- Cryptocurrency Brands Unlikely to Go Away, But Big Business Is Probably Over
- MLB, Mercedes F1, Miami Heat have all suspended their partnerships with FTX
- Tom Brady, Steph Curry and Naomi Osaka All Named in Lawsuit Against Exchange
The recent collapse of the FTX exchange, which has significant rightsholders among over a million individual creditors, will forever alter the cryptocurrency industry’s relationship with the sports industry.
Coming on the heels of similar funding issues amid the so-called “crypto winter,” the collapse of FTX potentially marks the end of a short but lucrative association between the sports world and cryptocurrency firms.
The rush of rightsholders to sign deals with brands in the cryptocurrency space once seemed like it could fill the sponsorship hole created by tighter regulations on the betting industry. With many companies relatively new and yet to fully scale their businesses, there seems to be mutual benefits for both parties as brands have garnered more attention than they otherwise could have. themselves.
Now, a senior executive at a major sports marketing firm has told SportsPro, on condition of anonymity, that cryptocurrency brands aren’t going anywhere, but now there will be a lack of trust from the public. sports industry to enter into agreements with them. Going forward, it looks like there will be increased scrutiny, even on companies that have shown good business practices so far. The executive said it’s likely companies known for good governance will be preferred, even if other brands write bigger checks.
Indeed, from a marketing perspective, he said the impact of FTX’s demise will likely push the cryptocurrency industry away from any high profile sponsorship deals for several years and that there is little likely that major contracts will be signed with sports organizations in the near future. coming. Going further, he said there could even be a push by major properties to prevent deals being struck with cryptocurrency exchanges, given the lack of regulation around them.
However, blockchain companies, which are considered to be in a different category, feel that while the collapse of FTX will put a temporary stain on their deals, it ultimately won’t impact their relationships within. Sport.
While there is no obvious beneficiary of the vacant sponsorship space left by cryptocurrency exchanges, emerging categories such as cleantech and sustainability companies may be able to step in, if not. quite spend-wise as seen by FTX.
Larry Mann, partner of the agency rEvolution, points to several other categories that could benefit from it. He said Reuters“While crypto might be cooling off as an emerging category, there are always other growth areas to watch – sports betting, CBD, Fintech, are a few examples to watch.
“If teams weren’t cautious about crypto before… they will be now.
“When it comes to increasing sponsorship revenue, teams/leagues are always looking for new opportunities, but what’s happening with FTX is a wake-up call.”
For FTX, which recently filed for bankruptcy after investors withdrew $6 billion from the platform in just 72 hours and saw a bailout deal with rival Binance collapsethe future is murkier.
Founder and Managing Director Sam Bankman-Fried resigned from his position at FTX immediately after its collapse, although he has since claims the business is still able to operate. Its new boss, John Ray III, said in a court filing that the company had suffered an “unprecedented and complete failure of corporate controls”.
The news that FTX had filed for Chapter 11 bankruptcy protection had a huge impact on a number of individual rights holders. The Mercedes Formula 1 team has suspended its partnership, while the Miami Heat of the National Basketball Association (NBA) has also terminated their 19-year arena naming rights deal with the company.
Other FTX partners that have moved away from the platform include esports organization TeamSoloMid (TSM), while Major League Baseball (MLB) has confirmed he is also ending his five-year sponsorship deal.
A class action lawsuit has since been filed against Bankman-Fried, with several athletes including National Football League (NFL) icon Tom Brady, NBA All-Star Stephen Curry and tennis ace Naomi Osaka named co -accused.
The lawsuit, brought by a group of pursuing investors, claim the defendants, which also include the NBA’s Golden State Warriors, “made numerous false statements” about FTX. The company is described in the filing as a “Ponzi scheme” in which entities owned by FTX moved funds from investors to look like a solvent company.
There also remains significant doubt regarding deals involving FTX affiliates such as crypto lending firm Voyager Digital. traveler, who had inked sponsorship deals with the National Women’s Soccer League (NWSL) and the NBA’s Dallas Mavericks, is currently the subject of a separate class action lawsuit.