WILMETTE, Ill. — Another racing season is underway with excitement filling the paddocks at tracks from coast to coast.
The current buzz in sports surrounds digital currencies and their push into sponsorships. This month, we examine that optimism and how motorsports is part of the plan.
One may ask — what is all this funky terminology? Basically, crypto is a digital asset based on a network that is distributed across a large number of computers.
The blockchain technology behind it will disrupt various industries. Their advantage will be cheaper and faster money transfers. Price volatility and potential use for criminal activity are less favorable characteristics of crypto currency.
Crypto exchanges and blockchain-based businesses are pouring money into sports like never before. The reason behind this effort is to acquire new customers and bring this increasingly popular digital asset class into the mainstream.
They have quickly become one the largest sponsors and advertisers in sports. It seems that new announcements are made weekly. Sports are embracing the category, looking to offset substantial losses incurred during the pandemic.
These deep pocketed companies are seeking to utilize the high visibility of sports to grow awareness of their emerging brands in a relatively new industry. It can be a confusing category, so they need to create legitimacy.
Sports fans are about twice as likely to be familiar with cryptocurrency than non-sports fans. Those who are avid, engaged in fantasy leagues and betting types top the lists as those acquainted with this category of currency.
Crypto currency companies are not only looking at spectators, they are reaching out to industry stakeholders — leagues, teams, players, etc. Technology is behind every process of business and they want to be part of it.
Sports betting is expanding due to the landmark decision striking down the federal ban of sports gambling three years ago. Almost half the country has begun the process of legalizing sports betting either in-person or online. There are about a dozen states that have deep-seated political opposition or complex tribal relationships.
Gaming and fantasy entities are spending on sports, but they are subject to regulatory approval. This may slow their adoption and be a barrier to entry.
The primary digital currency business entering sports sponsorships are crypto exchanges. These marketplaces facilitate the buying and selling of bitcoin, Ethereum and dogecoin.
Similar to the philosophy behind stocks, the idea is to purchase them, hope the price rises and then sell them for a profit. Investing carries risks, but volatility creates both winners and losers.
The cost of obtaining new users and getting them to use the digital trading platforms via sports sponsorships and advertising is viewed as lower than other forms of customer acquisitions.
Motorsports companies, including race teams, are receiving money from crypto currency companies.
The largest deal to date was made by Crypto.com.
This Asian-based cryptocurrency exchange has signed a deal with Formula 1 for $100 million over five years. In return, the company receives race sponsorships and hospitality area branding.
It recently became the naming rights sponsor of the inaugural Miami Grand Prix.
The season opening Daytona 500 at Daytona Int’l Speedway brought out new backers. Several teams announced deals with crypto sponsors prior to the beginning of the season. These deals featured logos and increased visibility as NASCAR’s three national touring series raced in front of a national television audience.
NASCAR disallowed the prospective sponsorship of LGBcoin due to it being “detrimental to the sport” based on political ties.
The unfamiliarity of digital currency may create an initial hesitancy among those in motorsports. Time will tell if crypto currency goes mainstream, but racing will be there as it is already in the fast lane.