Change in cryptocurrency exchanges could affect the sports industry

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The near-collapse this week of FTX, one of the largest cryptocurrency exchanges, has caused great concern throughout the cryptocurrency startup and investment community. But the consequences could also spill over into the sports industry.

Like other cryptocurrency companies, FTX has invested heavily in sports sponsorships, including partnerships and naming rights in professional basketball, baseball, and Formula 1 racing. Now, the company is in crisis. On Tuesday (8), it said it would be acquired by rival Binance after experiencing a sudden liquidity crisis, but the deal was canceled on Wednesday (9) by Binance after the company carried out a financial review of FTX.

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The uncertainty surrounding the company’s future raises new questions about what happens to its many sports businesses.

In 2021, FTX signed a 19-year, $135 million contract with the NBA’s Miami Heat to rename American Airlines Arena as FTX Arena. Major League Baseball struck a five-year deal in 2021 to name FTX as its official cryptocurrency exchange, a partnership that includes putting FTX patches on referee uniforms. The company is also the official cryptocurrency exchange partner of the Mercedes-AMG Petronas Formula One Team.

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“It is too premature for us to comment,” FTX Arena and the Miami Heat said in a joint statement provided to CNN Business when asked how the acquisition could affect their deal.

Even college sports have ties to one of the biggest in the cryptocurrency business, with the University of California, Berkeley signing a $17.5 million, 10-year naming rights partnership in 2021 for the school’s football stadium. . “We believe we’ve found a great partner in FTX,” Cal’s athletic director Jim Knowlton said at the time. “We look forward to building our relationship now and in the years to come.” Cal Athletics did not immediately respond to CNN’s request for comment.

FTX also works directly with some of the greatest athletes in sports. Los Angeles Angels star Shohei Ohtani became the exchange’s global ambassador in exchange for a stake in the company; NBA star Steph Curry and his foundation, Eat.Learn.Play., have signed a partnership with in 2021; and football legend Tom Brady has an equity stake and has served as the company’s ambassador.

Sports partnership experts say stadium naming rights are the biggest headache. “There’s not a great level of permanence to a lot of the things that have been done, except for the two buildings,” Peter Laatz, global managing director of sports partnership consultancy IEG, told CNN Business.

“It happened during the dot-com era, where a bunch of buildings, mostly baseball stadiums, were named after all these shaky dot-com companies, and they all disappeared completely,” Laatz said. “Naming rights agreements are so difficult to get to work, to get in the minds of consumers that Staples and American Airlines Arenas are now called something different, and digging up the roots of something like that is harder. This makes the property job more difficult. It’s more expensive.”

FTX and Binance did not respond to CNN’s request for comment.

FTX is not the only cryptocurrency company involved in the sports world. Brands like that spent more than $130 million on NBA sponsorships last season, up from less than $2 million the previous season. Just five cryptocurrency companies, including, Coinbase and FTX, accounted for 92% of industry spending, according to IEG.

In 2021, trading platform Coinbase signed a multi-year deal with the NBA to serve as the league’s exclusive cryptocurrency partner, reportedly worth $192 million over four years., another cryptocurrency exchange, purchased the naming rights to the Los Angeles Lakers stadium in November 2021, a deal worth $700 million. He also entered into a multi-year contract to become the official shirt-patch partner of the Philadelphia 76ers.

Then the market changed. Coinbase, and other services announced layoffs as rising inflation, fears of an impending recession and broader market turmoil led to a sharp decline in the value of cryptocurrencies.

“We’ve always said this was an arms race for brand recognition and users, and there were 40 cryptocurrency exchanges spending money on sponsorship a year ago – and now there’s none. There are maybe three or four,” Laatz said.

Binance, notably, has stayed out of the sports sponsorship frenzy. In a hiring announcement earlier this year, Binance CEO Zhao “CZ” Changpeng said, “It wasn’t easy to say no to Super Bowl ads, stadium naming rights, big sponsor deals a few months ago, but we did it”.

Source: CNN Brasil

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