Crypto commercials stole the Super Bowl advertising spotlight Sunday night, and have emphasized cryptocurrency companies’ appetite to captivate sports fans. Coinbase’s $14 million ad has paid off, as its stock finished the day 0.37% higher, adding ~$170 million to its market cap. Despite recent volatility in the crypto space, top cryptocurrency platforms have spent millions on Super Bowl advertising, and these amounts are just a fraction of what FTX, eToro and Crypto.com spent on sponsorship deals with sports teams across the globe since 2021.
While these deals continue to make headlines, analysts, teams and fan groups have voiced concerns about the unregulated market. “I think a lot of clubs took the opportunity as a short-term gain to plug a hole,” said Patrick Kinch, a sports analyst at GlobalData. Kinch thinks most marketing departments signed on too quickly as they wanted to get in ahead of competitors or before prices went up. “And they did it without due diligence. They were trying to get it done early.”
The main reason behind this crypto boom is COVID-19. “Lots of clubs have been left without revenues from ticketing and experienced greater scrutiny from their existing partners about the value of their deals,” Kinch said.
Before the pandemic, cryptocurrency deals within sports were either short-term or low in value. Last year saw a 488% increase in the number of cryptocurrency and blockchain partners entering sport sponsorship agreements, with soccer teams making over 52% of all deals in the sector. Aside from sponsorships, cryptocurrency brands have offerings that range from trading, fantasy fan engagement, and blockchain services for sports teams. A recent report by GlobalData shows cryptocurrency sponsorships have totaled over $742 million in 2021-2022, with a total contract value since 2019 over $3 billion.
A week before the Super Bowl, Manchester United joined the crypto bandwagon and signed a multiyear partnership worth $27 million annually with Tezos blockchain.
The deal was announced amid news that Iqoniq, a Monaco-based fan-engagement platform, allegedly went into liquidation. Iqoniq issues cryptocurrency in the form of a fan token (called an IQQ) redeemable for premium services on their platform. CEO Kazim Atilla denies the allegations of bankruptcy. However, he admitted in an interview with Sportico that his company had difficulty paying its partners due to pandemic-related losses, and some clubs have taken the matter to court.
“We didn’t go bankrupt, we didn’t liquidate,” he said in an interview. “In Monaco, when you close a company, you have to appoint a liquidator. Even if it’s a normal closure because you want to leave and stop the operation, you still have to appoint a liquidator. And that is exactly what we have done.”
Since 2017, Iqoniq has signed multiple deals. In 2020, LaLiga’s Real Sociedad signed a $3.5 million primary kit sponsorship with the firm. According to Spanish media, Iqoniq owes the team approximately $1 million for the 2022 season. An English soccer team, Crystal Palace, has suspended its deal after missed payments for the sleeve sponsorship contract it signed in September 2020 and has begun legal action. Outside European soccer, Iqoniq has dealt with a trio of F1 teams—Alfa Romeo, Williams and McLaren. None of the teams responded to Sportico’s request for comment.
While cryptocurrency values ballooned earlier in the pandemic, the market has been volatile. Bitcoin, the world’s largest cryptocurrency, is now trading below $35,000, around half of the nearly $69,000 level it reached last November.
“From sports teams’ perspective, I think it’s convenient to have crypto at times, instead of money paid in U.S. dollars, because you can play around with the terms,” Eloisa Marchesoni, a cryptocurrency expert and angel investor, said in a phone interview. “The downside is that we’ve seen many bubbles pop; you’re also going to see a lot of these companies go down, especially because we’re expecting a bearish market for a year. Bitcoin can go down to even $5,000 and ether to $800. I’m not sure how some of these companies are going to hold up.”
Manchester United’s move to sign with Tezos shows sports teams nonetheless have an appetite for crypto deals. Man United’s long-time shirt sponsor, the U.S.-based insurance company AON, recently ended its contract with the Red Devils. Last May, Tezos signed a sponsorship deal with Major League Baseball’s New York Mets and reported reaching an agreement to build an NFT experience for Formula One’s Red Bull Racing. Platform’s XTZ coin saw a recent slump from its all-time high in October, but it has been rising in value since signing with Manchester United. Meanwhile, according to Coingecko, Iqoniq’s IQQ coin is worth $0.
On top of concerns from teams and associations, there has been growing pressure from fan groups to protect fans from what they deem as “nefarious interests” from betting and trading companies. According to Kinch, in a meeting with EPL in November 2021, fan groups argued that an unregulated industry could harm supporters who invest in digital currencies. And since news about Iqoniq’s difficulties have surfaced, the Football Supporters’ Association (FSA), a British-based fan group, has called for regulations, claiming more teams are at risk. The association did not respond to Sportico’s request to comment.
Despite recent developments, GlobalData’s research shows crypto is here to stay, especially in fantasy sports where NFTs will be essential to get closer to the players and digital coins will be the internal currency. “Crypto becomes popular in all of the sectors where large sums of money are moving around,” Marchesconi said. “Especially where there’s some money to be somehow justified. Sports teams have strict rules on their balance sheets, how they need to calculate things. Crypto companies sponsoring these teams are setting up a compliant balance sheet. And at the same time [sports teams] need money all of the time.”