Cryptocurrencies and the exchanges they trade on have been a galloping gravy train in sports over the past year, with athletes touting them in commercials, teams striking partnerships, arenas signing deals. naming rights and even referees wearing logos.
But as evidenced by last week’s crypto crash, there is risk when investing in unregulated assets. So should famous athletes, teams and leagues encourage fans to participate?
Arthur Solomon, a former executive at global PR firm Burson-Marsteller, called crypto endorsements by teams, leagues and athletes a “disservice” because it is unregulated investment advice. “There are professional investment advisers who are regulated by the government to give financial advice, and I think the FTC and other government agencies shouldn’t allow someone just because they can hit a home run or throwing a touchdown pass, giving financial advice on the public airwaves,” he said.
When it comes to leagues and teams, Solomon is even more critical, calling them “shameless” and lumping crypto into the same category as beer and booze and gambling ads seen by kids. and vulnerable adults during games.
Critics’ concern is not that teams and leagues will see sponsorships plummet, but that sports entities are encouraging fans to invest in a risky and unregulated market. Sports cultural commentator Bomani Jones devoted an entire section of his HBO show to the space, which he described as a “crook”.
“People call it currency, but it’s just a word they use to keep fans away,” Jones said.
But not everyone sees a problem with promoting crypto in sports. Many athletes and teams have gotten into crypto because it is heralded as the future of money. It’s considered the coolest thing, with Tom Brady supporting crypto exchange FTX in fun commercials and Steph Curry and Trevor Lawrence as well, while Joe Burrow promotes Bitcoin.
“It’s new and exciting,” said Doug Shabelman, CEO of Burns Sports & Entertainment, a celebrity endorsement agency. “So why shouldn’t these guys want to come out and do it?” You know, it’s something different from the usual, and there’s money.
Crypto enthusiast Mark Cuban, owner of the Dallas Mavericks, sees no problem.
“Look at the stock market,” Cuban wrote in an email. “Facebook, Amazon, and Apple have lost more market capitalization than the entire crypto market. A ton of tech companies have lost 80% or more of their value. I don’t see anyone questioning the sponsorships of these companies .
The difference is that these companies advertise to entice consumers to buy or use their products, much like potato chip brands or restaurant chains. If their stock drops and the sponsorship disappears, it does not affect the fan who purchased the underlying product.
Crypto sponsorships and endorsements are different in that they are looking for fans to put their money at risk. Yet Cuban writes, “Their values go up and down based on their performance and the level of risk investors want to take. In fact, the Nasdaq and crypto markets are quite strongly correlated. They tend to rise and fall together.
While this may or may not be true, there is a risk for sports entities in aligning themselves closely with volatile assets. Last week, the Washington Nationals, which has a $38 million sponsorship with cryptocurrency Terra, tweeted a buzz video for investing as the coin crashed. The team and Major League Baseball declined to comment.
The crypto crash, which at one point wiped out an estimated $1 trillion in value, brought stories of investors losing their life savings. Crypto markets have stabilized somewhat this week, but the threat of wild volatility remains.
“Will they be a black eye of reputation?” Connected sports consultant Marc Ganis asked about crypto. “That’s where teams have to strike a balance between money and risk – reputational risk. The reality is that when a team signs a major sponsor or when a league signs a major sponsorship deal, you expects it to be a top company. And so it gets some of the credibility, some of the aura of the credibility of the league or the team. And that is forwarded to the sponsor.
Clearly, there were no such worries, as evidenced by numerous sponsorships, including Crypto.com’s 20-year, $700 million naming rights for the former Staples Center and the deal for $135 million from FTX to name the Miami Heat arena. FTX even has a patch deal for MLB umpire uniforms. There were so many crypto commercials during the Super Bowl, which averaged over $6 million per 30-second spot, that some dubbed the game the Cryptobowl.
But while crypto is touted as the future of money, the category is more like an investment than a currency, though it’s used in some transactions and a handful of athletes have converted. their salaries in crypto. But even FTX founder Sam Bankman-Fried said recently that Bitcoin, the most popular crypto payment, has no future as a currency because the technology system cannot handle it.
And former Federal Reserve Chairman Ben Bernanke told CNBC this week: “Bitcoin and other currencies, cryptocurrencies that change in value by the minute, have succeeded as as a speculative asset. And people are seeing the downsides of that right now. But they were meant to be a replacement for fiat money. And I think in that respect they weren’t successful. Because if bitcoin was a As a substitute for fiat currency, you could use bitcoin to go shopping. Nobody buys groceries with bitcoin because it’s too expensive and too inconvenient to do so.
“So I don’t think bitcoin is going to take over as an alternative form of money. It will exist as long as people are believers and want to speculate.
So if it is a speculative asset, should sports teams, leagues and players inflate it? Other corners of finance, from derivatives to mortgage-backed securities, which sparked the 2008 financial crisis, don’t have their own sports cheering section.
The NFL, which only allowed team sponsorship of crypto exchanges but not currencies in March, says it views crypto from the broader perspective of blockchain, the decentralized digital technology that underpins tend crypto. On the blockchain, non-fungible tokens, which are digital images and highlights, have traded for millions of dollars, although the market has cooled.
“It’s a space that we want to be thoughtful and cautious about,” said Joe Ruggiero, NFL senior vice president of consumer products. But the league has “an interest in entering the space because it’s a way to engage with fans in an interesting way,” he added, citing digital commemorative ticket stubs.
To date, only the Dallas Cowboys have signed a crypto exchange deal with blockchain.com, but other teams are busy probing the space.
The NBA allows transactions in the cryptocurrency space, including crypto exchanges, but does not allow the promotion of specific cryptocurrencies. The league advises its teams to vet potential partners before entering into promotional or other deals. These basic rules also apply to the WNBA.
Major League Soccer, which has a younger population and is less financially strong than its four legacy peer leagues, has waded into the crypto space, which also includes blockchain, NFTs and exchanges. In a bid to appeal to its younger, tech-savvy fanbase, the league and its teams have struck several deals, including DC United’s three-year, $18 million jersey sponsorship signed in February with the blockchain technology company XDC Network.
In March, Nashville FC announced that its sponsorship deal with digital asset management firm Valkyrie Investments would be paid for in bitcoin, the first MLS team to take crypto instead of US dollars for a partnership. Inter Miami and the New England Revolution have also entered into crypto-related partnerships.
MLS declined to comment
Advocates of esports engagement with crypto point out a difference between backing a specific coin and exchanges like FTX and crypto.com that have spent huge sums so far. Coinbase signed a deal in October to become the official cryptocurrency exchange for the NBA, WNBA, and G League.
And Cuban wrote in an email: “Unless a team has Terra as a sponsor, this is not an event. Terra is the crypto the Nats are promoting that crashed dramatically last week.
Comparisons are also made to the dotcom bubble burst of the early 2000s. , in some cases, not paying referrals. Many crypto exchanges are well-funded, so their deals for arena naming rights and other deals at the moment seem secure.
However, the concern of critics is not that teams and leagues will see sponsorships plummet, but that sports entities are encouraging fans to invest in a risky and unregulated market.
David Carter, a sports marketing consultant and associate professor at the University of Southern California’s Marshall School of Business, said young sports fans might view crypto as just part of their lives now and not deal with it. with the same risk aversion and uncertainty as older people.
“It has a lot to do with the consumer they’re trying to reach,” Carter said. “A team, a league or a sports property, you understand it and you take a measured risk. One person’s category of sin is another person’s compelling source of income. »
Jonathan Jensen, a sports marketing expert and assistant professor at the University of North Carolina-Chapel Hill, said crypto won’t be the last risky category to use sports to promote themselves.
“After fledgling tech companies, sub-prime mortgage companies and cryptocurrency, I’m sure there will be another new industry emerging that will use sports sponsorship to sustain itself,” Jensen said. “It’s kind of built to do that. Sometimes it works, and often it doesn’t. »
(Top photo of Cowboys owner Jerry Jones presenting a jersey to Blockchain.com CEO Peter Smith after announcing a partnership: Richard Rodriguez/Getty Images)