Whispers of a potential legal dispute between Spencer Dinwiddie and the NBA became real this past week as the league officially hired outside counsel to navigate ongoing discussions with the sixth-year guard and his plan to turn his contract into an “investment vehicle.” The NBA’s decision to bring in the Debevoise & Plimpton law firm signals the league’s expectation of a larger legal conflict in the near future.
The controversy first arose when Dinwiddie conceived an interesting way to capitalize on the three-year, $34.4 million contract extension he secured last winter with the Brooklyn Nets. The 6th-year guard had the idea to convert his contract into a digital investment, which would allow investors to purchase stock in Dinwiddie as professional athlete investment tokens, or “PAInTs.” However, Dinwiddie’s plan goes even further as he has created his own company, DREAM Fan Shares, that would expand this investment vehicle to other professional athletes and their contracts as well.
The profitability of these tokens is derived from the ability of the athlete to “out-play” their contract and earn more on their next. For example, Dinwiddie has consistently improved over his last couple seasons, averaging 12.6 points per game in 2017 to 16.8 last year and is right around 19 to begin this season. His contract also contains a player option worth $12.3 million in his 2021 season, meaning he can play for that amount or opt out with the expectation that he will earn even more. So, if investors accurately predict that Dinwiddie will be in a position to opt out for greater money, both parties will stand to net a huge return.
The LA native’s creativity in this venture stems from his fascination in cryptocurrency. In 2017, Dinwiddie invested in Bitcoin just before it boomed and spent any time off of the court learning as much as he could about crypto technology. Two short years later, he’s partnering with Ethereum, a blockchain similar to the decentralized platform of Bitcoin, and now envisions a future in which crypto currency is the primary medium of investment. However, the innovative athlete is going to have to gear up against the NBA before anything can get started.
Despite two meetings between Dinwiddie and league officials over the last month, the two sides seem extremely far apart on reaching any resolution on this issue. The most recent collective bargaining agreement states, “no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract,” seemingly rendering Dinwiddie’s idea defunct. Moreover, NBA EVP and Deputy General Counsel, Dan Rube, told media outlets that the league has reviewed variations of the digital token plan and arrived at the conclusion that all versions would violate the CBA.
Dinwiddie, however, remains steadfast on launching his company and plans to move forward in spite of the league’s position. In response, it was reported this past week that if the Nets’ guard continues with his investment platform without league approval, he could be subject to fines, suspension or even the termination of his contract. It is unclear in which direction Dinwiddie will go next, but it seems that he will need to get a lot more creative in navigating his way through the case that the NBA and its legal team will be looking to make against him.