DAO That Wants To Buy Denver Broncos Faces Major Hurdles

The Denver Broncos NFL team is for sale, and one of the potential buyers could be a DAO – a decentralized organization using blockchain tech. However, the efforts have to overcome major regulatory issues.

Specifically, stringent NFL rules could put its supposed decentralized nature in question.

BuyTheBroncosDAO

BuyTheBroncosDAO aims to raise $4 billion from fans and investors to buy the U.S. National Football League team. The sale, set before the start of the 2022 season, could set a record for any North American sports franchise.

Spearheaded by a former Cisco employee Sean O’Brien, the initiative claims that the DAO would make the team owned and managed by its fans.

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We know it sounds a bit crazy, but it’s also a bit badass. The purpose essentially is to establish an infrastructure so that fans from all walks of life can be owners of the Denver Broncos.

If the sale goes through, they say, members will have a say in Bronco’s governance, operations, and leadership. In case it doesn’t, fans who contributed will get their money back.

The successful sale would make the Broncos the only NFL team run by cooperatives, besides the Green Bay Packers. Moreover, it would make it the first major sports team run by a Decentralized Autonomous Organization (DAO).

DAOs use blockchain tech to enable communities to use decentralized governance. Ownership, voting rights, and other contributions are all stored securely on the blockchain.

This will allow the community to own the team, with members securely and transparently pooling resources and participating in decisions. Moreover, the DAO will be able to issue unique membership cards in form of NFTs. Members will be able to trade those, and their prices could go up and down in value.

This DAO is Different?

Decentralized organizations are becoming a popular trend among crypto enthusiasts. Recently, a DAO raised $45 million for the legal defense of Wikileaks founder Julian Assange. Earlier, the ConstitutionDAO raised $47 million in an unsuccessful bid to buy a copy of the U.S. constitution.

Derek Sorensen, a mathematician and an advisor to the project says that Broncos DAO will be substantially different from others.

ConstitutionDAO was essentially a fundraiser. It was kind of like, we’ll raise money, we’ll buy this Constitution, you don’t own any of the Constitution, or actually have any legal rights to anything about it. You can vote on where we put it, but there’s no legal guarantee.

BuyTheBroncosDAO will assume a completely different governance structure, he said. He also said that they plan to form the group as a cooperative, which they believe would exempt them from some SEC regulations.

Moreover, the project also has the apparent approval of key political figures. Colorado’s pro-crypto Governor Jared Polis, who recently signed a bill allowing residents to pay state taxes in crypto, said he supported the initiative.

The challenge will be it’ll take a lot of money…but you know what, if your imagination is big enough, then it can happen. And anything I can do to make it happen, I’d be happy to.

Regulatory Hurdles

The team aims to close the sale by the start of the 2022 season, which means that the DAO could form very soon. However, not until the DAO promoters get around key regulatory hurdles.

There’s one fact that the Buy the Broncos initiative does not advertise. NFL rules require that a team has a majority owner – with at least 30% of the stake. If the team sells for $4 billion, one owner would have to have a $1.2 billion stake in the team.

Moreover, the NFL does not allow for any decentralized types of ownership, including cooperatives, since 1980. Incidentally, Wisconsin’s Green Bay Packers managed to keep their cooperative structure through a grandfathering clause.

It is not clear whether the NFL would be willing to change its rules to facilitate the sale. As the Broncos CEO Joe Ellis highlights, the process of selling an NFL team is incredibly complex. It involves numerous parties and the league has to approve the sale.

The Broncos are a special franchise that is part of the fabric of this region, and whoever emerges as the new owner will certainly understand what the team means to our great fans and this community

Is the DAO Really Decentralized?

Moreover, the Buy the Broncos DAO organizers did not indicate that they would have a majority owner. According to the NFL rules, the majority of investor would have to put up a minimum of $1.2 billion to buy a team.

A structure like that would raise the question of whether that DAO would truly be decentralized. The DAO in which any member holds 30% of the tokens would be suspect in that regard.

Typically, members in a DAO make decisions by voting. Each member has voting rights in proportion to the number of tokens he holds. Moreover, a DAO can have special governance tokens with privileged voting rights. These tokens are usually for employees and other people directly associated with the project.

However, not all members vote on every issue. Most of the time, large segments of the members abstain. If that happens with Bronco’s DAO, this would enable the majority owner to decide every issue with his 30% stake.

It seems like the success of the project rests on the NFL’s willingness to change its rules on cooperative ownership.

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This is not the only crypto project in which whales could dominate something which is supposed to be a decentralized network. In most smaller cryptos, the team, the early backers, and venture capital hold the majority of the stake. This is why Bitcoin maximalists like Jack Dorsey are critical of smaller coins and Web 3 initiatives.