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Binance abandons FTX takeover

Crypto marketplace crash could have major ramifications for sports crypto projects and sponsorship.

10 November 2022 Steve McCaskill
Binance rescues serial sports sponsor FTX after ‘liquidity crunch’

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  • Binance had signed non-binding agreement to acquire rival FTX
  • Due diligence revealed too many problems for merger to go ahead
  • FTX has deals with sports teams, athletes and governing bodies

Cryptocurrency exchange Binance is pulling out of a proposed rescue of rival FTX in a development that could have ramifications for the sports industry and its growing relationship with blockchain-based technologies.

Binance had signed a non-binding agreement to acquire FTX’s operations outside the US and cover a “significant liquidity crunch” resulting from concerned investors withdrawing US$6 billion from the exchange in just three days. 

However, after performing due diligence, Binance has decided the problems at FTX are simply too great for it to get involved.

‘In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,’ Binance said in a statement.

‘Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.

‘As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralisation, the ecosystem will grow stronger.’

SportsPro has approached FTX for comment.

The collapse of the deal will exacerbate concerns about the health of the cryptocurrency market given the size of FTX’s platform, which allows users to buy and sell digital assets.

FTX’s ‘FTT’ token has plunged in value, while other cryptocurrencies have also declined in value, including Bitcoin and Binance’s own ‘Binance coin’ token. 

SportsPro says…

This news affects sport in two ways. The first is that many sports teams and federations have launched official non-fungible token (NFT) collections, such as digital trading cards, video moments, or limited edition artworks.

While these differ from fungible tokens like cryptocurrencies in that each of these tokens are unique and often have an associated utility, many NFTs are acquired for speculative reasons with owners hoping to benefit from any increase in their value. A crash in the wider market will inevitably affect valuations.

But perhaps the more pressing concern relates to sponsorship. FTX has been active in the market, reaching deals with the National Basketball Association’s (NBA) Miami Heat, the Mercedes Formula One team and the International Cricket Council (ICC). Meanwhile, tennis star Naomi Osaka is a global ambassador.

As recently as September, FTX paid US$1.4 billion to acquire the assets of bankrupt former rival Voyager Digital, which had deals with the National Women’s Soccer League (NWSL), among others.

Current partners will be concerned about sponsorship payments, while others might fear the crypto market is no longer the world of commercial possibility that it might have once been.

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