Cryptocurrency exchanges turn to sports sponsorships

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Executives in the sports and cryptocurrency sectors say sponsorships are on the rise, with some worth seven or eight digits a year

Author of the article:

Financial Times

Samuel Agini and Alex Hamer in London

Inter Milan’s Romelu Lukaku celebrates after winning in 2020. The team’s jerseys will now advertise crypto exchange Socios.com in a deal for an undisclosed sum. Photo by Reuters / Daniele Mascolo / File Photo

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For more than a quarter of a century, the logo of the Italian tire manufacturer Pirelli adorned the jerseys of the reigning Serie A soccer champions Inter Milan. But this season, Inter’s black and blue striped tops are turning into crypto.

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With the proliferation of cryptocurrencies and blockchain technology, the companies behind the burgeoning industry are increasingly turning to sports sponsorship to accelerate their decades-long journey from the depths of the internet to a mainstream speculative asset.

According to the Uefa umbrella association, European football clubs will miss 9 billion euros in revenue due to the pandemic, as interruptions to broadcasting schedules and games without fans in stadiums weighed on the balance sheet. While the UK is reviewing its gambling laws, some football managers are also warning of a potential drop in sales should regulators Italy and Spain follow suit in tackling betting sponsorship.

Crypto companies that have benefited from the rising value of Bitcoin and other digital currencies are poised to fill the void. Inter Milan’s jerseys will now advertise crypto exchange Socios.com in a deal for an undisclosed sum. Executives in the sports and cryptocurrency sectors say such sponsorships are on the rise, with some reaching seven or eight digits a year.

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“I don’t think it’s opportunistic [crypto has] Made it through the pandemic really well, the sport is on its knees [and] will take its money wherever it can get it, ”said Ben Pincus, director of commercial partnerships for 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 directory of sponsors that includes Swiss luxury watchmaker Rolex, Pirelli and oil company Saudi Aramco. According to someone close to Formula 1, the deal is worth up to $ 30 million a year.

However, there are questions about how sustainable crypto deals will be, with agreements stretching out over several years. For example, some exchanges grew rapidly before losing to new competitors or succumbing to theft and other cybersecurity flaws.

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Inter Milan is just one of a number of teams, including domestic rivals AC Milan and Juventus, Spain’s FC Barcelona and England’s Arsenal and Manchester City, to partner with Socios that will allow 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 companies registered in Malta and Switzerland, does not sponsor the jersey of any club it works with to sell tokens.

The tokens also give backers access to promotions or rewards. Juventus used the platform to allow token holders to choose which song to play when the team scores a goal.

Fans will need to use Socios’ own digital currency, Chiliz, to purchase team tokens through the company’s app. Chiliz is trading at just over $ 0.31 a coin after hitting as high as $ 0.84 in April this year, according to Coinmarketcap.com, showing how fans can find their way into volatile crypto markets.

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In May, Spanish club Atlético Madrid’s token rose to over $ 50 with a 24-hour trading volume of more than $ 300 million, just like it took the La Liga title. Within a few weeks it was a fifth of that.

Socios and Chiliz founder Alexandre Dreyfus said clubs and leagues need to be very careful about who they work with. “They are the ones who will give it some legitimacy [these] Brands, ”he said. Clubs need to ensure that crypto companies bring “regulatory security” and provide fans with a “safe environment,” he added.

Regulators are stepping up scrutiny of crypto. The UK’s Advertising Standards Authority has warned that it will “crack down on misleading crypto-related advertising” as financial regulators step up their oversight of the sector.

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In the US, however, there are still crypto sponsorships. In June, Major League Baseball signed a multi-million dollar long-term deal with FTX, an exchange valued at $ 18 billion last month, up from $ 1.2 billion last year.

“The pandemic has accelerated so many different consumer trends, whether it’s my parents who I never thought would figure out how to get into Netflix … or if it’s people who are investing in the crypto space,” said Noah Garden, Chief Revenue Officer of the MLB. “I think it’s here to stay.”

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Sina Nader, Chief Operating Officer of FTX US, said the next challenge is getting them into dialogue as people become more familiar with crypto as a concept. “And exercise really stimulates the imagination of literally billions of people. We aim to reach these billions of people, ”he said. “Is that opportunistic? I do not think so. The timing just happened. “

The exchange has donated tens of millions of dollars annually to sports sponsorship, hiring quarterback Tom Brady of the Tampa Bay Buccaneers and his supermodel wife Gisele Bündchen as ambassadors and advisors.

By joining forces with the biggest names in sport, crypto companies are betting that the digital economy will become more appealing to a mainstream audience – and they are ready to pay to be the first.

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

“Most of the people we want to target with the NBA aren’t into crypto yet,” he said.

© The Financial Times Limited 2021.

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