The New York Jets have sued sportsbook Fubo Gaming Inc. in Delaware’s Court of Chancery in a dispute over payments in a sponsorship agreement.
New York Jets LLC v. Fubo Gaming Inc., filed Nov. 4, seeks the appointment of a receiver, who would help the Jets obtain money the team claims is owed in a contract. Fubo Gaming, a subsidiary of fuboTV, recently filed for dissolution in Delaware and ceased operations—a move Jets attorney Andrew Lee of Foley & Lardner wrote in an Oct. 25 letter to Fubo Gaming the Jets were “shocked to learn.”
In response to the court filing, a spokesperson for fuboTV told Sportico, “We believe this petition is without merit and intend to vigorously defend our position.”
The Jets can maintain fuboTV, as the parent, is responsible for the actions of Fubo Gaming, a subsidiary. Lee’s letter stresses the dissolution of Fubo Gaming was made “at the direction of the [parent’s] Board of Directors,” a point that suggests the Jets plan to argue the dissolution was made to circumvent a contractual obligation.
The Jets say Fubo agreed to pay $12.4 million in sponsorship fees over a five-year term but failed to pay about $1.2 million that was due on Oct. 1. The team says Fubo’s actions constitute “a blatant act of bad faith” to avoid payment. The Jets also contend they have fully performed their obligations under the agreement. The team says it has supplied a suite and tickets to games as well as furnished marketing and advertising support. As portrayed by the Jets’ letter, Fubo says it lacks sufficient assets to pay.
FuboTV (NYSE: FUBO) shares fell 16% in trading Wednesday.
The Jets aren’t the only major U.S. sports property confronting the business collapse of a major partner—far from it, in fact. There’s been a spate of companies recently that have ceased business operations shortly after signing big sports deals. Cryptocurrency lender Voyager Digital filed for bankruptcy just a few months after signing one of the biggest commercial deals in NWSL history, leaving the league (and its players) scrambling to see where they fit as creditors. FTX, the crypto empire that collapsed this week, has a number of sports deals, including naming rights for an NBA arena (Miami) and a Pac-12 football stadium (Cal). Fubo Gaming’s partners also include the Cleveland Cavaliers and Houston Dynamo.
Some of this could likely be solved with better due diligence, but it’s also a commentary on the sports marketing industry more broadly. Upstart companies in sectors like sports betting and crypto lending are often flush with investor cash and in a mad dash for market share. Sports have proven to be a valuable place to achieve that, with high-visibility deals giving startups both name recognition and access to millions of tech-savvy future clients. As a result, the money dangled in front of teams and leagues often supersedes the downside risk of a partner’s inability to fulfill the contract.
Fubo Gaming’s deal with the Dynamo, for example, was both a sponsorship deal and a market access deal, and could have been worth $178 million over 10 years, making it one of the largest commercial deals in MLS team history. (A representative for the Dynamo didn’t respond to an email seeking comment on the status of their deal). Last year the arena formerly known as the Staples Center was renamed the Crpyto.com Arena in a $700 million pact that will pay venue owner AEG more in four years of payments than Staples paid in the whole 20 years of its agreement.
Fubo Gaming’s shuttering presents at least one different wrinkle. While the sportsbook won’t be operational, the company’s main product—its streaming service—will be. The Jets can maintain fuboTV, as the parent, is responsible for the actions of Fubo Gaming, a subsidiary.
Fubo will have an opportunity to respond to the allegations and dispute them. The case could also end in a settlement at any point.
This story has been updated to reflect the name of the case and to add a response from a fuboTV spokesperson.