Paul Rouse: Cryptocurrency – The making or breaking of sport? – Irish Examiner

This understanding came not just from his experience as the owner of a prestigious ice hockey team, but also as the Chairman of Delaware North, a company which is involved in many forms of entertainment and hospitality services (including hotels, airports, gambling, and entertainment industries).

Jacobs noted that there was something timeless about sport, that the love people had for it was “insatiable”, and that sport was something that was remade in each generation by changes in technology and social dynamics.

And he wanted to try and figure out where sport was going next.

As an investor – as well as someone who was just curious – Jacobs gathered together a “brain trust of futurists and experts to gaze into the next 25 years.” The sport that they largely concentrated on was elite, professional sport.

The ideas of these experts were distilled to ‘The Future of Sport’ report. As Jacobs noted it was a lot of fun writing it, although what would actually come to pass was “far from obvious”.

He concluded: “No one wants to bet on the wrong trend.” Seven years on it is possible to see that some of the predictions are already coming to pass around the medicalisation of sporting performance, around the phenomenal growth of esports, around the intersection between sport and smartphones, and around adventure sports.

In fairness, these can be considered to be trends that were already discernible as underlying trends in 2015 and their subsequent progress was not unexpected.

Similarly, the manner in which “virtual reality” would increasingly provide fans with a new dimension of sporting experience is now becoming more prevalent.

But the report also had a good look at money, itself – at what exactly it would be, how it would be used and how sports organisations could profit from it. More precisely, they looked at cryptocurrencies.

There is a fascinating line which the editors of the report – Josh McHugh, Po Bronson and Ethan Watters – wrote in their introduction about the relationship between sport and cryptocurrency: “Franchise owners will create their own Bitcoin-like cybercurrencies that blur the line between real money, loyalty programs, and gambling chips.” 

The first thing to say here is that getting a precise, understandable definition from somebody about what a cryptocurrency is and how it works is no straightforward matter. Explanations quickly head off jargon and the type of language that is almost always the recourse of the specialist. Perhaps the hardest thing in teaching is to try and explain complex things in simple language. Cryptocurrency – for all its advocates – has too many “experts” who talk about it but cannot explain it.

I will run with the incomplete, unsatisfactory explanation that a cryptocurrency is a digital form of money or a tradeable digital asset that only exists online (and not also in some physical form of money). 

It uses encryption to authenticate itself and to protect transactions, and there are now hundreds of different cryptocurrencies in use.

Among the cheerleaders for cryptocurrencies are libertarians who see it as some sort of rebellion against the state, and rejection of how governments ‘control’ money.

But it is this unregulation and the absence of underlying assets or government backing that has led critics to say that to buy cryptocurrencies is to engage with a speculative bubble. Basically, it is claimed that cryptocurrencies will find their place in history in the boom-and-bust Hall of Fame beside Tulip Mania and the South Sea Bubble.

As ‘The Future of Sport’ report predicted, sports organisations have indeed sought to make money from cryptocurrencies. Month after month, their union grows deeper.

There is a logic to this. The core audience for sports is precisely the audience that cryptocurrencies are targeting for themselves.

The result is that cryptocurrencies and their platforms are now sponsoring stadiums. For example, Crypto.com is now the sponsor to the LA Lakers NBA team home arena, after a reported $700m deal last year.

They paid for the sponsorship in cash.

The kind of cash that they paid is what companies pay when they have identified precisely the kind of customer they want to bring into their own industry.

Three different cryptocurrencies bought Super Bowl ads this year; the purchase of advertising space is most famously at its most expensive during the Superbowl, which cost a reported $7m for just 30 seconds of airtime.

Cryptocurrencies are also now the “official partners” of clubs and associations, including at Manchester City and AC Milan, and – inevitably – at FIFA itself.

All told, the ‘Financial Times’ reported last week that the money cryptocurrency firms spent on sports sponsorships grew from less than $50m in 2020 to more than $600m last year. And that figure does not include the spend on television commercials.

One such commercial is running repeatedly in America now during the NBA finals. It shows Steph Curry – an outstanding player with the Golden State Warriors and one who is adored for his joyous approach to the game – extols the virtues of cryptocurrencies.

Last September, Curry joined the most successful American football player of all-time – Tom Brady – as brand ambassador and (apparently) equity shareholder for FTX.

When he signed on for FTX.com, he said: “I’m excited to partner with a company that demystifies the crypto space and eliminates the intimidation factor for first-time users.” 

But this is a promise that might prove spectacularly difficult to keep. It will be fascinating to watch this “demystification”.

And how will these “first-time users” react when they start to lose money? 

The notion has taken hold that cryptocurrencies are a way to make money and, in the way of these things, mentions of the financial risk has been minimised. That is when it is mentioned at all.

There has be a reckoning somewhere; there is no industry yet imagined where everybody gets rich.

Crypto.com believes it is in the early stages of a “mission” which will see the world transition to cryptocurrency. Those who promote cryptocurrencies believe that the recent “volatility” in the market is just normal and nothing to be unduly alarmed about. The partnerships with sports organisations and sporting superstars is seen to be part of a normalisation of what they are doing, a way of saying that there is nothing unduly complicated here.

But, when you strip everything else away, investing in cryptocurrency is a form of gambling. And this will invariably mean loss – even significant loss – for some who invest in these products.

It’s alright for Steph Curry to say that he is “just getting started in the crypto game” in a disarming way; he can afford to lose the money. He recently signed a contract that will see him play for the Warriors for the next four years and earn $215,353,664.

The question will be: how will things go if the company he is now an equity shareholder in goes bust and a load of his fans lose their money?

Particularly when Curry says in the advertisement that he doesn’t need to be an expert in cryptocurrency, because – and he then shows the FTX app to the camera – “with FTX I’ve everything I need to buy, sell and trade crypto safely”.

That’s a fairly serious hostage to fortune.

Paul Rouse is professor of history at University College Dublin