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    FTX’s Downfall Leaves Sports Rights Deals in Jeopardy

    In the intervening 15 months, the cryptocurrency exchange based in the Bahamas has become widely known and used throughout the sports industry. It has worked with four major league sports franchises and many famous athletes, including the Mercedes-Benz Formula One team. Umpires in Major League Baseball wore its brand on their uniforms.

    Sports fans reacted with a resounding “Who?” when the Miami Heat announced in March 2021 that the team had sold naming rights for its arena to FTX.

    In the intervening 15 months, the cryptocurrency exchange based in the Bahamas has become widely known and used throughout the sports industry. It has worked with four major league sports franchises and many famous athletes, including the Mercedes-Benz Formula One team. Umpires in Major League Baseball wore its brand on their uniforms.

    It took about a week for it to all come crashing down. Miami-Dade County, which owns the arena the Heat play in, announced it would “terminate our business relationships with FTX” and look for a new naming rights partner after FTX Group filed for Chapter 11 bankruptcy amid reports of insolvency and misuse of customer funds.

    Team SoloMid, one of the most well-known names in esports, recently ended a 10-year, $210-million sponsorship and naming rights deal with FTX. Considering that agreement was signed last year, it had been doing business as TSM FTX.

    California’s UC Berkeley has pulled the plug on its $17.5 million naming rights deal with FTX and removed the company’s logo from both end zones of California Memorial Stadium. The agreement was supposed to last for ten years but only lasted eighteen months.

    The most prominent companies in the cryptocurrency industry looked to sports marketing to raise brand recognition and increase sales before and for some time after the market crash last year.

    Staples Center, home of the Los Angeles Lakers, was rebranded as Crypto.com Arena in a deal between AEG Worldwide and Crypto.com finalized in November 2021, days after the price of bitcoin reached its all-time high. According to those familiar with the transaction, its value was $700 million.

    Bearish conditions in the market lasted for another two months, during which time several cryptocurrency companies splashed out on Super Bowl commercials. Binance hired basketball star Jimmy Butler, a cryptocurrency exchange whose owner’s schemes contributed to the downfall of FTX, to appear in a spot warning viewers to be wary of celebrity crypto ads. The cryptocurrency exchange Binance is the official sponsor of the African Cup of Nations.

    Six months into the cryptocurrency downturn, in May, the WNBA’s Seattle Storm announced a multiyear partnership with Coinbase, making Coinbase the franchise’s official cryptocurrency platform. The decision by major sports entities to hitch their brands to crypto companies is coming under fresh scrutiny in the wake of FTX’s implosion, which has stoked new fears about a domino effect affecting other exchanges and currencies.

    It was one of the most expensive stadium rights deals ever when Staples Center changed its name to Crypto.com Arena. In 2019, AEG, a Denver-based subsidiary of global sports and music entertainment presenter Anschutz Corp., repurchased the naming rights from Staples for an undisclosed amount. The Los Angeles Clippers play there until their arena is ready to open, and the Los Angeles Kings ice hockey team also calls it home.

    This week, AEG stated that it has “complete and utter faith and confidence” in Crypto.com’s ability to uphold its end of the bargain. It provided more detail about that statement late on Wednesday, saying, “For the many ways in which our fans, athletes, and performers have benefited from the title sponsor’s involvement with the arena, AEG is grateful. Crypto.com has been a great partner for us on a number of arena projects, and they truly care about spreading the word about how awesome our product is and how they can help make the game day experience even better for the fans.”

    The revelation that FTX founder Sam Bankman-Fried used user funds to fund a trading firm that bears his name—Alameda Research—raises questions about the extent to which FTX’s finances are intertwined with those of other exchanges and coin issuers in a market that has been an unregulated Wild West compared with Wall Street. The new CEO brought in to oversee FTX’s bankruptcy, John Ray III, claimed he had never seen such a blatant breakdown in corporate governance or controls.

    According to Crypto.com’s v.p. of communications Matt David: “manages a conservative business with an emphasis on security and regulation. We never borrow money from our clients.”

    According to David, Cypto.com, “minor FTX risk. We topped $1 billion in sales last year, and we’re already well on our way to breaking that record this year. Strong financials and unwavering dedication to our sports partnerships (including Crypto.com Arena) make us a formidable opponent. Through these collaborations, we’ve been able to expand our user base to more than 70 million people around the world.”

    Texas-based energy, commodities, and services provider Enron collapsed under the weight of criminal convictions and scandals. (The new head of FTX, Ray, was the Enron executive in charge of cleaning up the company’s mess.) The Houston Astros baseball team paid a $2.1 million settlement in 2002 to get out of a $100 million, 30-year contract to call their stadium Enron Field.

    The name of the stadium where the Baltimore Ravens play their home games, formerly known as PSINet Stadium, was changed back to Ravens Stadium after PSINet, an early commercial ISP, went bankrupt. M&T Bank Stadium is its new name.

    The Metropolitan Museum of Art had the name of the Sackler family, whose company manufactured Oxycontin, removed from seven exhibition spaces after the drug’s widespread negative publicity. In 2019, so did the Louvre in Paris.

    We’ve seen it happen before and it will happen again. What might be a little different this time is how rapidly the crypto industry grew and how fast it became an essential marketing partner to many in and around the sports space.

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