were picked. Rather, there was an underlying theme that crypto and digital assets can change the way franchises do business.
Heading into the first round on Thursday night the consensus number one overall pick, QB Trevor Lawrence, sold his NFT collection for $225k. Surely he could have used that cash more as a college student than a pro athlete.
There’s no doubt about it that future draft picks and professional athletes will also look to capitalize on selling digital assets. Additionally, with new NCAA guidelines that now allow players to profit from their Name, Image, and Likeness (NIL), college players will also look to sell NFTs way before they are considering on getting drafted.
The key will be to design a program that satisfies all stakeholders involved: the Players, the University, the fans, and the NCAA.
Digital assets such as NFTs can provide a solution. Here is an example of what the program looks like for a D1 Football player at an elite program:
- First day freshman year each player is given a distinct number of tokens (e.g. 50) to sell as NFTs
- Player and University each get a percentage profit from the initial sale
- Player profits from sale on secondary market
- Fans and holders of the football program’s NFTs get exclusive access to content and other program offerings.
Digital assets are highly transparent in nature and cannot be sold on the black market. Therefore, the NCAA can easily track every transaction as legitimate.
Token owners will be fans who get special access to team information or rewards like prioritized seating, gear, events, and appreciation of value of token as the player performs well. Imagine being the owner of Tom Brady’s freshman year Michigan NFTs.
To incentivize the players to be student-athletes and not simply athletes, they can be rewarded with additional tokens for good grades and academic performance.
Furthermore, at the start of each season their tokens can increase. For example, the beginning of each season could look like this:
- Seniors receive 400 tokens
- Juniors receive 200 tokens
- Sophomores receive 100
- Freshman receive 50
- +500 tokens for graduating
By this math, a student who stayed 4 years and graduated was rewarded with 1250 tokens that he could have sold. This incentivizes students to stay in school, and lowers the opportunity costs of staying until graduation.
Take Trevor Lawrence for example. He went pro after his junior season and sold his NFTs for $225k. By the method above he’d have 350 tokens valued at $642 per token. If he stayed in school for a senior season and graduated (a total of 900 more tokens) he could earn an extra $577k at that same valuation, making his option to stay more enticing.
Certainly not all athletes will be bound for the NFL or go pro, yet there will still be demand from dedicated fan bases. Additionally, the athletes that know going pro is highly unlikely are already incentivized to graduate and find a career.
For the athletes that will turn pro, the proceeds of the sale of the tokens can help support them financially until they are drafted. They can hedge their bets by not leaving as much money on the table by finishing their degrees, earning tokens and selling them as NFTs.
In summary, digital assets can help align incentives:
- Players: Profit from NIL
- University: Profit from sale of tokens, increase fan engagement, top recruits enroll in the university instead of opting out of college for minor leagues
- Fans: Increased engagement with team and favorite program
- NCAA: emphasizes “student first” mentality for athletes, rewards athletes who stay in school longer
In a new age of collegiate athletics, NFTs can be the solution the NCAA has been looking for.
