Dawn Of The Baller Bond?

Spencer Dinwiddie has long seen himself as far more than a basketball player. Describing himself as 'just a tech guy with a jumper,' the Brooklyn Nets guard turned down the chance to attend Harvard and spends his spare time immersed in the world and potential of cryptocurrency. When not offered an endorsement deal by a major shoe company on reaching the NBA, Dinwiddie took matters into his own hands, joining with athletic footwear experts to design his own basketball shoe which he believes to be better performing than market-leading brands.

It is this mindset that has led Dinwiddie onto his latest - and most controversial - off-court venture. He proposes to securitise his playing contract with the Brooklyn Nets, providing him with a lump sum payment that he can then invest, with the hopes of providing both a larger and more sustainable income long-term. The idea is elegant in its simplicity - Dinwiddie intends to sell 90 $150,000 'digital investment tokens,' which will initially be available only to accredited investors, raising a total of $13,500,000 - more than his salary for this season, which is $10.6 million. These will come with a guaranteed repayment of principal plus interest, expected to be at 2.5%. Investors can be confident of their return because Dinwiddie's playing contract is guaranteed until 2022. To lose the it, and therefore the means to repay his investors, he would either need to be recklessly injured outside of basketball (say, by going mountain biking) or be expelled from the NBA for serious misconduct (more on this later). If he is injured playing, training or by freak accident, the worst that can happen is that he is subject to the 'stretch provision' - a rule which allows teams to release a player and pay out their contract over a longer period than originally agreed. Though it would undoubtedly complicate matters, it should be possible to legislate for this in the model, as the total amount due to the player does not change.

This is, however, no ordinary bond. Dinwiddie's proposed investment would culminate in sharing his 2021/22 basketball-related income - the final, and highest paid, year of his current contract - with investors, in a 60/40 split (investors share the 40). The significance? Dinwiddie can unilaterally opt out of this final year to become an unrestricted free agent, signing a more lucrative contract with the Nets or any other team he so chooses. The Nets, on the other hand, have no such option; if he...