Here is what the charts won't tell you about loyalty: it has a price, and the market resets it to zero the moment that loyalty is tested.
I used to believe fan tokens were a small, beautiful lie — a membership card dressed up as an asset, forgivable because every club needs its rituals of belonging. Then Mateo Kovacic spoke about his future at Manchester City, and $CITY, the club's fan token on Chiliz's Socios platform, flickered like a candle in a draft. The originating report was brief, anonymous, almost dismissive: a midfielder's devotion, it said, is a fragile anchor for a token's valuation, and investors should watch the partnerships instead.
That conclusion is half right. The wrong half is the dangerous one.
I have spent eighteen years in this industry, first as an economist skeptical of the hype, then as an auditor of the code that hype hides behind. In 2017, at the height of the ICO mania, I spent my nights manually reviewing the Solidity of Gnosis Safe's multisig implementation and found twelve critical logic flaws. I submitted them on GitHub for no bounty, because I believed then, as I believe now, that decentralization is an engineering promise, not a marketing mood. That experience taught me a question I bring to every asset, including a football club's token: who holds the private keys, in code and in fact?
For Manchester City's fan token, the answer is uncomfortable. The token trades under a familiar standard and appears on major exchanges, but the custody model is not a smart contract you can read; it is an app you trust. The balance you see inside Socios is a claim on a corporate ledger, and the platform that issued the token can upgrade the contract, freeze the supply, or redefine what the token means. There is no self-custody equivalent, no deterministic protocol you can fork, no code you can lovingly audit and call your own. "Code is law" is a myth whenever the code is a company with an admin panel. The multi-sig, in this case, is a sales agreement.
Let me lay out what we are actually looking at. The project is $CITY, the Manchester City fan token, issued through Socios.com and powered by Chiliz, the sports-focused blockchain firm that built its own chain to host these assets. Socios launched its first tokens around 2019 and scaled quickly: Juventus, Paris Saint-Germain, Barcelona, and Manchester City all sold fan tokens to a global audience eager to feel closer to the beautiful game. By 2021, during the European Championship and World Cup cycle, the sector was a banner narrative at every crypto conference.
Then the sector went quiet. From the highs of that cycle, most top club tokens have lost seventy to ninety percent of their value. Chiliz's own token never recovered. And the quiet has a specific texture in this bull market: AI agents, real-world assets, and restaking protocols are printing fortunes while an entire asset class bleeds out in the corner. That discrepancy is not a temporary dip. It is the market reading the technical and economic reality, and paying for the privilege of having believed the story once.
By 2022, the sector's shortcomings were already visible. Chiliz has since pitched itself as a Layer 1 for the sports economy; the marketing deck is stronger than the developer wallet. Third-party integrations remain rare. The contracts are not in the major aggregators, not in DeFi, not on the identity stack of any meaningful wallet. The ecosystem is a walled garden with a token in its pocket.
The report I am working from is a short, unnamed industry brief. It contains essentially three claims: that the Kovacic episode is a signal; that fan token valuations move violently around such signals; and that investors should henceforth focus on broader partnership relationships, not on player loyalty. It is not a technical document. It does not audit custody, does not examine emissions, does not ask what the token actually claims. But the absence of that audit is precisely the information. An article about a serious protocol would have noticed the gap. An article about a fan token does not, because the gap has come to feel normal.
So let me do the audit that the brief skipped.
A token's value is supposed to map to something. A DeFi protocol has fees, a treasury, total value locked. A DAO has a governance surface that touches real decisions. A fan token has a poll about which song the team runs out to, which goal celebration the players borrow, which jersey design gets a commemorative edition. None of that is a cash flow. None of it is a claim on Manchester City's commercial revenues. When the kit sponsor writes its check, the money enters the club's treasury, not the token's protocol. When the club sells shirts around the world, the margin flows to the club's retail operation, not to token holders. The token holder's only economic benefit is exit: to find a later buyer who also believes the story.
Consider the structure of its economics. In a typical mid-tier fan token sale, a meaningful share of the supply is sold through the platform's launchpad, with allocations going to the club, the platform, and early ecosystem partners. The fans — the emotionally committed ones — often end up holding the smallest cheques and the most undiversified bags. And because the token carries no protocol revenue and no fee-sharing model, the only yield available to a holder is the yield of belonging. That is not yield. That is a marketing line on the app's dashboard.
The fundamental structural flaw is a token with no claim on the cash flows it is priced to reflect.
Compare this with a different model. Sorare, at least, gamified its asset: the NFT cards are inputs to a managing strategy, with utility in game mechanics and a marketplace that reflects both scarcity and performance. The fan token has no game to enter, no card to combine, no performance mechanic beyond the club's on-pitch results. Its entire utility surface is a poll and a discount code. When the only use case is emotional access, the asset is priced as a lottery ticket on emotion.
Consider what a traditional analyst would do with this. Discounted cash flow is unworkable because there is no cash flow. Comparable analysis is circular because you would be pricing one poll against another poll. The only remaining method is narrative extrapolation — how much new emotion can the club generate before the next quarter's result? That is not valuation. That is weather forecasting.
This is the human cost I have been writing about since DeFi Summer 2020. That summer taught me something I still carry. When Compound's governance token crashed, it took my modest savings with it — and the savings of friends in my Beijing study group. I did not retreat. I interviewed thirty affected retail users and documented the emotional wreckage behind the yield curves. I wrote a series about the psychology of impermanent loss, because the numbers never show you the part that matters: people who bought for belonging, and were left holding a ticket to an event that no longer exists.
One interview from that period still sits with me. A software engineer who had put his family's savings into a governance token told me, "I didn't mind the loss. I minded that I was made to feel like a partner when there was never a partnership." I think of him every time the relationship between a club and its fans is described as a partnership.
Fan tokens run on the same fuel. Loyalty is the loss leader. A club does not need a token to generate commercial revenue; it already has season tickets, merchandise, broadcast rights. The token exists to convert devotion into a balance sheet item, and the moment that conversion is visible, the devotion becomes a trading variable. The price of loyalty is not ten dollars or a hundred; it is the difference between what a fan believes and what the liquidity actually offers when they try to leave.
One pattern kept repeating in my 2020 interviews. People did not abandon their governance tokens at the first sign of a crash. They held while the price disintegrated, because they had been sold a story about building the future. That conviction slowed their exits. I see the same conviction on the football side, but stronger: a fan who buys a token to support the club will hold through a forty percent drawdown, because selling feels like betrayal. The asset's price is therefore pinned by an emotion that is specifically designed to override financial rationality. That is not a robust market foundation. It is a fragile psychological construct, engineered by marketing, deployed at scale.
The original report advises watching partnerships. I understand the instinct: a sponsorship deal with a global brand is more durable than a player's promise. But the sponsorship money still does not flow to the token. You are simply switching from one headline that moves the price to a bigger headline that moves the price. The structural flaw remains untouched.
Let me put this in institutional terms. If a token is priced as equity, it must behave like equity: distributions, governance over real capital allocation, audited financials. If a token is priced as a utility, it must have a compelling, unavoidable utility that keeps the majority of its transactions non-speculative. Fan tokens sit between the two, claiming the privileges of both and accepting the discipline of neither. That is not a stable basin. That is a knife's edge.
What would my inner auditor need to see before changing my view? The mechanics. A mechanism that routes a defined percentage of sponsorship revenue into a buyback-and-burn schedule. A membership layer that makes the token the preferred payment rail for matchday purchases, with benefits that no speculator can arbitrage away. A governance surface that includes at least one real decision — a community treasury, a charitable allocation, a say in the token's own upgrade rights. Absent those mechanics, "watch the partnerships" is merely a recommendation to become a slightly better-informed spectator of the same casino.
There is also a bitter irony in the volatility the report describes. The more the token reacts to external events — a player's loyalty, a transfer window, a trophy run — the less defensible its "utility token" label becomes. Regulators use an old test for whether something is a security. Was there an investment of money? Yes. In a common enterprise? A single club ecosystem financed by a single platform qualifies. With an expectation of profit from the efforts of others? This is the clincher. The token's price moves because the club's recruitment, the platform's listings, and the players' performances all change, entirely outside the holder's control. The designers insist the token is a product. The price action says the token is an investment. A UK or EU regulator, armed with a chart of $CITY reacting to a player's interview, does not need to work hard to make the case.
In fact, the same volatility that generates trading volume generates the legal evidence that could eventually delist the asset. The loyalty the report worries about is not just a fragile narrative; it is a regulatory witness testifying against the token's own story of what it is. The FCA has already flagged certain fan tokens as high-risk investments. Europe's MiCA regime will force a classification decision, and a token that moves thirty percent on a press conference will find it difficult to defend its utility status. A market crash in fan tokens would be politically unremarkable — the sector's market cap is a rounding error. But a single delisting announcement in England would make tabloid headlines and draw a letter from a lawmaker within days.
The governance surface makes this worse. Fan token holders vote on what the industry politely calls engagement activities — anthems, art designs, the occasional charity kit. They do not vote on the treasury. They do not vote on sponsorship decisions. They do not vote on token issuance. I have spent years arguing that "code is law" does not work in DAO governance because upgrade rights always settle in the hands of a few multi-sig admins. Fan tokens are the extreme version: an entire participatory culture built atop a governance theater, where the real decisions happen in a boardroom, not on-chain. The token's "utility" is the alibi; the centralized control is the architecture. I built an educational platform on the premise that blockchain should decentralize power, so I have to look at fan tokens and admit what they are: a centralized database wearing a crypto costume.
I said it, and I mourn it, because I wanted the idea to be true.
Now let me play the contrarian to the report and apply the pragmatism test. The author says: stop watching loyalty, watch the partnerships. I would take this further and ask whether this asset should trade at all.
There is an inherent contradiction the market refuses to name. A tool that functions as consumption — a membership benefit, a discount voucher, an access pass — does not need its price to rise. In fact, price stability, or even price irrelevance, is what makes a good tool. But an asset that trades on exchanges, with leverage, needs volatility to deliver the returns investors expect. You cannot have both in the same token. The moment a club is honest about the tool side — when the primary use is gating real-world perks that a speculator cannot liquidate — the speculative premium evaporates. The moment it is honest about the asset side, it becomes a security and triggers the regulatory machinery.
The report is right about one thing: loyalty is a weather variable, not a structural one. But partnerships, as currently structured, are hardly more structural. The recommendation is an incremental move from a fragile anchor to a less fragile one. I am asking for an actual mooring.
Which partnerships, exactly, should we track? A kit provider's deal is a commercial event with a fixed fee. A broadcast rights renewal is a media event. A global tour is a logistics event. None of these is a token event unless the agreement explicitly routes value toward token holders. If Manchester City signed a proposal earmarking even five percent of incremental sponsorship value into a token buyback, the market reaction would be genuinely meaningful — because it would be the first time the token acted like a real claim. But that will be an implementation detail, not a headline. And no club is rushing to implement it.
The industry even has a better template available. The conversation around tokenizing stadiums — the San Siro case is the one everyone cites — shows what a real asset-backed sports token could look like: not an emotional coupon, but a claim on a revenue-bearing asset with maintenance obligations, income rights, and cash flows that can be modeled. That is the direction I would push any serious sports property. If the club refuses that direction, the asset is an entertainment fixture, not crypto.
This is the negative-sum reality the report does not mention. The club and the platform monetize the emotional premium at issuance. Early entrants occasionally profit. The late buyer — the fan who holds out of love, or the investor who enters after the peak — is systematically the exit liquidity. I saw this in NFTs too. In 2021, I refused to mint speculative profile pictures. Instead, I built a small collective called On-Chain Diaries, minting fifty digital artifacts that documented our daily interactions with the city of Beijing, and I coded the contract so royalties returned to local artists. It was a quiet act of resistance. But I watched the broader market consume itself, and I learned that affiliation and assethood, when fused too tightly, always end with the affiliation getting hurt.
So what do I actually predict? The sector bifurcates. Some clubs — probably the most commercially sophisticated ones — will quietly convert their fan tokens into boring, stable, off-exchange point systems. No volatility, no regulatory exposure, just a loyalty app with a wallet button. The remaining listed tokens will be drawn slowly into regulatory compliance, and most will lose their exchange listings. The winner's story will not be the token that turned a player's loyalty into a rally. It will be the infrastructure that lets a club verify its superfans without pretending that a ledger is either a family or a fund.
As a founder now working on verifiable truth in the machine-learning era, I have seen what real trust infrastructure looks like. It uses zero-knowledge proofs to verify what claims are actually true, without exposing what should remain private. It does not ask you to speculate on a story. It verifies the underlying fact and then lets you decide. Trust is not declared. Trust is verified. Fan tokens, in contrast, ask you to accept the story as the fact. A player says he is loyal. The token flickers, because it has nothing else to flicker on. "Watch the partnerships" is still watching the story. The verification, when it comes, will be on-chain, mechanical, and boring: a percentage, a clawback, a distribution schedule, a real vote.
The charts will not tell you any of this. The charts will tell you that a player promised to stay, and that the promise was priced, and that the market later remembered promises are not contracts.
Follow the fear, not the chart.
The quiet fear — not the panic — is what tells you where the code is weak, where custody is centralized, where the cash flow claim is absent, where the regulator is standing. I followed my fear through 2017, into the DeFi crash, through the NFT winter, and it has never lied to me. It is telling me now that a token anchored to devotion is a token that will teach someone an expensive lesson about what devotion actually costs.
If you can look at a fan token and see neither a football club nor an investment thesis, but a mirror held up to the industry's own loneliness — the desire to belong, turned into an exit ticket — then you might survive this market with your empathy intact. And if you can also write the boring code that gives the token a real claim, a real vote, a real flow of value, then you will not just survive it.
You will rebuild it.