Cryptocurrency exchanges target sport sponsorships

For more than a quarter of a century, the logo of Italian tyremaker Pirelli graced the shirts of reigning Serie A football champions Inter Milan. But this season, Inter’s black-and-blue-striped tops are going crypto.

As cryptocurrencies and blockchain technology proliferate, the companies behind the nascent industry are increasingly turning to sports sponsorship to turbocharge their decade-long journey from the depths of the internet to mainstream speculative asset.

European football clubs are on course to miss out on €9bn of revenue because of the pandemic, according to governing body Uefa, as disruption to broadcast schedules and games played without fans in stadiums hammered balance sheets. As the UK reviews its gambling laws, some football executives have also warned of a potential revenue hit should rulemakers follow Italy and Spain in cracking down on betting sponsorship.

Crypto companies, which have profited from the rising value of bitcoin and other digital currencies, are willing to fill the gap. Inter Milan’s shirts, in a deal for an undisclosed sum, will now advertise crypto exchange Socios.com. Sports and cryptocurrency executives say such sponsorships are growing, with some worth seven or eight figures a year.

“I don’t think it’s opportunistic in as far as, [crypto has] done really well through the pandemic, sport’s on its knees [and] will take its money from wherever it can get it from,” said Ben Pincus, director of commercial partnerships at Formula 1, the global racing series.

In June, F1 added Crypto.com, which provides digital wallets for storing and paying with digital currencies, to a sponsorship roster that includes Swiss luxury watchmaker Rolex, Pirelli and oil company Saudi Aramco. The deal is worth as much as $30m a year, according to a person close to F1.

But there are questions over how sustainable crypto deals will be, with agreements stretching over several years. Some exchanges, for example, have seen rapid growth before losing ground to new competitors, or succumbing to theft and other cyber security failings.

Inter Milan is just one of a series of teams, including domestic rivals AC Milan and Juventus, Spain’s FC Barcelona and England’s Arsenal and Manchester City, to partner with Socios, which enables clubs and leagues to issue digital tokens that can be sold to fans and traded like other assets.

Socios, which is part of a group of entities registered in Malta and Switzerland, does not sponsor the shirt of every club it partners with for token sales.

The tokens also give supporters access to promotions or rewards. Juventus has used the platform to allow token holders to pick which song is played when the team scores.

Fans must use Socios’ own digital currency, Chiliz, to buy team tokens via the company’s app. Chiliz is trading at just over $0.31 a coin, having reached as high as $0.84 in April this year, according to Coinmarketcap.com, demonstrating how fans can find themselves caught up in volatile crypto markets.

In May, Spanish club Atlético Madrid’s token surged to more than $50, with a 24-hour trading volume of more than $300m, just as it clinched the La Liga title. It tumbled to a fifth of that within weeks.

Socios and Chiliz founder Alexandre Dreyfus said clubs and leagues had to be very careful over who they partner with. “They are the ones who are going to give some legitimacy to [these] brands,” he said. Clubs need to make sure crypto firms bring “regulatory certainty” and offer a “safe environment” for fans, he added.

Regulators are stepping up scrutiny of crypto. The UK’s Advertising Standards Authority has warned that it will “crack down hard and fast” on misleading crypto-related advertisements, while financial regulators are expanding their supervision of the sector.

Yet in the US crypto sponsorships keep coming. In June, Major League Baseball signed a long-term multimillion-dollar deal with FTX, an exchange that was last month valued at $18bn, up from $1.2bn last year.

“The pandemic accelerated so many different consumer trends, whether it’s my parents who I never thought would figure out how to get to Netflix . . . or whether it’s people investing in the crypto space,” said Noah Garden, the MLB’s chief revenue officer. “I do think it’s here to stay.”

Sina Nader, chief operating officer of FTX US, said that as people become more familiar with crypto as a concept, the next challenge is to engage them in a dialogue. “And sports really capture the imagination of literally billions of people. We aspire to reach those billions of people,” he said. “Is it opportunistic? I don’t think so. The timing happened to line up.”

The exchange has committed tens of millions of dollars a year to sports sponsorship, enlisting Tampa Bay Buccaneers quarterback Tom Brady and his supermodel wife Gisele Bündchen as ambassadors and advisers.

By associating themselves with the biggest names in sports, crypto companies are betting that the digital economy’s appeal to a mainstream audience will grow — and they are willing to pay to be first.

In July, StormX paid “eight figures” for a five-year jersey sponsorship of the US basketball team Portland Trail Blazers. Simon Yu, chief executive of the company that works with big retailers to reward shoppers with crypto tokens, said there was a “very strong correlation” between NBA viewers and StormX’s target audience of 18- to 45-year-old “predominantly male” customers.

“Most of the people that we’re trying to hit with the NBA aren’t into crypto yet,” he said.