Initial Token Of Scepticism

Mark Cuban is a quick learner. Recently he ranted on Twitter about cryptocurrencies being in a bubble and today Coindesk announceshe is a cornerstone investor in an upcoming ICO or Initial Coin Offering by Unikrn.

[Source Flickr:] (https://www.flickr.com/photos/briansolis/2846279578)

I’ll reserve final judgement for the formal marketing of the token which should take place in August but let’s just say I’m issuing my Initial Token of Scepticism.

Unikrn is an e-sports betting platform that raised a bunch of money from celebrities like Ashton Kutcher, Elisabeth Murdoch and 500 Startups. It could be my personal experiences cloud my judgement. Before switching my attention to a different kind of gambling I grinded online poker for about six years. Anyone who had any funds on Full Tilt Poker, when the FBI shut down the major sites that had been circumventing the spirit of U.S. law, will attest to it being a gutwrenching experience. No access to your money anymore. The traffic on these sites collapsed and the whole poker ecosystem took a huge beating.

In Daily Fantasy Sports, an admittedly super fun form of gambling that adheres to the letter of the law, operators had a good runway and put learnings from the pokerboom and subsequent crackdown into practice. Still, as soon as Fanduel and Draftkings were getting serious traction they received a lot of negative attention from the government. They’ve since taken it down a notch and are carefully continuing to build the industry. Their valuations took a huge hit after government attention.

The idea of a Seattle based e-sports betting platform is not something that immediately inspires a ton of confidence in me. Why would gambling in “tokens” that you can convert into dollars fly with regulators? This is exactly what happens on a casino floor , they are called chips, and will be recognized for what it is in an instant.

That means there is always the distinct probability of legislation just stomping all over this. And IF Unikrn does gain traction it is a CERTAINTY it will attract the attention of regulators.

I can’t begin to imagine why Cuban put money in this thing.

I can imagine why he is very interested in an ICO. As long as the initial investment is of a decent size compared to the add-on and the add-on is sufficiently leveraged, it could be highly beneficial. The distribution of the tokens as pictured in the Coindesk graphic is one red flag but this Coindesk articlesheds some additional light on the playbook:

"not only is 500 Startups interested in ways to let retail investors back projects by buying digital tokens, he's even open to the idea of his own portfolio companies supplementing their cash flow by leveraging blockchain."

At 500 Startups, an investor in Unikrn, they are open to the idea of “their companies supplementing their cash flow by leveraging blockchain.”

I bet they are as it means the companies they invested in at much more advantageous terms raise a ton of additional money on potentially very, very easy terms. Essentially, part of that value accrues directly to them.

Ideally as an initial VC, you don’t participate in the token sale but obviously it helps the ICOs marketing if you do. Especially, if you are celebrity like Mark Cuban.

To be fair Cuban gave us a heads up. A couple of weeks ago he admitted believing cryptos to be in a bubble and people making money way too easily. Today, he’s “leading” an ICO to funnel some of those easy gains into one of his venture investments.

Again, I’ll reserve final judgement until the details are out but, from the celebrity investors, the Crypto twitterstorm, to the opportunistic fund raising while playing with legislative fire, this does not impress me favorably.