When the Miami Heat announced in March 2021 that the team had sold the naming rights to its arena to FTX, the response from sports fans was one unequivocal: Who?
In the year and a half since, the Bahamas-based cryptocurrency exchange has become ubiquitous in the sports world. His name was on the uniforms of Major League Baseball umpires. It had a partnership with the Mercedes-Benz Formula 1 team and works with four professional sports teams and some of the most famous athletes in the world.
The breakdown of all this took about a week. After FTX Group filed for Chapter 11 bankruptcy following reports of bankruptcy and misuse of customer funds, Miami-Dade County, which owns the arena where the Heat play, said they are “ending our business relationships with FTX” and a new naming rights partner would search .
Team SoloMid, one of the biggest names in online gaming as a spectator sport, has terminated its 10-year, $210 million sponsorship and naming rights deal with FTX. It had been using the TSM FTX name since signing that deal last year.
In California, UC Berkeley suspended its $17.5 million naming rights deal with FTX and removed the FTX logos from both 25-yard lines of California Memorial Stadium. The planned 10-year contract lasted less than 18 months.
Before crypto prices started falling a year ago, and even months later, the industry’s biggest companies viewed sports marketing as a key way to build consumer awareness and gain market share for their hard-to-understand, seemingly interchangeable offerings.
In November 2021, just days after Bitcoin’s price hit its all-time high, AEG Worldwide struck a deal with Crypto.com to rebrand Staples Center, home of the Los Angeles Lakers. The deal was valued at $700 million, according to sources with knowledge of the terms.
Two months later, when the market was already firmly in bear territory, several crypto companies splurged on Super Bowl advertising. Binance, the cryptocurrency exchange whose machinations played a role in the downfall of FTX, hired basketball star Jimmy Butler to appear in an ad warning viewers to beware of celebrity crypto endorsements. Binance also became an official sponsor of the African Cup of Nations football tournament.
In May, six months into the crypto downturn, the WNBA’s Seattle Storm announced a multi-year partnership with Coinbase, making it the franchise’s official cryptocurrency platform.
Now, as FTX’s implosion fuels new fears of a domino-like run on exchanges and currencies, the decision of major sports companies to peg their brands to crypto companies is coming under renewed scrutiny.
“Anytime you enter into a long-term business, you obviously have to assess the financial resources or creditworthiness of the other person,” said Irwin Kishner, co-chair of the sports group at the New York law firm Herrick Feinstein. “The obvious question is, ‘What is the long-term viability of crypto as a product group and its ability to make the payments it has promised?'”
The answer to that question, he said, is “everyone’s guess.”
The deal, which rebranded the Staples Center to Crypto.com Arena, was one of the most expensive in stadium rights history. It came after AEG, a global sports and music entertainment host that is a subsidiary of Anschutz Corp. in Denver, which bought back the naming rights from Staples in 2019 for an undisclosed sum. In addition to the Lakers, the venue is home to the Los Angeles Kings ice hockey team and, pending completion of their own facility, the Los Angeles Clippers.
AEG said this week that it has “all the confidence and faith in the world” in Crypto.com’s ability to honor its agreement. It expanded on that statement late Wednesday, saying: “AEG has enjoyed their association with the arena’s title sponsor and the benefits they have brought to our fans, athletes and artists. Crypto.com continues to be a valuable and collaborative partner for us on various arena initiatives, dedicated to promoting the value of our product and enhancing the fan experience.”
Revelations that FTX has loaned billions of dollars worth of user funds to Alameda Research, a trading firm controlled by FTX founder Sam Bankman-Fried, has raised suspicion and invited questions from the entire sector, which has been an unregulated Wild West compared to Wall Street about how its finances were mixed up with other exchanges and coin issuers. John Ray III, the new chief executive brought in to oversee FTX’s bankruptcy, said he had never seen such a complete failure of corporate governance or controls.
Matt David, Crypto.com’s chief communications officer, said the company “runs a very conservative business that’s focused on compliance and security. We don’t use client money.”
David said Crypto.com had “insignificant exposure to FTX. We made over $1 billion in sales last year and have already made over $1 billion in sales this year. We have a very strong balance sheet and are 100% committed to our esports partnerships, including the Crypto.com Arena. These partnerships have played a key role in growing our user base to over 70 million worldwide.”
The parties selling naming rights are under no obligation to honor their agreements if things go wrong, said David Carter, executive director of the USC Sports Business Institute. In 2002, the Houston Astros bought its way out of a $100 million, 30-year deal to name its baseball stadium Enron Field for a $2.1 million settlement. Enron was the Texas energy, resources, and services company that imploded amid criminal convictions and scandals. (Ray, FTX’s new CEO, was the executive tasked with cleaning up the mess at Enron.)
PSINet Stadium, home of the Baltimore Ravens soccer team, became Ravens Stadium again after PSINet, one of the first commercial internet service providers, went bankrupt. It is now the M&T Bank Stadium.
Walmart heiress Paige Laurie’s name has been scratched from the stadium her parents donated to the University of Missouri after she was accused of cheating through USC. The name of the Sackler family, owners of the company that made the much-maligned opioid Oxycontin, has been removed from seven exhibition spaces by the Metropolitan Museum of Art. The Louvre Museum in Paris did the same in 2019.
“We’ve seen it before and it’s going to happen again,” Carter said. “What might be a bit different this time around is how quickly the crypto industry has grown and how quickly it has become a very important marketing partner for so many in and around esports.”
Baird Fogel, a partner in the San Francisco office of law firm Eversheds Sutherland, which focuses on the sports industry and renewable energy, said that naming rights agreements often include a morality clause in case of major problems, “because you always enter into some kind of sponsorship agreement, for better or for worse, attach yourself to this entity and this organization. Your reputations are now aligned. It takes a long time to build a reputation and about five minutes to destroy it.”
But for all of the hundreds of millions of dollars that have poured into naming rights deals over the past two decades, there seems to have been little impact beyond greater awareness of the name, or perhaps a heightened sense of legitimacy. When it comes to financial gains from buying naming rights, most of the time there aren’t any, said Michael Leeds, an economics professor at Temple University who co-authored a 2007 study of 53 naming rights.
“Only three of the companies or entities that bought these rights made large profits beyond what they were pursuing prior to the deal or saw their share price rise,” Leeds said. “The vast majority of these deals haven’t moved the needle at all.”