Cred, a cryptocurrency-based lending and borrowing service, is teaming up with professional NBA basketball player and businessman Spencer Dinwiddie. A special web page and service was launched on March 20, 2020 for Dinwiddie’s fans who may use the Cred platform. Cred allows users to earn interest on stablecoins (digital assets usually pegged to national fiat currencies) and other cryptocurrencies. The company has been offering a highly competitive 10% annual interest rate. Users may also use Cred’s lending services by collateralizing their digital asset holdings.
More on Spencer Dinwiddie Contract
On Tuesday, New York Nets point guard Spencer Dinwiddie confirmed his platform Dream Fan Shares (DFS) will partner with a new broker-dealer to help launch a token offering backed by his NBA contract. DFS will partner with Tritaurian Capital, a FINRA registered broker-dealer and investment bank which specializes in blockchain and digital securities. “Tritaurian is a registered broker-dealer that has worked closely with regulators over the past several years to understand their perspective on blockchain and cryptocurrency,” read an email sent to prospective investors.
Crypto industry insiders are hopeful Dinwiddie and DFS can become the first successful pioneers of this kind of venture. “I am cheering for Spencer and think that he is one of the most forward-thinking professional athletes out there,” Anthony Pompliano, co-founder and partner at Morgan Creek Digital, told Decrypt. “The mechanism that he is proposing here is not only incredibly smart, but it will likely become the norm at some point in the future.”
Instead, the NBA came out fully opposed to using the player option, even though Dinwiddie was just trying to use it in the way it was created. “I stand up for what I believe in and what I believe is right. And so I’m going for it, obviously, in the face of some adversity,” he said. “But I also wasn’t going to sacrifice my basketball career for this.”
Part of the league’s opposition, Dinwiddie thought, was based off fear because of how new and innovative the idea was. “Legacy systems generally do fear that type of thing,” Dinwiddie said. “And so they kind of drew a hard line and kept talking about termination.”
“I think the prolonged conversation obviously worked out,” Dinwiddie said, since the NBA backed down from terminating his contract, “because they recognized I’m not doing anything wrong or anything illegal. They know it’s coming. They didn’t have too much rebuttal for it. There’s nothing in there that’s considered gambling.”
After months of discussions with the NBA, on Jan. 13 Dinwiddie will launch the digital investment vehicle using his $34.4 million Nets contract, The Athletic has learned. Dinwiddie has made changes to his product and has no longer tied the platform to his NBA contract, according to sources. “Spencer Dinwiddie’s advisors provided us 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,” NBA chief communications officer Mike Bass told The Athletic in a statement.
The NBA is continuing to review final proposals and documents that Dinwiddie’s group has sent, according to sources. Sources tell The Athletic that Dinwiddie had been bracing and preparing for any potential disciplinary action from the NBA when he launches on Jan. 13, but his final proposals have made tremendous changes. The NBA, who previously hired outside legal counsel in the Debevoise & Plimpton law firm for its part in the discussions with Dinwiddie, had previously informed him that his digital token cannot be approved.
Spencer Dinwiddie: 2 things. Yes I’m doing it. No I’m not getting myself suspended and jeopardizing the team. Regardless of what they want you to believe basketball is my second priority in life behind my family (Elijah specifically) Guess that makes 3 things ??
“I really just find the play-option stuff so funny,” Dinwiddie said. “If we’re going to break it down by technicality, wouldn’t every player in a player-option year be incentivized to screw their team and shoot a million times and try to average 40 points and all that stuff, right? But I’m saying if we’re going to talk about gambling, then it’s gambling by nature. The same way a team option would incentivize a team to short the player, right? Like ‘Oh, if I don’t play him as many minutes, maybe I can sign him to a long-term deal, lock him up and then he can’t potentially make as much money.’ “If you want to play that card, then that’s on you guys, because you guys made the CBA the way you guys made it. I’m merely just saying since the CBA is the way it is, can I do this with my money? That’s literally all I said.”
The NBA hired outside legal counsel to take part in its ongoing discussions with Brooklyn Nets guard Spencer Dinwiddie regarding his investment vehicle using his $34.4 million contract, and the Debevoise & Plimpton law firm and the league have informed Dinwiddie that his digital token cannot be approved at this time, The Athletic has learned.
Dinwiddie still plans to move forward and launch his digital investment platform, according to sources, with the Nets swingman said to believe that the NBA’s lack of approval is baseless. “At the request of Spencer Dinwiddie and his advisors, we have reviewed a number of variations of their digital token idea,” Dan Rube, the NBA’s Executive Vice President and Deputy General Counsel, told The Athletic. “All of the ideas presented would violate collectively bargained league rules, including rules prohibiting transferring a player’s right to receive NBA salary, gambling on NBA-related matters, and creating financial incentives to miss games.”
The league’s stance on this right now is that it wants to work with Dinwiddie and find common ground, as the league does with every player-related issue or idea. Should Dinwiddie go through with his plan without NBA approval, he could be subject to penalties such as termination of contract, suspensions without pay and fines.
Spencer Dinwiddie’s meeting with lawyers from the NBA and Players Association over what he has named his Professional Athlete Investment Token (PAInT) went well enough for him to feel confident in moving forward with the project soon. “They had four or five comments previously, we got them down to one,” Dinwiddie said. “I think we’re going to get it done. It’s just pending a little more feedback. “Obviously there might be one more iteration, just of making sure they’re perfectly fine with it. Our goal was to partner and not to go to war. The good thing is obviously they see that we’re not breaking any rules, so it’s all about just kind of appeasing them as much as possible.”
Dinwiddie plans to offer what he has named his Professional Athlete Investment Token (PAInT) as soon as this week. The offering has a minimum investment of $150,000, and it would be available only to accredited investors on a new platform that he hopes will eventually host dozens of athletes who follow his lead. The NBA has taken issue with Dinwiddie's efforts, and the two sides have been debating whether issuing a PAInT would violate the league's collective bargaining agreement (CBA). Dinwiddie is hopeful that the measures he has taken over the past few weeks will persuade the league of its permissibility under the CBA.
Though the information isn't public, Dinwiddie says the token likely will pay an annual interest rate in the range of 2.5%. That would mean that on that initial $150,000 investment, you would earn $3,750 over the next year -- paid either quarterly or biannually -- and $3,750 in 2020-21. Year 3 is when the token effectively matures and things get interesting for both Dinwiddie and you. Dinwiddie is performing his own personal "revenue sharing" of his individual post-tax 2021-22 basketball related income. Dinwiddie said this will be done at a 60-40 split and that 40% will be paid out to investors.
The 10-year U.S. Treasury Note, arguably the most reliable debt instrument in the world, currently offers a yield of 1.753%. Dinwiddie's offering would pay around 2.5%, marginally more, but it comes with more credit risk. After all, PAInT is an unproven asset class with an unproven payment mechanism -- and novelty, by its very nature, is uncertain.
Albert Nahmad: Dinwiddie structure appears to be a hybrid (unsecured) debt instrument, with: (a) $13.5M face value, (b) fixed 2.5% coupon (1st two years), (c) 3-year maturity, and (d) value at maturity = $13.5M + 40% of 2021-22 after-tax “BRI” (at 50% proj. tax rate). espn.com/nba/story/_/id…
Brian Lewis: The NBPAs statement regarding Spencer Dinwiddie: “At his request, we are assisting Spencer and his business associates in seeking to address the League’s concerns. Our hope is that a resolution satisfactory to all parties can be achieved.” #nets #nba b
What is Spencer Dinwiddie's plan? A few different things. In the big picture, Dinwiddie's token would be a proof of concept for a larger objective: He wants to create a new asset class -- athletes -- that would allow fans and anyone else to invest in players the way you would the stock market, a treasury bond, a real estate fund or cryptocurrency. Those assets could then be traded on a platform that he is in the process of creating. Most immediately, though, he wants to offer a debt issuance to accredited investors that would be backed by his earnings in the 2021-22 season. This product, which would be issued as a token (PAInT), would have many of the characteristics of a typical bond, but it's quite different.
If Dinwiddie moves ahead with the opening of his investment vehicle, what recourse does the NBA and/or the Nets have? Could they suspend him? Could the Nets nullify his contract? Sources say the NBA hasn't reached the point where they're contemplating disciplinary actions against Dinwiddie, and the two sides are continuing to discuss the matter. But if the league felt like Dinwiddie was truly in violation of the CBA, disciplinary action could be conceivable.
What if Dinwiddie decides to opt into the final year of his deal? Dinwiddie is scheduled to earn $12.3 million in 2021-22 if he opts in -- much less than the $20 million in the above scenario -- so the rate of return would be considerably lower, approximately 7.4% annually, or $150,000 plus an additional $35,825.
What's in it for Dinwiddie? Dinwiddie raises millions in cash at the front end of his contract that he can now put to work in various investments. "The $13.5 million would be in relatively traditional vehicles," Dinwiddie said. "You want to be strong with your money -- we've all heard the horror stories. These investments are designed to be something that athletes can benefit from. We're going to set aside [an amount] for venture capital, but it's not like I've found a new element or anything like that."
Marc Stein: Nets guard @Spencer Dinwiddie confirms to @NYTSports that he has another meeting scheduled with the NBA on Monday -- on the eve of the regular season -- as he continues to seek league cooperation to "tokenize" his contract. The NBA, to date, has said Dinwiddie's plan violates the CBA
Alex Schiffer: Spencer Dinwiddie said he has a meeting tomorrow with the NBA to discuss his stock offering with the league. Might cause a delay in its release, but hopes this gets it resolved.
Spencer Dinwiddie: We were ready to open on the 14th but in the spirit of partnership, we are pushing it back a week to try and allow the @NBA sufficient time to respond. Having been on the ground in China, we are sensitive to what the @NBA has been dealing with. (1/8) This is why we are giving them additional time as our goal is to partner. Regardless of the @NBA’s position, we will move forward. Therefore we will launch on Oct. 21st, a week from our original date and before the start of the @NBA season. (2/8)
Spencer Dinwiddie: Even with our desire to partner with the @NBA, it is not necessary. And I want to be clear, this is not and never was an “assignment” nor am I in violation of the CBA. By definition an “assignment” would give fans rights towards the Nets/NBA. (3/8) This is a third party business transactions between the fans and I beyond the jurisdictions of those entities. Much like the way no one can tell me which home or car I can buy, I am free to use my money the way I see fit. (4/8)
Spencer Dinwiddie: To continue to suggest anything else is deliberately misleading the public. Quite simply the market will determine the demand for this previously untapped asset class. There will be a bevy of information at their disposal and accredited investors (for the first offering) (5/8) will be able to make an informed decision. As we have witnessed, any great business that is built upon its consumers knows how to listen to the demands of that base and adjust as necessary. (6/8)
Spencer Dinwiddie: Although we are individual assets in this instance we are a part of a collective family in the sports/entertainment world as a whole and those same fans should be involved and empowered to determine what their appetite entails. (7/8) Lastly, as we speak about freedoms domestically and urge athletes to offer comments on situations they maybe werent prepared for, it would be a shame if we try to abuse our power to limit similar liberties that can be beneficial to all parties involved due to misunderstanding.
Marc Stein: An NBA spokesperson tells @NYTSports of the Nets’ @Spencer Dinwiddie and his ongoing attempts to sell shares in his contract: “The arrangement discussed in yesterday’s meeting remains prohibited by the CBA.”
Nets guard Spencer Dinwiddie’s plan to convert his $34.4 million contract into a digital investment vehicle has caused a stir, and a lot of curiosity about how exactly it would work. As we reported on Monday, the NBA and Dinwiddie scheduled a meeting together after the league objected to his plan and raised concerns. According to sources, Dinwiddie and NBA officials met on Thursday and both sides had back-and-forth discussions regarding legal issues about the plan. Dinwiddie still plans to move forward with his plans, sources say, as the NBA reconvenes over potential next steps.
But Dinwiddie said that was never his plan in the first place. “I wasn’t doing it anyway,” Dinwiddie said. “You’ve got to think about it: If I spent just short of a year building it, you really think I didn’t read the CBA? You really think I didn’t have lawyers read the CBA? That would be outrageously stupid. If it’s a whole business and lawyers went through it, they probably saw that provision, right? Which means that we wouldn’t construct it in a way that would violate the CBA because who wants to lose their job? That would be pretty dumb on my part.
“So we constructed it in a way that doesn’t violate the CBA. They said they were going to make their statement, and I honestly just said, ‘That’s not what I’m doing.’ It’s very simple. Once the Nets pay me, that’s the end of it. If I wanted to shoot the money into deep space, technically, I could.” Dinwiddie plans to have further conversations with the NBA, though presumably not Elon Musk for the space plans.
Malika Andrews: Spencer Dinwiddie addressed the back-and-forth with the NBA over whether or not he can tokenize his contract. The NBA issued a statement saying Dinwiddie would violate league rules by doing that. Dinwiddie said today that his lawyers made sure he was not violating the CBA.
Spencer Dinwiddie: 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: I look forward to an understanding because as I stated in the previous articles it was made with the @NBA in mind. Hopefully being able to bring added fan engagement to the different players/teams and liquidity for team owners.
Spencer Dinwiddie: 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.
The N.B.A. on Friday notified the Nets’ Spencer Dinwiddie that he cannot use his contract as a digital investment vehicle, according to a league official. Dinwiddie had announced earlier this week to The Athletic that he planned to go public with an “$SD8” token offered by his company DREAM Fan Shares that would enable investors to essentially buy into Dinwiddie’s three-year, $34.4 million N.B.A. contract.
The N.B.A. issued the following statement to The New York Times on Friday: “According to recent reports, Spencer Dinwiddie intends to sell investors a ‘tokenized security’ that will be backed by his player contract. The described arrangement is prohibited by the C.B.A., which provides that ‘no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract.’ ”
Marc Stein: Reached tonight by @NYTSports, Brooklyn’s @Spencer Dinwiddie said he plans to meet with league officials to explain the concept further to try to change their minds on today’s ruling
Spencer Dinwiddie: My current contract will be the first Professional Athlete Investment Token. #PAInTs give athletes, artists, and influencers financial control of their contracts. And for fans an alternative to our current financial climate.
For Dinwiddie and his investors, the prime appreciation is designed to come during his player option season in 2021. Dinwiddie has a player option worth $12.3 million for the 2021-22 season. By opting out and earning more, it will, of course, create a major return for him — but also investors. “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. “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. “Establishing an asset class that is not correlated to the legacy markets and stocks that are going to get hammered when everything comes to fruition, it can help people save money and create a real fantasy sport. It enhances the real fan engagement. It enhances the NBA.”
How do you believe this is going to change the game and how can people get involved? I’m doing it through my company, Fan Shares, and people will be able to go on the website and buy a token. It will pay out in cash. I’m not creating my own currency; that was floated out there. I’m not creating my own Bitcoin. These transactions will flow through the dollar. The money that we’re operating under is guaranteed from my contract.
Dinwiddie will in essence sell bonds in himself to raise funds. The Players Association had no comment on Dinwiddie’s plans, and there have been questions about whether it could face long, drawn-out scrutiny from the league, although Dinwiddie wasn’t expecting it. “What are they going to do, try and stop me? I mean, they could try,” Dinwiddie said. “Then they’d have to have legal standing to do so. Do you really want to do that? Because wouldn’t that be bad PR for them to do that? I would think. Then I’d start to look like [Colin] Kaepernick. “Nothing I’m doing is illegal. I know there’s a lot of misinformation out there, like I’m trying to create a currency or something. I’m not trying to reinvent the wheel and create a new bitcoin; this is different. … I will say this, though: It solves some of the league’s fan engagement issue. It does do that.”
Brooklyn Nets guard Spencer Dinwiddie is planning to turn his contract into a digital investment vehicle and receive an upfront lump payment, The Athletic has learned, an unprecedented move for an NBA player. Dinwiddie, according to multiple sources, is starting his own company to securitize his NBA contract in the form of a digital token as he begins a three-year, $34.36 million extension with the Nets. It’s unclear how much of the contract amount he wants to raise upfront, but it would likely be less than the total amount, according to sources.
In a securitization, the borrower gives up some future income in return for a smaller lump sum payment. But the borrower, in this case Dinwiddie, then has more money to immediately invest than he otherwise would. A token is a digital currency term. The bond exists in the digital currency world. Instead of buying the bond from a broker, it is through a token. According to sources, this Dinwiddie bond would pay investors principal back and interest, which would be covered by what the Nets owe him.
The National Basketball Players Association was informed of Dinwiddie’s decision this week, sources said. While unique for the NBA, it is not the first time a pro athlete has attempted to turn his future earnings into an investment vehicle. Former NFL running back Arian Foster, then with the Houston Texans, started the process of listing himself as a private stock under a company called Fantex Inc. in 2013.
