USA Law and Practice Contributed by: Irwin A. Kishner, Daniel A. Etna, Joel Wagman and Barry Werbin, Herrick, Feinstein LLP
Saudi National Development Fund announced the establishment of two venture funds aimed at making equity investments in gaming and esports companies. The International Olympic Committee (IOC) took notice of the success of the Inaugural Olympic Esports Week in 2023, and the successful inclu - sion of esports in the Commonwealth Games, PanAmerican Games and Asian Games. Desiring to reach a younger market, the IOC announced that esports would become a competitive med - al-winning event. The inaugural Olympic Esports Games are set to be held every other year, with the inaugural games taking place in Riyadh, Saudi Arabia in 2025. 10. NFTs, AI and the Metaverse 10.1 Non-Fungible Tokens (NFTs) Non-fungible tokens (NFTs) are unique digital assets that use blockchain technology to record ownership. Each NFT has a unique identifier that is recorded on a blockchain database, which acts as a public ledger to verify ownership and transfers. NFTs can reflect a variety of tangible and intangible objects, such as images, videos, songs and art. NFTs are distinguished from other digital assets that use blockchain technology, such as cryptocurrencies, by the “non-fungible” nature of NFTs. Each NFT represents a specific and unique item and is not valued on a one-for- one basis. In sports, NFTs have been created for the owner - ship of images, video clips, highlights and player trading cards. One of the earliest and most sig - nificant NFT ventures in sports is the NBA’s Top Shot product. Top Shot is an NFT marketplace for digitised NBA-related content. The NBA licenses highlights and images to a third party
which digitises the footage and creates NFTs, each with its own blockchain authenticity. Fans then buy and sell the NFTs, and transfers are recorded on a blockchain ledger for verification. The NFL’s NFL All-Day product and the Ultimate Fighting Championship’s UFC Strike product are additional examples of sports leagues creating officially licensed NFTs to be sold on similar mar - ketplaces. NFTs also provide teams and leagues with addi - tional opportunities to enhance fan relationships, and allow for real-world applications beyond investment. For example, holders of NFTs may be granted special in-person experiences, per - sonalised messages from players, or discounts on merchandise. Holders of NFTs have also been able to participate in unique fantasy sports con - tests and to vote on governance and other team decisions such as player awards. As teams and leagues continue to innovate with immersive viewing experiences, NFTs and blockchain tech - nology may provide a crucial link between fans and their favourite teams and players. NFTs also provide individual athletes with ways to reach a broad consumer base with their own licensed NFTs, such as athlete-designed artwork or images. Players have paired the sale of their own NFTs with the opportunity to meet them in person and attend games. The NFT market poses significant risks for both investors and creators. Little regulation currently exists, and it remains to be seen how regula - tory authorities will look to assert control over the market. Class action lawsuits have been filed, including against Top Shot, alleging that the products sold on its marketplace are unreg - istered securities. While the Top Shot suit was ultimately settled, other NFT products may face similar claims in the future. Furthermore, invest -
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