Later today, the Miami-Dade County Commission will vote on a proposed naming rights deal with FTX—a cryptocurrency exchange. If approved, the county’s basketball arena (currently known as American Airlines Arena) will be renamed FTX Arena. While a vote in favor of the 19-year, $135 million deal would make FTX the first pro stadium sponsor within the burgeoning cryptocurrency industry, Crypto.com became the first exchange to align with a big four franchise, announcing a partnership with the Montreal Canadiens last week. A pair of sponsorship pacts within a new category, signed within a week of each other, might seem like the beginning of a trend. But conversations with sponsorship and crypto authorities alike suggested we pump the breaks on talk of the category becoming sports’ next significant revenue stream. “I don’t think it’s going to be as widespread as some might think,” Michael Neuman (managing partner, Scout Sports & Entertainment) said.
Our Take: Cryptocurrencies have boomed before (see: 2017), but because few outside of “early adopters” were trading coins/tokens at the time, sports sponsorships never materialized. Decrypt editor-in-chief Dan Roberts said that has changed over the last 12 months, creating an opportunity for crypto brands that didn’t exist before. “It is not just the prices [that has the likes of FTX and Crypto.com entering into sports sponsorships]. Crypto has never been more mainstream than it is right now. Big consumer-facing companies have bought in (see: PayPal, Square, Tesla). Wall Street hedge funds have changed their tune. Famous investors are now allocating a portion of their portfolio to Bitcoin. So, you have a huge number of people, who were not interested in the past, who might at this moment be considering buying cryptocurrency for the first time. [Crypto companies] see this as their marketing moment.”
Crypto companies want to invest in sports because they see it as a “quick way to get their name out to the mainstream,” Roberts said. There is also a significant overlap in fan demographics. “There’s a good number of young males [betting on sports], who have recently gotten into stocks and crypto, and might not yet have a place where they buy crypto,” he explained.
While sports teams can offer crypto companies the platform and credibility they desire, and crypto companies can provide sports teams with much needed incremental revenue, there are several reasons why those we spoke to were skeptical that the category was about to take off. For starters, pro sports partnerships aren’t cheap—particularly stadium naming rights deals—and their long-term nature could scare away some in the crypto category. “While [a company may be] able to sign at this given moment, in crypto they’re always concerned the good times will end soon [making the prospect of a long-term partnership unattractive]. These are companies whose entire financial situation rests on how [volatile] crypto prices are doing and on trading volume and activity.”
It’s also not clear there are a ton of crypto companies with the means to do a sports partnership. Will Foxley (CoinDesk) suggested there were likely no more than 10 large enough to cover the costs. “Binance U.S. is one that I’ve been waiting to do something like this,” he said, adding, “eToro is another. I could even see startups who have their own tokens (think: Chiliz) doing this.”
One company Roberts doesn’t expect to jump into sports partnerships is Coinbase, the largest crypto exchange in the U.S., which is set to go public next month. “It doesn’t match their brand,” Roberts explained. “[They] want to be the Goldman Sachs of Bitcoin, and Goldman Sachs would not slap its name on a NASCAR car.” (Note: Goldman Sachs does, however, sponsor PGA golfer Patrick Cantlay.)
It’s not evident sports teams are ready to embrace the category, either—at least in part because there’s no guarantee any of these companies will be around long enough to have a positive financial impact. “Remember when the Bitcoin Bowl existed in college football?” Roberts asked. For those who do not, that is exactly the point; it was a three-year agreement beginning in 2014 between the crypto exchange BitPay and ESPN (the owner of the St. Petersburg-based bowl game). “BitPay had to exit the sponsorship after just one year because of crypto winter,” Roberts said.
Financial risk aside, “pro sports teams have brand equity,” Roberts said. “They have credibility, and they want to align with premium brands. So, there may be teams whose ownership is [simply] too conservative to engage with crypto brands.” It’s important to understand the crypto industry as a whole has historically done a poor job of identifying “scammy exchanges” (see: Mt. Gox), and as Roberts said, “No one wants to be the team that aligns with the next Enron.”
Of course, that didn’t stop the Canadiens or Miami-Dade County from striking agreements with Crypto.com and FTX, respectively.
Payment category exclusivity could keep crypto companies from entering the sports sponsorship space, too. As Neuman explained, “The complexity of the payment category and the speed in which it is evolving is unlike anything we’ve seen in a long, long time.” It used to be that payment processors would work to keep banks and credit card companies from infringing on their platform. But those looking far enough into the future may see a conflict with a technology that enables users to buy and sell things (even if it’s not currently being used for that purpose) and push for future carve-outs to include crypto companies.
With all of that said, there is almost certainly going to be “a couple of novel moments in sports within the next year, where crypto brands are going to experiment to see if sports partnerships can change brand sentiment,” Neuman said. Roberts agreed and added if these early sponsorship deals are effective at driving customer acquisition, others will “gravitate towards the space.” The beauty of blockchain is that the activity taking place—or not taking place—will be accessible to all.
Considering Miami-Dade County has been looking for a new naming rights partner for nearly two years and that they’re voting on a deal with a cryptocurrency exchange, it’s fair to wonder why there has been so little brand interest in the opportunity. The problem is that the Heat don’t control the naming rights—at least not on the building’s exterior. So, any brand looking to acquire the rights needs to work out a deal with the County and then a separate low-seven-figure pact with the team for branding inside the building. It’s simply not viewed as a great investment because of the need for incremental spend.