Crypto and sports are betting on a winning combination to woo fans

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When Crypto.com stamped its name on the main sports arena in Los Angeles, crypto exchange boss Kris Marszalek said the $700 million deal marked “the moment when cryptocurrencies . . . crossed the chasm into the mainstream”.

The renaming of the LA Lakers National Basketball Association’s home team in November opened the floodgates to a series of multimillion-dollar marketing deals and partnerships between digital asset companies brimming with money and sports franchises that can offer millions of potential customers.

Rival exchanges Coinbase, Crypto.com and FTX bought Super Bowl ads this year, which cost $7 million for just 30 seconds of airtime. The home of NBA team the Miami Heat is now the FTX Arena – under a 19-year deal for the Sam Bankman-Fried-led exchange, and Coinbase has become the “exclusive partner of the cryptocurrency platform” for the NBA and WNBA in October.

“It’s almost like buying real estate in California,” said Haider Rafique, chief marketing officer at OKX, a crypto exchange that recently signed a sponsorship deal with Premier League club Manchester City FC. He said the rush for “hyper-priced” sponsorships came as crypto companies had a lot of money to burn, “or at least everyone did last year at the top of the market.” .

Six months after the Crypto.com coup in Los Angeles, the exuberance of the virtual asset markets has faded. The deal came on top of last year’s crypto price rally. An investor who bought bitcoin, the largest cryptocurrency, on the same day as the transaction would have lost almost half of their money.

Still, the love affair between sports and crypto seems like a perfect match, as franchises can offer a wider audience within the demographic that digital asset players want to reach. “It’s a way to really reach their target audience. The traditional sports watcher syncs very well with the more traditional crypto holder or early adopter,” said Shailesh Lakhani, Managing Director of Sequoia Capital in India.

Crypto.com, which struck a World Cup sponsorship deal with Fifa in March, said the exchange’s user base has grown from 10 million in February 2021 to more than 50 million.

Spain’s market regulator has reprimanded FC Barcelona’s Andrés Iniesta for participating in a paid influence campaign for crypto exchange Binance © Reuters

Lou Kovacs, president of North American marketing for ad and talent agency Octagon, estimates that marketing spend by crypto companies for sports sponsorships has grown from $25-50 million in 2020 to more than $600 million. dollars last year – excluding television commercials.

The marketing rash has raised concerns from regulators and consumer groups that inexperienced investors may be encouraged to funnel their money into digital tokens they don’t understand. “It takes a lot of intellectual calories to understand these [crypto] companies,” said Quentin Thom, co-director of crypto due diligence firm Perform Due Diligence Services.

Thom compared the wave of crypto marketing to previous promotions of now controversial industries. “It’s the cigarette boom again. You have millions of fans who will use crypto, and [a sports franchise] could end up having the reputational risk of being associated with bad actors, but there is also a financial risk for all your fans,” he said.

Spanish football star Andrés Iniesta was reprimanded by the country’s market regulator last year after taking part in a paid influence campaign for crypto exchange Binance with three other footballers.

American boxer Floyd Mayweather, NBA Hall of Famer Paul Pierce and social media influencer Kim Kardashian were named in January in a lawsuit claiming they helped inflate the price of the EthereumMax token in the part of a scheme that enriched its backers at the expense of ordinary investors. Backers of the token dispute the claims.

As part of the broader pivot to crypto-related content, sports franchises have also embraced fan tokens.

In December, the Advertising Standards Authority in the UK said Premier League side Arsenal FC breached marketing rules with “irresponsible” advertisements for its token, which allows holders to participate in official club decisions. The club said it takes its fan publicity responsibilities “very seriously”.

Bar chart of tokens by market capitalization (in millions of dollars) showing that the biggest football fan tokens are worth millions

Rich Kleiman and basketball champ Kevin Durant, co-founders of tech investment startup Thirty-five Ventures, were Coinbase’s first investors in 2017 and expanded their relationship in December. Kleiman said consumers and celebrity endorsers have a responsibility to do their due diligence on emerging markets and products.

“As athletes approach these agreements – and any agreement – in something like this that is new and foreign to a lot of people is obviously [a need] to educate you,” he said. “There’s no ‘let me get into crypto, roll the dice and hope I become a multi-millionaire’.”

Ronan Evain, executive director of Football Supporters Europe, a leading supporters’ group, highlighted the risks of an “unregulated financial product”. He said teams and players backing crypto assets were “considerably irresponsible” because such tie-ups were meant to “bolster the legitimacy of the product for an audience that didn’t necessarily know about it.”

But Kleiman said the current volatility in crypto markets hasn’t shaken their confidence in the industry.

Crypto.com said it “remains fully committed to its sports sponsorships.”

“We are well funded, and these are multi-year contracts, which will continue to play a crucial role in our mission to accelerate the global transition to cryptocurrency,” the company added.

Kovacs said the surge in marketing spending was typical of life cycles in other industries, such as during the dotcom boom and the rise of fantasy and sports betting in the United States, when companies offering new products or services spend their advertising dollars through a mass-market industry like sports. Eventually, these marketing booms turn into “retrenchment,” as companies move from outreach to a more targeted strategy, but crypto has yet to reach that point.

“I don’t think that’s something we’re seeing right now,” he said. “This could be due to part of the decline in [cryptocurrency] value, but it is more likely to be driven by . . . focus more on certain areas in which they want to invest.

Yet some sports teams are still watching from the bench, waiting to see if crypto becomes a lasting part of their industry.

“We don’t think we need to be first to market,” an English Premier League football club executive said. “Everyone is just worried about the industry because it’s huge, it’s high value and it’s unknown. We approach with caution.

Video: Highlights from the FT Summit on Crypto and Digital Assets | FT live
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