Tokenizing ISAs for Trillions

Mark my words: within 5 years, there will be a multi-billion dollar company that hasn’t even launched yet. This company will take the concept of fantasy football to an entirely new level by letting fans (and pure investors) own – in a near-literal sense of the word – their favorite players. This company will productize the Income Share Agreement, or ISA, such that players – and musicians and actors and writers and anyone – can easily sell shares in their future earnings. We already have patient zero: yesterday, Spencer Dinwiddie of the Brooklyn Nets launched a sale of $13.5M of his 3-year, $34.4M contract. Investors will pay $90K per share and earn a 4.95% annual return during the three years, before receiving back their initial investment.

This bell cannot be un-rung. We will hear of a second professional athlete announcing a tokenized ISA within 6 months, and we’ll hear of at least 5 more before the year’s out, including a non-athlete celebrity, probably an actor. By 2021, there will be hundreds of celebrities who want to issue ISAs, going direct to their fans via their vast followings on social media. But at least two big things need to happen before this demand can be filled.

The first is that someone needs to build this mega-unicorn, because ISAs are really hard today.  There’s no telling how many $1000 legal hours Dinwiddie paid for to have his ISA paperwork drafted, reviewed, revised, adjusted for SEC compliance, adjusted again to comply with NBA regs, and reviewed again. Nor is there any telling how much he or Securitize, his technology partner, spent on technical talent to tokenize his ISA so that shares could be recorded on a blockchain. The Mega-Uni I’m predicting will distill this legal knowledge and turn it into composable bits of code that will eventually allow anyone to replicate and customize Dinwiddie’s efforts with the click of a button.

The second thing that needs to happen is that SEC investor accreditation rules need to change. This is already underway, but will likely be years before any meaningful change is made. Because of the current rules, only accredited investors are allowed to buy “Spenshares” (my term; his is Dream Fan Shares). But imagine if retail investors, aka fans, were allowed to participate: instead of selling 150 shares at $90K, Dinwiddie could have sold 1.5M shares at $9 each, effectively turning a legion of fans into business partners, evangelists, die-hard game watchers, and merchandise buyers.

And that’s what’s in it for the celebrity: they give up a little interest, and maybe some upside in the case of more complex ISAs, in return for 1) getting a slug of capital up front that they can then invest in higher-returning opportunities, and 2) they get hardcore fans who have a real stake in their success. What Swiftie wouldn’t want to own a piece of Tay Tay? What Marvel fanboy wouldn’t want to ride Thor’s cloaktails to a piece of his box office billions?

But what about this: what if your high school valedictorian, instead of taking student loans or his parents’ money to attend that prestigious university, instead sells shares of his own ISA to his well-heeled classmates. Not only does Young Veezy sidestep the student debt epidemic, but he’s made friends for life (assuming he’s successful). What if we all bought a stake in each other’s success? Could ISAs, their value tokenized and flowing freely on blockchain networks, become the economic gravitons that pull society back together after so much technology in the last 20 years has isolated us from one another?

Maybe, maybe not. Tokenizing real world assets like real estate, fine art, and ISAs allows us to fractionalize ownership of those assets to a much higher degree than is practical without token networks. And tokenizing makes those assets liquid: tradable, like stocks, but even easier. That means I can sell my $10 Hemsworth token for $20 when the new Thorigen Story is announced. But it also means I might dump my token when the disappointing opening weekend box office numbers come out. Would we dump our neighbor’s token when his house burns down? Scarier yet, would someone short his neighbor’s token and then burn his house down? Ok, that scenario seems unlikely, since the payoff would be relatively small. But I can imagine a disgruntled fan, pissed that Tay Tay didn’t heart his Insta-gush, shorting Taytokens with his life savings and then setting out to make sure she never plays another show again.

Like any technology, Mega-Uni’s platform could be used for good or ill. And like any useful tech, if it can be built, it will. So who’s going to build the tools to tokenize ISAs with the click of a button? Maybe it’s Securitize. But who’s going to be the first to lock up supply by striking preemptive deals with celebrities via their teams, leagues, agents, managers, and publishers? Who’s going to attract fan demand and maximize liquidity by building the smoothest UI, the most scalable network, and the most secure smart contracts? Whoever does is going to be able to command a percentage of each IIO (Initial ISA Offering) and take a fee every time a token is traded. Binance went from zero to billions in just a few years by facilitating the exchange of a handful of assets only 40 million people care about. Imagine the valuation of an exchange listing limitless assets craved by billions of people. Now that Spencer Dinwiddie has gotten that round ball rolling, who’s going to build this trillion dollar company? If it’s you, DM me and I’ll buy a share of your ISA.