Reuters
- Brooklyn Nets guard Spencer Dinwiddie is trying to turn his three-year, $34.4 million contract into an investment vehicle.
- But the NBA is trying to block him, The Athletic first reported Tuesday.
- After reviewing several variations of the plan, the NBA determined it violates collectively bargained league rules, according to a statement provided to Business Insider.
- Dinwiddie still intends to launch the digital token, which could open him up to penalties such as a suspension, fine, or even termination of his contract, The Athletic found.
- Visit the Business Insider homepage for more stories.
The NBA is trying to block Brooklyn Nets guard Spencer Dinwiddie's plan to convert his $34.4 million contract into an investment vehicle, Shams Charania of The Athletic reported on Tuesday.
In a statement provided to Business Insider and other outlets including The Athletic, NBA Executive Vice President and Deputy General Counsel Dan Rube said the league has reviewed several variations of Dinwiddie's digital token plan.
"All of the ideas presented would violate collectively bargained league rules, including rules prohibiting transferring a player's right to receive NBA salary, gambling on NBA-related matters, and creating financial incentives to miss games," Rube said.
Dinwiddie still intends to launch the digital investment vehicle despite the NBA's pushback - which could open him up to penalties such as a suspension, fine, or even termination of his contract, according to The Athletic.
The NBA brought on outside legal counsel from the Debevoise & Plimpton law firm to help with the discussions, The Athletic found.
Dinwiddie reportedly met with league officials and lawyers twice over the last month to discuss his plan. In a meeting on October 3, the NBA told Dinwiddie that his actions would be assigning his salary as a third-party transfer - a violation of the league's collective bargaining agreement, according to The Athletic.
During a second meeting, Dinwiddie reportedly convinced league officials of the legality of the "third-party transfer" arrangement. But the NBA said his 2020-2021 player option worth $12.3 million was still an issue, The Athletic reported.
In response, Dinwiddie reportedly changed the premium on the appreciation of his player option to a binary, one-time trigger, compared to being a factor of his basketball-related income. That means if he chooses to accept the option, nothing changes for investors. But if he opts out, the premium rises.
The NBA is viewing Dinwiddie's third-year player option as a "gambling token," which has brought the discussions to an impasse, The Athletic reported.
In early September, Dinwiddie reportedly began looking into a digital token as a way to trade future income for a smaller upfront payment, allowing him to invest the sum immediately. Investors would receive principal and interest, and Dinwiddie's contract would pay for what he owes the bondholders.
If Dinwiddie's attempt to securitize his contract is successful, the league could see other players follow suit. That could also change how the NBA views future contracts.
Dinwiddie told The Athletic that he doesn't want to "go to war" with the NBA and he wants to continue working with the league to make the process easier for players in the future.
He also said he believes his token would be a better investment than a publicly-traded stock because it's not correlated to typical market forces and wouldn't be impacted by a recession.