Sports teams and businesses may shy away from long-term deals with crypto firms to minimise their risks after troubled crypto exchange FTX filed for US bankruptcy protection last week, industry experts told Reuters on Monday.
FTX filed for bankruptcy on Friday in one of the highest-profile crypto blow-ups after traders withdrew $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.
The announcement had an immediate impact in the world of sport, where the exchange has a significant presence, with the Mercedes Formula One team suspending its partnership agreement ahead of the Brazilian Grand Prix.
National Basketball Association side Miami Heat also dropped the FTX name from their arena, ending a 19-year deal they signed with them last year for $135 million.
David Ridpath, professor of sports administration at Ohio University, believes the situation at FTX could “100%” lead to sports firms looking outside crypto to avoid association with the space in future.
“Crypto was/is the next big thing and it was natural for sports properties to pursue them but it also was a very volatile market so a huge risk that certainly panned out like many thought it would,” Ridpath said.
“I think crypto will be at the bottom of prospect lists for quite some time. Until that industry stabilises and has better oversight and controls — if it happens — then maybe it might be a viable partner.”
‘WAKE-UP CALL’
The ever-evolving nature of sports sponsorship means other emerging categories could come to the fore, said Larry Mann, partner at sports marketing and media agency rEvolution.
“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 keep an eye on,” Mann said.
“If teams weren’t cautious before regarding crypto … they will be now,” he added. “As it relates to increasing sponsorship revenue, teams/leagues are always looking for new opportunities, but what’s happening with FTX is a wake-up call.”
Singapore-based crypto exchange Crypto.com said on Monday it had moved about $1 billion to FTX over the course of a year, but most of it was recovered and exposure at the time of FTX’s collapse was less than $10 million.
CEO Kris Marszalek added that the firm — which also has a major footprint in sport and is an official sponsor of the FIFA soccer World Cup in Qatar — would prove naysayers wrong on the platform being in trouble.
“We’re a global partner of the FIFA World Cup. There will be probably five billion people watching the game,” Marszalek said in a YouTube livestream.
“And the name Crypto.com is going to be all over this. It’s going to serve to raise awareness and maybe help a tiny bit with issues of trust because of the visibility and being right next to the most trusted brands in the world.”
