A National Basketball Association player for the Brooklyn Nets is planning to tokenize his contract. Nets point guard Spencer Dinwiddie is, in effect, doing a STO, or security token offering with the tokens secured by the terms of his contract, thus creating a digital investment that’s the first of its kind for the NBA.

Last week it was reported that Dinwiddie would be swapping future income for an up-front lump sum dollar amount via the STO, allowing him to use those funds for other investments. The investors in his token would receive principle and interest covered by the longer-term payout of his contract.

While this digital investment sounds like a novel way to receive a cash payout backed by future cash flow, it’s actually a tech-enabled version of factoring, which has historic roots tracing  back to ancient Mesopotamian culture.  

Rock star David Bowie did something similar more than twenty years ago when he received a large up-front sum of cash by securitizing his future music revenue. According to Investopedia, “Bowie bonds were first issued in 1997 when David Bowie partnered with Prudential Insurance Company and raised $55 million by promising investors income generated by his back catalog of 25 albums.”

Tokenizing future cash flows of professional athletes, musicians, movie stars and others of that ilk makes the creation of these types of digital investments a whole lot easier. Likewise, transferring the risk of future performance income is very attractive for the “issuer.” In the case of Dinwiddie, there is no doubt a clause (or two) inserted into the token contract regarding misconduct, which could adversely impact investor payouts. It is also unclear how contract extensions and re-negotiations would be addressed.

All this begs the question of whether the “digitization of athletes” will elevate fantasy sports to a new level. Will draft choices choose to tokenize their very first contract before they even play a game? Investors will have to weigh the risks (and de-couple from their enthusiasm) of owning a financial stake in a sports star. Once again, an old concept (securitization) is updated as the investment becomes tokenized.

Look for more of these types of celebrity investments in the future as others choose cash upfront, rather than the stable longer term contract payout to finance their careers.

Bill Taylor is managing director and chief investment officer of Entoro Wealth LLC.