Fans were quick to express their anger at their favorite team pushing a plummeting cryptocurrency on its Twitter account of over 780,000. The tweet was planned in advance, according to several people within the organization, who also said Terra’s collapse is causing tension over how to proceed with the partnership.
The Nationals signed a five-year, $38.15 million contract this winter to promote Terra and received all the cash up front. The internal debate, according to several people familiar with the discussions, centers on whether the organization should honor its deal with Terra and keep the company’s name on its luxury club behind home plate, where “Terra” is. stripped down on every seat, and elsewhere in the stadium.
As the fallout from the Terra crash continues, the Nationals’ predicament highlights potential pitfalls for athletes, teams and leagues that have attached their marks to the volatile digital currency.
The terms of the Nationals’ contract with Terra include naming rights to its first club, signage around Nationals Park, big-screen advertisements and continued promotion on the Nationals’ official social media accounts. Announcing what they called a “breakthrough partnership” with Terra in February, the Nationals said Terra “has had a meteoric rise as a market leader thanks to its blockchain and DeFi [decentralized finance] ecosystem “. The team called themselves “Major League Baseball’s leading innovator”.
But that was back when TerraUSD was trading at $1. On Friday, it was down to less than seven cents, in what crypto market analysts call an irreversible implosion. A spokeswoman for the Nationals, whose owners are considering a sale, declined to comment on the partnership or the off-the-cuff tweet. Terra did not respond to a request for comment.
Terra marketed itself as offering a new form of digital money, backed by its own financial ecosystem that would make it faster and cheaper than traditional payment options. The project revolved around a TerraUSD, a type of token known as a stablecoin because it aimed to hold its price at $1. Unlike other stablecoins that maintain reserves of dollars and other real-world assets to back up their tokens, TerraUSD – also known by its symbol, UST – relied on complex financial engineering to keep its price stable. .
But Terra began to crumble on May 7. For reasons that are still not entirely clear, crypto traders have started dumping UST, driving its price down to 99 cents. Instead of the trading mechanism behind the stablecoin restoring its price to one dollar, the selloff self-reinforced, sending both UST and an associated crypto called Luna into what traders call a death spiral, as confidence in the coins evaporated. On Friday, UST was trading below seven cents and Luna was priced at a fraction of a penny. Some major crypto exchanges have removed the coins from the listing.
The crash helped accelerate a broader crypto market slide that wiped out around $500 billion in global value over the past two weeks. Top financial regulators, including Treasury Secretary Janet L. Yellen, cite the Terra implosion as stressing the urgency for federal watchdogs to craft rules for the industry. Meanwhile, ordinary investors who have invested money in the project are sorting through the wreckage. A Reddit sub-forum dedicated to Terra directs readers to suicide prevention hotlines.
“The fallout, if something is fraudulent or illegal or a horribly bad investment, could be more severe if we don’t just talk about naming rights,” said Alexa Roberts, a law professor at the University of New Hampshire, who specializes in in brands and fakes. The advertisement. “Because now we’re saying we took a few meetings, and we excitedly introduced this company to our fans or followers.”
Other naming rights deals have failed for teams over the years, none more famous than Enron Field, home to the Houston Astros when the energy company collapsed. But the recent volatility in the crypto market has caused some teams and leagues to be more cautious about partnerships in cryptocurrency and NFTs, said Tim Mangnall, CEO of Capital Sports Media & Capital Block, a consulting firm in UK-based sport.
Few teams fully understand the industry, Mangnall explained, which means they often don’t fully grasp the risks or rewards of investing in cryptocurrency. He added that teams also have an obligation to their supporters. Mangnall cited football teams as a more responsible example.
“They’re starting to realize that they really need to protect their fans,” Mangnall said. “And not just take the biggest check from an exchange or try to force NFTs on them.”
As cryptocurrency has boomed in recent years, sports have been one of its favorite targets for publicity. Dozens of companies, including the three largest trading platforms, have spent hundreds of millions of dollars turning sports fans into new customers. No league has been more responsive than the NBA.
Crypto.com has signed a 20-year, $700 million naming rights deal for the former Staples Center in Los Angeles, home of the Lakers and Clippers, and is the jersey sponsor of the Philadelphia 76ers. The Miami Heat arena is now called FTX Arena. Coinbase is the exclusive crypto sponsor of the NBA and WNBA.
Many of the world’s best-known athletes have also become pitchmen, including NFL stars Trevor Lawrence and Odell Beckham Jr., two-way baseball phenom Shoehei Ohtani and Stephen Curry of the Golden State Warriors. When the Nationals and Terra announced their partnership, Do Kwon, the founder of Terraform Labs, said in a statement that the “first-of-its-kind partnership between a DAO [decentralized autonomous organization] and a sports franchise opens up a new world of opportunity to bring crypto and DeFi to the masses.
“The deal would have helped Terra not only from a marketing and branding perspective. It could have helped stabilize the coin, as it would have given it a source of demand beyond speculators,” said Omid Malekan, Columbia Business School professor, cryptography expert “Terra needed people to want to use it. And while the volume at the Nats ballpark would have been purely symbolic, if it worked, they could have done it.” designate as a pilot as they circled other companies.
“A lot of people have been hurt,” Malekan added, “and there will be serious legal and regulatory consequences.” While he doesn’t expect those consequences to reach the Nats, Malekan said he would advise the team to donate some of the sponsorship money to a charitable cause.
The team had announced that, starting in the 2023 season, TerraUSD could be used for purchases at Nationals Park. But those plans have been superseded by the uncertainty surrounding Terra and what awaits this partnership. As a reminder, as the bottom-seeded club return home next week, fans can watch anywhere in the stadium.