Two people who go by the pseudonyms Flex Chapman and Commodore have channeled their childhood aspirations of playing in the NBA into a way to own an NBA team.
A group known as Krause House hopes to do something ambitious: raise funds to buy an NBA franchise. The group has raised $4M in ETH via crowdfunding efforts, which is only about 0.3% of the cost of the cheapest NBA Franchise, the Memphis Grizzlies.
The group raised 200 ETH in the first 15 minutes by selling NFTs on Mirror, to grant buyers access to its Discord Server and Ethereum token KRAUSE. There are three levels of membership in Krause House, made possible by three categories of NFT sales, namely Courtside, costing 10 ETH, Club Level, costing 1 ETH, and Upper Level, costing 0.1 ETH, with Courtside granting the highest level of access and the highest allocation of KRAUSE tokens. The number of Krause tokens is equivalent to the governance stake a member will have. At the time of writing, the DAO had raised 1000 ETH via NFT sales. Krause House was started by friends, who go by the pseudonyms Flex Chapman and Commodore.
Will the NBA come onboard?
This new effort, named after the now-deceased Chicago Bulls manager Jerry Krause, has amassed over 2000 members in this latest effort. The DAO has released a “flightpaper” in which it describes its vision to allow fans to own part of the club (much like owning stock) and grant governance rights to participate in club decisions.
It is unclear whether the NBA would allow this form of governance or ownership, and Krause House is not optimistic. Faceless organizations are unchartered, and fall under unchartered regulatory and legal territory. For Sotheby’s to have allowed ConstitutionDAO to bid for the rare document, ConstitutionDAO had to establish a partnership with a crypto-exchange, as Sotheby’s doesn’t permit DAOs to bid in auctions yet. ConstitutionDAO’s bid of over $40M ultimately failed to secure a rare copy of the U.S. Constitution, losing out to Citadel CEO Ken Griffin.
Krause House Ownership Models
There are three proposed models to Krause House involvement in team activities: a Majority Decentralized Ownership, Minority Decentralized Ownership (DAO), and Minority Decentralized Ownership (Social Tokens). The first one is where “majority rights” to a team could be purchased (over 50%), where ownership rights, funding, and governance would all be on-chain. The DAO members would have their voices heard regarding ownership decisions, team location, approval of key leadership candidates, and marketing and events. The Minority Decentralized Ownership Model would see the DAO own a minority stake in the team, and has some rights in decisions like where the team should be located, marketing and event efforts, and some say in the hiring for executive positions. Krause House admits that the second minority-ownership will be the one that the NBA may accede to, more than the first option, since they would not allow a faceless organization to have majority ownership of a club, irrespective of the dollars on offer.
This is the first time the concept of a DAO has been linked with team ownership. Previous partnerships entered into involved fan tokens for the sake of driving engagement and generating revenue for sports teams, similar to FC Barcelona, where fan tokens are the medium of transactions to receive exclusive NFTs and special event access.
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