The near collapse this week of FTX, one of the largest cryptocurrency exchanges, has shocked the entire crypto startup and investment community. But the consequences could also extend to the sports industry.
Like other crypto companies, FTX has heavily invested in sports sponsorships, including partnerships and naming rights in professional basketball, baseball, and Formula One racing. Now, the company is in turmoil. On Tuesday, it said it would be acquired by rival Binance after experiencing a sudden liquidity crisis, but the deal was canceled on wednesday by Binance after the company conducted a financial review of FTX.
The uncertainty about the future of FTX raises new questions about what will happen to its many sports deals.
In 2021, FTX signed a reported $135 million, 19-year contract with the NBA’s Miami Heat to rename American Airlines Arena as FTX Arena. Major League Baseball reached a five-year agreement in 2021 to name FTX as its official cryptocurrency exchange, a partnership that includes placing FTX patches on umpire uniforms. FTX is also the official cryptocurrency exchange partner of the Mercedes-AMG Petronas Formula One team.
“It’s too early 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 FTX, with the University of California, Berkeley signing a 10-year, $17.5 million naming rights partnership in 2021 for the school’s football stadium. “We think we’ve found a great partner in FTX,” said Cal Director of Athletics Jim Knowlton. said at that time. “We look forward to building our relationship now and for years to come.” Cal Athletics did not immediately respond to CNN’s request for comment.
FTX also works directly with some of the best athletes in all of sports. Los Angeles Angels Superstar shōhei ohtani he became the global ambassador of the exchange in exchange for a stake in the company; NBA star Steph Curry and his foundation, Eat.Learn.Play., entered into a partnership with FTX in 2021; and football legend Tom Brady has an equity stake and has served as an ambassador for FTX.
Sports association 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 association consultancy IEG, told CNN Business.
“It happened during the dotcom era, where a bunch of buildings, mostly ballparks, were named after all these wacky dotcom companies, and they all fell apart,” Laatz said. “Naming rights deals are so hard to get going, getting consumers to think that Staples and American Airlines Arenas are now called something different and digging out the roots of something like that is harder. It makes property work more difficult. It is more expensive.
FTX and Binance did not respond to CNN’s request for comment.
FTX is not the only cryptocurrency company involved in the world of sports. Cryptocurrency brands spent more than $130 million on NBA endorsements alone last season, up from less than $2 million the previous season. Just five crypto companies, including Crypto.com, Coinbase, and FTX, were responsible 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, worth $192 million over four years. Crypto.com, another cryptocurrency exchange, purchased the naming rights to the stadium from the Los Angeles Lakers in November 2021, a deal worth $700 million. It also entered into a multi-year deal to become the official jersey patch partner of the Philadelphia 76ers.
Then the market changed. Coinbase, Crypto.com and other services announced layoffs as rising inflation, fears of an impending recession and broader market turbulence caused cryptocurrencies to plunge in value.
“We have always said that this was an arms race for brand awareness and users, and a year ago there were 40 crypto exchanges spending money on sponsorship, and now there are none. Maybe there are three or four,” Laatz said.
Binance, in particular, 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 ago. a few months, but we did it.