Cryptocurrency companies poured billions of dollars into sports sponsorships in 2021 — but this year’s downturn has made the flood of cash dry up, The Post has learned.
As a so-called “crypto winter” takes hold and companies look to trim costs, firms that splurged heavily on sports deals last year are now looking to cut costs.
Crypto exchange FTX — which shelled out $135 million to rename the home of the Miami Heat in March 2021 — pulled out of talks to provide a jersey patch to the MLB’s Los Angeles Angels in recent weeks as the crypto market tanked, sources with direct knowledge told The Post.
Another patch deal between the NBA’s Washington Wizards and a crypto company also recently fell through, the sources said.
Both deals were nixed as the market crumbled, the sources said. The Washington Wizards patch had been seen as particularly desirable for crypto companies since the politicians and regulators who oversee the space attend their games.
The Angels declined to comment. FTX and the Washington Wizards did not respond to requests for comment.
Columbia University sports management professor Joe Favorito told The Post he would be “shocked” if any major new crypto sponsorships are inked during the current downturn.
“What money hasn’t been spent already you’re going to see curtailed — just like we saw during the dot-com bubble,” he said.
The spending slump comes after large crypto exchanges binged on sponsorship deals in 2021 in an effort to woo sports fans, many of whom were flush with cash in a tight labor market, fresh on the heels of generous government stimulus from the pandemic.
In addition to renaming Miami’s arena, FTX paid an undisclosed amount to become the MLB’s “official crypto exchange,” spent $20 million for an October ad campaign starring Tampa Bay Buccaneers quarterback Tom Brady and his supermodel wife Gisele Bündchen, and paid a reported $6.5 million for a Super Bowl Commercial featuring Larry David, among many other sponsorships.
Then on June 10, privately-held Crypto.com laid off 260 employees, roughly 5% of its workforce.
Both Coinbase and Crypto.com attributed the cost-cutting moves to the current bear market, which saw bitcoin plummet below $20,000 over the weekend after flirting with $70,000 last November. Ethereum has plunged 70% from its highs, trading at around $1,100 on Monday.
Two major stadiums — Baltimore’s PSINet Stadium and Boston’s CMGI field — had to be re-christened after their namesakes imploded in 2001.
Despite the current turmoil, there’s no indication Crypto.com or FTX are currently looking to back out of their stadium naming rights deals, according to Chris Lencheski, an ex-Comcast executive and adjunct professor at Columbia University’s School of Professional Studies who has worked on arena naming deals.
But if either of the companies were looking to back out, they would likely be forced to pay heavily, Lencheski told The Post. While the professor said he’s not privy to details of the Crypto.com or FTX arena deals, he said he has worked on contracts in the past where a company would have to pay out 55% of the remaining pact to exit a deal.
If Crypto.com were to withdraw from its 20-year, $700 million contract under such terms, the company would be on the hook for a whopping $385 million.
“There is always a negotiated ability to exit,” Lencheski said. “But it’s got to hurt. The reason that it’s got to hurt is because there’s some damage to the building regardless.”
Both Lencheski and Favorito noted that removing a dead or damaged company’s name from a stadium can hurt a franchise’s brand and can reduce the facility’s appeal to future sponsors.
A Crypto.com spokesperson said in a statement to The Post: “We remain focused on investing resources into product and engineering capabilities to develop world-class products, as well as our strategic sports partnerships and believe they will continue to play a crucial role in our mission to accelerate the world’s transition to cryptocurrency.”
Changpeng Zhao, the CEO of Binance — the world’s biggest crypto exchange — appeared to poke fun at his rivals for spending big on sports deals in a tweet last Wednesday that came shortly after Coinbase and Crypto.com announced layoffs.
“It was not easy saying no to Super bowl ads, stadium naming rights, large sponsor deals a few months ago, but we did,” the CEO wrote. “Today, we are hiring for more than 2,000 open positions.”