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Sorare & the Growing Crypto x Sports Sector
exploring the often overlooked onboarding mechanism & the future of gamified digital collectibles
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Sports Highlights to Six Figure PFPs: The NFT Cycle
As we slowly progress through 2023, many late entrants drawn to the insanity that was the first true NFT cycle may not realize what ignited the initial frenzy. What kicked off the lunacy that was the eventual NFT bull run of 2020-2021 was largely a result of the launch of NBA Top Shot. Top Shot was a booming market for those that were early as the bottled fever of no live sports and lockdowns during covid directed pent up money and attention to alternative assets. Top Shot captured the fever of this parabolic growth in time and money spent online in a massive way.
While Top Shot’s mindshare and volume has decreased, the imagination that began with the launch of CryptoKitties in 2017 was rejuvenated and the excitement around ERC-721s and what NFTs could become was reimagined. TopShot drew in hundreds of thousands of users that eagerly waited in a queue, hopeful that the market gods would reward them with NBA highlights in a digital card form distributed through the pack drop of the day.
Around this same time, NFTs began to slowly reach exit velocity as the number of market participants and money online, NFT projects launching, and infrastructure necessary to service the burgeoning market found a home with the excess money flow Top Shot inadvertently created.
As everyone knows, crypto is extremely cyclical in nature and the broad NFT market is currently experiencing its largest drawdown to date. Despite this, one sector of NFTs continues to grow, onboard users to crypto rails, and highlight the ability of crypto to provide users with digitally native property rights.
Ironically, the same sector that fueled TopShot’s success and the following NFT bull market is currently the healthiest sector of the NFT market in terms of MAU, total transactions, product market fit, and onboarding users to crypto rails. That sector is the Sports x Crypto intersection which remains relatively nascent in development, but is displaying rapid, global growth.
Accessing the Landscape
Okay, but why should you care about TopShot’s history, Sorare, Stake, Chiliz, or anything tangentially related to the burgeoning gamified NFT sport sector? Because it continues to be one of the fastest growing sectors, operates as a trojan horse onboarding mechanism, has done hundreds of millions in secondary volume sales, and is tapping into a market that will continue expanding.
Substantiating this argument is Fisher8’s great, recent report “The State of Crypto and Sport”, where they highlight the sector as primed for explosive growth. “The global sports betting market is estimated to be valued at approximately $168B in 2021 with a CAGR of 10% from 2022 to 2029…according to the Fantasy Sports and Gaming Association, the number of fantasy sports players by year in the USA and Canada has nearly doubled over the last ten years, with about 63 million active players in 2022.”
If the projected market growth wasn’t enough, we’re now witnessing digital collectibles that people actually utilize, without fear of damage, selling for more than their physical card counterparts.
With the table set, we’ll dive into the largest players within the Sports x Crypto sector that currently has 5-6 main players. While there are obvious differences between the companies listed below, it’s important to note that Sorare and Chiliz are head and shoulders above the others in the ability to truly own, transfer, and self-custody a user’s assets.
DraftKings Reignmakers — At the intersection of collectibles and fantasy gaming where players can build a collection of officially licensed digital player cards and draft those cards in fantasy contests throughout the year. “Each player card represents an athlete and scores points based on the player’s statistical performance in a given event or game.”
Chiliz (CHZ) — “Building the web3 infrastructure for sports and entertainment”. Creators and operators behind the fan token ecosystem that we saw explode leading up to the 2022 World Cup — offers holders of officially partnered soccer club tokens the ability to participate in fan-led decisions, take part in contests and accumulate reward points to redeem for team merchandise and experiences.
Panini — Highlights the fact that even one of the oldest manufacturers of physical cards (founded in 1961) embraces the digital collectible (NFT) era, although their ecosystem is built on enterprise blockchain solutions that is closed and siloed compared to other competitors.
Sorare — A fantasy sports game at heart, but instead of just picking player names from a list during a draft, you purchase digital trading cards that are NFTs on the Ethereum blockchain; Sorare has over 300+ partners including the Premier League, the NBA, the MLB & more while currently offering players soccer, basketball, and baseball leagues to compete for ETH and new card rewards.
Stake & Rollbit — while different than the other platforms that generally represent sport IP as NFTs listed above, Rollbit & Stake allow users to bet on sports and gamble online with crypto playing a large role in spreading awareness of BTC, self-custody and crypto at large (think Drake broadcasting million dollar bets in BTC to his 134 million followers). Tapping into this global market netted Stake a cool $2.6B in revenue last year.
As you can see, the crypto and sports IP sector has continued to expand in recent years. At a high level, this specific crypto sector may not interest everyone, but it’s important because it has routinely been one of the largest funnels for people to not only enter the crypto ecosystem, but to understand the value and potential of self-custodial digital goods. As previously alluded to, this fact is evidenced by a significant portion of today’s NFT ecosystem participants finding crypto and NFTs through NBA Top Shot.
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In addition to that, the numbers of participants in each ecosystem and the collective market cap of the assets is worthy of exploration. For example, CHZ market cap is currently ~$600M, the collective fan token market cap, while down significantly from the highs, is still above $300M, Sorare’s secondary marketplace has done close to $600M of trade volume and a Unique 1/1 Giannis Antetokounmpo Sorare card was recently auctioned at record price of $187k.
Highlighting the scale of the opportunity, Fisher’s report notes that the size of the fantasy gaming industry in the US and Canada has doubled over the past ten years. That growth has resulted in ~63M active fantasy sports players in the US and Canada, a number which is ~15% greater than those countries estimated total crypto holders/users (~55M).
To further emphasize the point, DraftKings, the largest web2 player in the space that essentially IPO’d off the strength of their daily fantasy sports platform, current market cap is $8.71 billion (their valuation is largely supported around their sportsbook’s projected growth).
That ~$8.7B market cap would place DraftKings as the 11th largest crypto token, sandwiched between MATIC and SOL. Clearly, the Sports x Crypto sector’s TAM is massive and the players involved have the ability to scale, within a relatively short time frame, to the equivalent of a top 10 token by market cap.
So we know the market is massive and will only grow in recent years, but how about adoption? The potential for an asset class to grow into a hypothetical addressable market is useless if there’s no early signal of demand from people that actually want to use those services.
The below screenshot is from cryptoslam.io and shows the total cumulative sales volume of all NFT collections across all chains. What immediately stands out, is the size of the NFT market when broken down into buyers and sellers. While certainly a function of their high prices, CryptoPunks have topped out at 6k buyers. BAYC and MAYC have seen 13k and 27k buyers respectively. Doodles, one of the older, more accessible price level collections, has only seen ~15k buyers and sellers.
In contrast, TopShot and Sorare exemplify that the number of potential market participants in the Sports x Crypto sector is infinitely greater than that of a 10k+ NFT collection.
Actually, Sorare has around ~250k unique market participants as a number of them haven’t registered a transaction on Ethereum yet. Importantly, Sorare provides that optionality for users. Sorare, as a medium of expression for sports fans across the globe, provides exposure to crypto rails and subconsciously informs users about what a truly owned digital asset can enable.
If total market participants aren’t enough to convince you of the onboarding mechanism, the timing of a couple Sorare data points should. While the broad NFT market has been down only since BLUR’s token launch a month and a half ago, Sorare’s unique monthly active buyers reached a new all time high of over 50k in February 2023.
In addition to that, on January 30th, Sorare announced a partnership, rumored to be valued around $150M, with the English Premier League. In response to the announcement, clear demand and product market fit were displayed as the day of the Premier League announcement resulted in the largest sign up day in Sorare’s history.
January 30th was an interesting time in crypto markets as the rally that started in the beginning of the year was in full swing, but overall crypto market participation was as low as it had been since before Covid. Cratering prices due to macroeconomic uncertainty, inflation, and FTX/LUNA’s fraudulent collapses painted a grim picture for the crypto market.
Despite that, the demand for Sorare’s product was clearly isolated from the broad crypto market. While Sorare’s product encompasses the ability to operate on crypto rails, the users that wanted to play and enter the ecosystem that Sorare provides showed apathy to FTX and the overall broad crypto market. Users across the globe simply wanted to play Premier League fantasy sports with their friends and support their diehard fandom while also having the ability to potentially win new card prizes, ETH, and irl experiences.
What this signals to me is that the Sports x Crypto sector represents one of the best onboarding mechanisms, that is sticky through market drawdowns, as the popularity of fantasy sports coupled with crypto rails and the ability of users to truly own, manage, collect, and trade their digital assets has demonstrated clear product market fit. Additionally, as someone who in a past life played daily fantasy sports (DFS) for a living, I can assure you that the mechanisms and ownership that Sorare, DraftKings, and CHZ provide are orders of magnitude better than their web2 predecessors.
The same spillover effects initially created by NBA Top Shot will continue to onboard users to crypto as the Sports x Crypto sector continues to develop. In the not so distant future the fluidity with which this can be done will also be drastically increased by UX/UI improvements to L2s and account abstraction enabling users to create wallets with already existing accounts at Google, Facebook, Apple, Amazon, etc.
Sorare the Market Leader
Now that we’re aware of the market size, its potential for massive growth, and have highlighted its ability to onboard global participants to the crypto ecosystem, let’s take a deeper look into the market leader, Sorare. Around the same time Top Shot took off, a lesser known NFT fantasy sports platform was slowly and methodically building.
Founded in Paris in 2018, Sorare is the incumbent in this category as they have managed to obtain licenses from various football (soccer) leagues, the NBA, & the MLB players associations. Sorare takes ownership in sports to the next level as you own your players forever compared to traditional sports games such as Fifa Ultimate Team.
As Mason Nystrom said when Sorare announced their partnership with the NBA in September, “NFT fantasy cards and platforms like Sorare provide ownership to fantasy leagues which further financialized a hobby of millions of people around the world. As a whole, the crypto fantasy sports sector continues to be one of the most promising applications that can bring millions of non-crypto native users into web3.”
With adoption continuing to grow, what’s unique about Sorare is that not all users need to download Metamask or a crypto wallet. Sorare currently supports other top wallets such as Coinbase and enables mainstream users to on-ramp via Moonpay and Ramp with a credit card. Sorare users can then buy digital collectible cards directly with their credit cards and become aware of their ability to fully own, transfer, self-custody, and sell their cards.
Since their launch, Sorare has had ~250k paying users with ~180k of those global buyers figuring out how to download and install metamask and make a secondary marketplace transaction. Once again, we see the scale to which Sorare and other Sports x Crypto platforms can reach as the number of secondary market participants is orders of magnitude larger than the number of users who participate in the traditional NFT market.
This edition of Page One is sponsored by Sorare. Sorare is the best fantasy sports platform and is powered by NFTs! Users own their cards (NFTs) forever while using them to create lineups and compete for new card rewards, crypto powered prizes & real life experiences. The second MLB season just started while Sorare also recently announced a four year partnership with the Premier League.
Myself, Moon, and numerous people in The One have been playing Sorare NBA since their launch in October so join the discord to come hangout where you’ll find dedicated Sorare NBA and Soccer channels. You can sign up for Sorare today and get 1 free limited card when you buy 5 cards from the primary market!
High level stats of Sorare and what the platform offers:
670k+ monthly active users
Monthly active buyers reached a new all time high last month of over 50k
3 million+ sign ups, growing exponentially with partnerships such as Premier League, NBA, and MLB along with recently announcing their English Premier League partnership
Between 50-100x the amount of daily buyers/sellers compared to all other NFTs
Sorare did $500M+ of revenue in 2022 and billions in secondary trading volume
One of the best onboarding funnels to crypto and wallet awareness to those across the world who have never used crypto rails before
Bridges the physical with digital experience for sports fans and allows each user to be a general manager, coach, scout, speculator, collector & more
Soccer product launched in April of 2019 – US expansion with MLB launch in July of 2022, NBA in October of 2022 – incredibly well funded after raising a $680M series B with a valuation of $4.3B
Sorare’s Game Mechanics
Each player card and its associated scarcity is minted as an NFT
Primary market — cards are issued by Sorare through auctions, the speed at which is determined by rarity (i.e. the higher the scarcity the less often an auction occurs), which allows users to determine the fair market value
Secondary market — allows users to buy, sell and trade cards
Sorare utilizes an ETH layer 2 to scale their product providing users with quick transactions and minimal fees
Sustainability – the slow-drip auction & tiered card rewards format provides Sorare the ability to not over saturate the market
Competitions – managers use the cards they’ve acquired to compete in game weeks that typically last 3-4 days with prizes available including ETH based rewards, new cards allowing managers to build better rosters and level up, and various other real life perks or products managers can win bridging the digital and physical experiences
As you can see from the above picture, Sorare’s number of transactions, buyers, and sellers are 10-100x more than any other collection. In addition, the average sale price is around $41, providing a much easier entry point for global market participants.
To further highlight the power of Sorare and similar platforms, I’ll once again reference the excellent “The State of Crypto and Sport” report from the extremely crypto-native fisher8 capital team where they opine, “blockchain-based fantasy sports differ from traditional platforms due to the tradability and composability of cards, where benefits may come in the form of”:
Using cards as collateral for NFT-backed loans
Being able to utilize cards as characters in other games (eventual composability)
Ability to sell cards on platforms and marketplaces along with the ability to withdraw and transfer assets to self custodial wallets
As for the brands, companies and leagues that partner with crypto enabled products like Sorare, they benefit from:
Ability to improve fan engagement, appeal to gen Z, & penetrate new markets
Crypto ownership heavily skewed to younger generations
New revenue streams – often a percentage of secondary market sales
Expanding consumer base & driving further brand engagement
Establishing competitive advantages by gaining market share in emerging markets
So, Where From Here?
As we can see from all available metrics, Sorare, and the Sports x Crypto intersection at large, continues to drastically expand their reach while onboarding everyday users to crypto for the first time. Importantly, the space remains in its earliest days as further advancements can come from sports teams, leagues, and ownership groups implementing benefits to die hard fans through soulbound tokens and potentially utilizing NFTs to issue tickets.
Soulbound NFTs along with NFTs representing past attended games or events create the ability for teams and individuals to airdrop to holders of past events, deepen the out of season relationship for their most dedicated fans, and enable a direct medium to engage with loyal fans throughout the entire year.
Additionally, NFTs as tickets eliminate the middleman (like the routinely hated Ticketmaster that just announced a NFT-gated sales pilot) creating more value for both fans and ticket issuers. The secondary market of ticket sales is projected to reach $9.7B in 2027 while currently, from 6529’s estimation, the total NFT market cap sits at a smol $16B.
Over the next several years, I’m expecting the experimentation within the Sports x Crypto sector to drastically increase and continue to operate as one of crypto’s best onboarding funnels. No matter how the space develops in the coming years, we’re likely to see Sorare continue to pave the way for this exciting new sector.