Home Miami jersey The Sudden Decline of One of the Largest Crypto Exchanges Could Shake the Sports Industry

The Sudden Decline of One of the Largest Crypto Exchanges Could Shake the Sports Industry

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CNN Business

The near collapse this week of FTX, one of the largest cryptocurrency exchanges, has sent shockwaves throughout the crypto startup and investor community. But the fallout could also spill over to the sports industry.

Like other crypto companies, FTX has invested heavily in sports sponsorships, including partnerships and naming rights in professional basketball, baseball, and Formula 1 racing. Today, the company is boiling. On Tuesday it announced it would be acquired by rival Binance after experiencing a sudden liquidity crunch, but the deal was canceled by Binance on Wednesday after the company conducted a financial review of FTX.

The uncertainty surrounding FTX’s future raises new questions about what happens to its many sports offerings.

In 2021, FTX signed a 19-year, $135 million deal with the NBA’s Miami Heat to rename American Airlines Arena as FTX Arena. Major League Baseball entered into a five-year deal in 2021 to name FTX as its official cryptocurrency exchange, a partnership that includes putting FTX patches on umpire uniforms. FTX is also the official cryptocurrency exchange partner of the Mercedes-AMG Petronas Formula 1 team.

“It’s far too premature for us to comment,” FTX Arena and Miami Heat said in a joint statement provided to CNN Business when asked how the acquisition might impact their deal.

Even college sports has 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,” Cal athletic director Jim Knowlton said at the time. “We look forward to building our relationship now and in the years to come.”

In a statement after this story was published, Cal Athletics said, “FTX is a great partner for Cal Athletics. We are monitoring the evolving trading situation with FTX and will determine next steps if warranted.

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

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

“It happened during the dot-com days where a bunch of buildings, mostly baseball stadiums, were named after all these crazy dot-com companies, and they all completely freaked out,” said said Laatz. “Naming rights deals are so hard to set up and make work, to get consumers to understand that Staples and American Airlines Arenas are now called something different and pulling the roots of something like that is just harder . This makes property work more difficult. It’s more expensive.”

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

FTX isn’t the only crypto firm involved in the sports world. Cryptocurrency brands spent more than $130 million on NBA sponsorships alone last season, compared to less than $2 million the previous season. According to IEG, just five crypto companies, including Crypto.com, Coinbase, and FTX, were responsible for 92% of industry spending.

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

Then the market moved. Coinbase, Crypto.com and other services announced layoffs as rising inflation, fears of a looming recession and broader market turmoil caused the value of cryptocurrencies to fall sharply.

“We always said it was an arms race for brand awareness and users, and there were 40 crypto exchanges spending money on referrals a year ago – and now there there are no more. There are maybe three or four,” Laatz said.

Binance, in particular, avoided the sports sponsorship frenzy. In a job announcement earlier this year, Binance CEO Zhao “CZ” Changpeng said, “It wasn’t easy saying no to Super Bowl ads, stadium naming rights, big sponsorship deals a few months ago, but we did it.”