It’s the year 2036. It’s the fourth quarter of Super Bowl LXX. Patrick Mahomes, now 40 years old, is on the brink of winning his fifth title.
Three seconds left on the clock. The Chiefs just scored to pull within a point.
Now they have a choice.
They could kick the PAT, tie the game, and try their luck in overtime. Or they can go for two and win the game outright.
This piece is part of CoinDesk's Sports Week.
What do they do?
Or, more accurately, what do you do?
Because you are part of the Chiefs DAO, or decentralized autonomous organization, you are technically a part-owner of the Chiefs. You get to help make decisions. So you grab your phone and cast your vote: Go for it.
Within seconds, thousands of other Chiefs owners/fans have just voted as well, and the “Go for it” crowd wins 57% to 43%.
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Mahomes snaps the ball … and lunges into the end zone on a QB sneak. He wins. The Chiefs win. You win. Not only have your beloved Chiefs won the Super Bowl, but a tiny sliver of the team’s revenue has just been zapped to your crypto wallet – as an owner, you share in the profits.
Welcome to the world of Sports DAOs.
Buy the Broncos
In a very literal sense, the above scenario is unlikely to ever become a reality. It’s easier to imagine the Browns winning a Super Bowl than it is to see the NFL relinquishing game-time decisions to the fans. That’s more sci-fi than prediction.
But in a deeper sense, it’s also true that there are several Sports DAO projects – with millions in their treasuries – that have ambitions to one day own a sports team. Some are long shots, some are imminent. And if these DAOs succeed, they could revolutionize the very nature of what it means to be a fan … or even a player.
“Fans are clamoring for the ability to not just be a fan, but to also have a voice,” said Sean O’Brien, co-founder of the DAO called BuytheBroncos that recently tried to, well, buy the Denver Broncos.
Based in Utah, O’Brien owns and runs a few small businesses with his wife – a mix of real estate, apparel and payment processing. He also dabbles in crypto. In 2021, he was intrigued by DAOs, as they seemed like the “great equalizer” that could help the little guys compete with the billionaires.
Then he had a wild idea.
“We knew the Broncos would be going up for sale,” O’Brien said, given that longtime owner Pat Bowlen had passed away in 2019, and the team had since been run by a trust. “We were pretty sure it would be in 2022.”
So O’Brien did his homework. He knew the NFL and the Securities and Exchange Commission would be reluctant to acknowledge some goofy-sounding Web3 entity, so along with longtime friend James Wigginton, he spent months developing the legal foundation. (O’Brien has a J.D./MBA; Wigginton is a lawyer who worked for years at white-shoe law firm Sullivan & Cromwell.)
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Now they think they have one. As O’Brien describes it, the NFL officially acknowledges five different types of ownership structures: independently wealthy individuals, an association, a partnership, a corporation or the fifth category of an “other entity.”
They think the DAO can slide into the “other” category, because the DAO is a co-op. “This is a solid legal framework, Wigginton said. “Cooperatives have worked for hundreds of years.” Farmers use co-ops. REI is a co-op. When you pay your $30 membership to REI, you are technically a part-owner and you receive year-end dividends when you buy tents and skis and sleeping bags. “This could potentially revolutionize fan ownership,” Wigginton said, “because a cooperative – unlike a corporation – allows the users of the product to own the product.”
BuytheBroncos started with just O’Brien and Wigginton. Once they realized it had legal legs (they vetted it with more lawyers and accountants), they began making calls and invited other to join – football fans, Web3 folk and even former NFL players. They started to grow. They began to get some press. “We know it sounds a bit crazy, but it’s also a bit badass,” O’Brien told CNBC in February. “The purpose essentially is to establish an infrastructure so that fans from all walks of life can be owners of the Denver Broncos.”
Even high-profile fans began to listen. “I would be excited to be part of it myself,” Colorado Gov. Jared Polis said at ETHDenver in February. He acknowledged that the Broncos asking price (at least $4 billion) was daunting, but said that “if your imagination is big enough, then it can happen. And anything I can do to make it happen, I’d be happy to.”
Others felt the same way. Roughly 1,000 people are now involved in BuytheBroncos, said O’Brien – an unlikely mix of Web3 enthusiasts and football junkies. There are teenagers and old men. This has made it tricky to even agree upon a communication platform. “There are some people who don’t know what Discord is, and some people who [preferring encrypted channels] don’t want to use text,” said O’Brien. When they first launched the DAO’s website, the landing page said 'JERD,' for 'jocks and nerds unite.'”
So if O’Brien succeeds, would fans be deciding whether the Broncos should kick the field goal or go for it on fourth down?
O’Brien sees zero chance of this, and it’s not part of his pitch or his vision. “The DAO needs to be nurtured,” he said, and several times he stressed that the goal is not to give fans real-time decision-making, or to let them help draft players or run the front office. “At least for the moment, the DAO shouldn’t interject itself in day-to-day operations,” O’Brien said. “We don’t want to be electing Russell Wilson to kick the PAT.”
Fans might not be calling the plays, but in O’Brien’s framework, they’ll have more of a voice. They’ll have a “seat at the table.” If a team is considering leaving the city and relocating to Los Angeles? The fan/owners could vote that down.
The DAO could even empower NFL players. “We haven’t made it public yet, but we have close to a dozen current Broncos who have said they’re onboard with us,” O’Brien said, along with “a few dozen” former NFL players. The pitch: If current NFL players are allowed to own a sliver of their team, this will both give them agency and boost their loyalty.
“Players would greatly appreciate owning a piece and having a small say,” said Ben Garland over text, a retired 11-year NFL veteran and former Bronco. Garland has been helping pitch BuytheBroncos to other NFL players, and he says there’s interest. “Just about every player I talked to was excited about the possibility.”
Garland thinks that a DAO would “incentivize players both to come to a team and stay with a team. Which adds value to that team.” He cites Tom Brady as an example. What if Brady, through a DAO, had a partial ownership of the Patriots in 2019? It’s hard to imagine him bolting for the Buccaneers. “I would want to end my career with the team I owned,” Garland wrote, “instead of selling my ownership and moving to another team for the last few years of my career.”
The Brady example isn’t even that hypothetical. As O’Brien points out, when Brady briefly retired in February, there was speculation that he almost joined the Dolphins – arch-rival of the Patriots! – just to get a slice of ownership once he retired. “The man controls every room he walks into,” said O’Brien, but even a post-retirement partial ownership was “almost enough to get him to go there.”
But then there’s reality.
NFL franchises, of course, are not cheap. And on June 7, the Broncos announced they had reached a deal to sell the team to the Walton-Penner family, which includes Walmart heir Rob Walton and company chairman Greg Penner, for $4.65 billion.
O’Brien was not prepared to go on the record with how much the DAO has raised, but he acknowledged it was nowhere close to $4.65 billion.
The dream looked dead. But the NFL isn’t the only avenue for Sports DAOs …
Golfing and yachting
It costs $4.65 billion to buy the Denver Broncos.
But how about buying a golf course?
That’s relative chump change.
The average course costs $3.1 million, according to Links magazine, which puts it easily in the striking distance of crypto budgets, even in a bear market.
Enter LinksDAO, a group of 5,300 golf enthusiasts who are trying to buy a golf course. “We’re rethinking the concept of what a golf community can be,” said Jim Daily, the DAO’s founder (along with Mike Dudas), who views the DAO as a way to make the exclusive world of golf “more fun and inclusive and egalitarian.”
LinksDAO has $9 million in the treasury, according to Daily, which was raised through a non-fungible token (NFT) drop that sold out in less than 48 hours. So unlike the more quixotic quest of buying an NFL team, a DAO-infused golf course feels likely to happen. (Daily clarifies that they will not use the DAO’s treasury to purchase the course, but instead do an “equity raise with more traditional capital,” and that in a technical sense, the DAO members will not actually own the course.)
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Daily, who now spends much of his time “humping around the country looking at golf courses,” said the DAO is an easy way for golfers to nerd out over golf. It’s a way to find your tribe. (A tribe that might now include … Bill Murray?) “If you’re a golfer, you play the game for life,” Daily said, “and there are so many different areas where you can really lean in with other people.” The community obsesses over things like the optimal putting technique, clubs, accessories, coaching and the best courses to play. Just ask any nongolfer who’s forced to listen to other golfers talk about golf – it can be insufferable.
Then there are the real-life benefits. Through partnerships with high-end apparel companies such as Holderness & Bourne and Devereux Threads, members get immediate discounts in the real world. Not just in the future. This is happening today. At TopGolf locations throughout the U.S., members get discounts on food and drinks. “One of our LinksDAO members had $2,600 worth of value in partnerships,” Daily said. “And this has only been around for six months.” (O’Brien has a similar vision for BuytheBroncos, which would give perks to the fans/owners: discounts on Broncos merchandise, early access to seats at the game and digital goodies in the metaverse.)
With the NFL, O’Brien has worked hard to distance BuytheBroncos from the zanier idea that fans will control real-time granular decisions. “Democracy doesn’t equal chaos,” he said. “Just because you have a DAO cooperative doesn’t mean there are 10,000 people sitting in the room deciding whether we turn the AC to 71 degrees.”
LinksDAO, in contrast, is leaning into the idea of fans controlling the decision-making. That’s part of the fun. Every question of the course’s strategy and management could be decided by the DAO. Should they redesign the course, and if so, what architect do they choose? What are the rules for the clubhouse? How much are the fees? In LinksDAO’s Discord, members are already brainstorming ways to give the course a Web3 twist. One inspired or ridiculous idea is to install constantly running cameras on the par-3 holes, and if you get a hole-in-one it automatically mints you a hole-in-one NFT.
LinksDAO is not the only sports DAO to embrace the more sweeping potential of granular decision-making by fans.
Wanna buy a yacht?
The sailing league SailGP, founded by Larry Ellison, co-founder and chairman of Oracle, is working with the Near blockchain protocol to offer the sale of a team through a DAO.
The average person can’t afford to buy a yacht. But if thousands of people pool their resources? Suddenly the barrier to entry is lowered. And then they can start calling the shots: Who captains the crew, how much the team should get paid, which sponsors to use, which nation’s flag (if any) should unfurl from the boat and how to upgrade and tweak the yacht. The DAO could pick the sponsorships. “Do you want, for example, Philip Morris on the boat? You might not, and you can have a say in that,” said Chris Ghent, global head of brand strategy and partnerships at the Near Foundation.
Then the DAO could make even more granular decisions. Ghent says that in every sailing race, each day, the boats provide 8 billion data points that can be analyzed. This fire hose of data includes second-by-second variables like wind speeds, crew decisions and pressure on the trampoline. The DAO could monitor and react to this data in real time. “When you think about the ability to swap players out, is that possible? Absolutely,” said Ghent. Or perhaps the DAO makes a snap-decision vote on what the crew should do, and then that’s an “advisory” input that’s shared with the coach. All of these scenarios are up to the discretion of the DAO.
Ghent says that SailGP has worked with lawyers at Proskauer Rose to hammer out the legal framework. “We’re only months away from the beginning of this,” said Ghent, who predicts that a DAO-owned yacht will enter the waters in 2023.
The SailGP DAO, like LinksDAO, feels imminent. But there’s one SportsDAO that’s already up and running.
The pseudonymous “Flex Chapman” is a 30-something software engineer who’s a lifelong basketball fan and player; he once played in the AAU against the likes of Kevin Durant and Dwight Howard. (He clarifies that he “didn’t stand a chance” of playing in the NBA.) In May of 2021, purely as an experiment, Chapman decided to launch “Krause DAO,” with the name a cheeky reference to longtime former Bulls’ General Manager Jerry Krause.
Krause DAO had a simple goal: “We’re a community of hoop fanatics crazy enough to buy an NBA team.” As Chapman wrote in the project’s white paper (or “hype paper”), “Team ownership shouldn’t be limited to a handful of billionaires, but rather a movement of individuals that want to be a part of the greatest professional league in the world.”
Then Chapman articulates the logic that undergirds all of these Sports DAOs: “Fans breed life to the organizations in which they attach, so isn't it reasonable to accept a shared portion of the ownership and upside? We don't think it's merely acceptable, but mandatory.”
The growth rate of these DAOs is astonishing, even by the standards of crypto. When I first wrote about DAOs in the fall of 2021 (reporting on how the exchange ShapeShift had converted into a DAO), I first noticed KrauseDAO and dismissed it as a joke; at the time it only had 392 members. Mea culpa. KrauseDAO’s membership has swelled to 7,000. Thanks to a lucrative NFT sale, it now has a treasury of more than $4 million.
It costs a lot more than $4 million, of course, to purchase an NBA team. (In 2019, the Brooklyn Nets sold for $3.3 billion.) But KrauseDAO actually owns a basketball team. The DAO purchased a team called the “Ball Hogs,” which plays in a more casual three-on-three league, the “Big 3,” that was founded by Ice Cube.
The Big 3 is entertaining. It’s packed with former NBA All-Stars (like Joe Johnson and Baron Davis) and has a 4-point shot. Big 3’s motto is “we’re changing the game,” which makes it the ideal testing ground for a Sports DAO.
KrauseDAO has already put the collective hive to use, such as sending a scouting report to their coach, NBA Hall of Famer Rick Barry, breaking down their upcoming opponent’s strengths (including rebounds per game, steals and blocks per game) and weaknesses (such as 3-point shooting). “Thanks for the breakdown,” Barry texted back. “This is very helpful.”
“We want to add value not only to the team, but also the players,” Chapman said. This could mean getting them new sponsorships. Chapman said that when power forward Stacy Davis casually mentioned he enjoys Lara protein bars, the members of KrauseDAO used their connections and landed him a sponsorship deal.
But Chapman realizes there are limits to what the DAO can realistically do. When he first hatched the idea, his “little kid brain” loved the idea of fans getting to act as general managers who signed and cut players, made all the roster decisions and commanded the draft-night “war room.”
The more Chapman dug into what actually happens at NBA front offices, he realized that a general manager’s job is “way more high-touch and about personal relationships than one would think.” That was “a bummer to hear.”
But there are other ways that a DAO-infused fanbase can contribute. The way that NBA teams scout for international players, Chapman said, is still at times rudimentary, or “a lot like scouting in the 70s,” where it’s simply impossible to canvas the entire globe for talent. Teams have finite budgets. What if you could tap into a network of amateur scouts that’s free, decentralized and able to reach even the most remote gyms in Cambodia? “We could have people all over the world,” said Chapman. Even if these are not professionally trained scouts, at the very least they could record footage of the games, or perhaps take notes on players’ body language. Chapman said he described this idea to an NBA executive and “their eyes widened.”
DAO fan/owners could bring a team more content. “The same thing that user generated content did for e-commerce, fan-generated content can do for sports teams,” Chapman said. “Every team should be their own Bleacher Report, or be their own ESPN.” The reason this doesn’t happen now, he said, is because teams lack the bandwidth; some front offices employ only seven people. They’re all busy and they might not have time to launch a new media vertical. “There’s no reason why the Warriors shouldn’t have four podcasts, three YouTube channels, and a TikTok account,” Chapman said. A DAO could organize its energy and help make that happen.
On a more philosophical note, Chapman sees the DAO as a way to empower the fan. To give them agency. “Fans are like the atomic unit of the NBA,” he said. Fans are the reasons the stadium is so big. Fans are why franchises are worth billions of dollars. “Fans are why the NBA is in business, but they are typically viewed as fungible assets,” he said. “Everyone is wearing the same colors in the stadium. They come and clap for an hour or two and they go home.”
Chapman considers the historic model of fandom as “value extractive” – fans are just leeched as consumers of popcorn and jerseys and ticket sales. But they have more to offer. “There’s this nuclear energy sitting in the stadium,” said Chapman. “The people who are going to the games are lawyers and marketers and software engineers.” With the DAO, fans can harness their abilities to help the team win. “Our goal is to build that conduit,” he noted. This conduit would help fans contribute to their team not just financially, but through their own work and creativity, “to help them win more games and more championships.”
‘It’s going to happen’
It does not, as of this writing, appear that Sean O’Brien will miraculously pony up $4.6 billion dollars to buy the Broncos.
But there’s a twist to this story. BuytheBroncos does not need to purchase 100% of a team to succeed. Raising $4.6 billion might be a stretch, but what about $460 million, or enough to snag a 10% slice? Or even $230 million for a 5% chunk? Given that the ConstitutionDAO raised $47 million in seven days, a sum of $230 million is not inconceivable.
This has not been reported by the press (to my knowledge), but BuytheBroncos has quietly been meeting with the other suitors of the Broncos, hoping to join their bid as a minority partner. What if the combination of Suitor B and BuytheBroncos DAO could outbid the Walton family?
That was O’Brien’s hope. “Being pragmatic, the better play was to align ourselves with these other bidders,” he said. He was surprised by the June 7 announcement that the Broncos were selling to the Walton-Penner family. He thought the bidding process would last for another few weeks, and he had planned to use that time to “hit the green button” and go more public to raise capital. “Until we could confidently say that we had an agreement in place to be a partial owner, we wanted to hold off on the public side of the raise,” said O’Brien.
The idea of the DAO as a “partial NFL owner” might be less colorful than you calling the Chiefs’ play at the end of the Super Bowl, but it still has the potential to revolutionize the NFL, or at least NFL fandom. And the idea might even be embraced by unlikely allies: NFL owners.
True, it’s hard to imagine NFL owners – a group of wealthy old men – caring about the decentralized principles of Web3. But it’s easy to see them caring about money. A lot of money. As O’Brien sees it, if Jerry Jones wanted to open up, say, a 20% ownership stake to a Cowboys DAO, “he would put $2 billion in his pocket overnight, and he would have the most rabidly loyal fans.”
Or look at the Green Bay Packers. They are the only team in the league that’s owned by the fans: 360,584 stockholders. It can’t be a coincidence that this is one of the most loyal fan bases in the NFL, even if all the “owners” can really do is proudly hang stock certificates on the wall. “The sun will explode and life on Earth will cease to exist before the Green Bay Packers move out of Green Bay,” O’Brien said. “That’s how all teams should be, essentially. Every current owner could open up 10%, 15% or 20% of their ownership stake, put immediate liquidity in their pocket, and become gods in their respective cities.”
This is why even if O’Brien fails in the bid to outright buy the Broncos – that seems inevitable – he’s confident that the framework of a DAO is so logical, so compelling and so lucrative that it’s bound to catch on somewhere. Teams from “every major sports league in this country have reached out to us,” said O’Brien. “That includes the MLB, NHL, NBA and the MLS, in addition to the NFL.”
O’Brien knew that buying the Broncos was a long shot. He knew that by “going first” he faced stiff resistance. “It’s kind of like how the first person through the door always gets shot,” he said. “We knew we were going to get shot in a lot of ways.” But he’s confident that the DAO can be a blueprint for the future. Maybe for another NFL team. Maybe for the NBA.
“It’s going to happen,” O’Brien said. “Someone’s going to do it.”
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