Riot files to terminate League of Legends sponsorship deal with failed crypto exchange FTX
This was the first year of Riot's seven-year partnership with FTX.
Riot Games filed a motion to compel yesterday in the hopes of terminating its League of Legends Championship series sponsorship deal with the cryptocurrency exchange FTX (credit to crypto researcher and Harvard Innovation Lab fellow Molly White for the spot.) This follows the highly-publicized implosion of FTX and the arrest of its founder, Sam Bankman-Fried, on charges of fraud.
Coindesk reported on the agreement between Riot and FTX last August. The sponsorship deal was set to last for seven years, with FTX branding displayed prominently during LCS events. Riot did not publicly disclose the price of the deal at the time, but did indicate that it was the largest such esports sponsorship the company had ever secured.
FTX was one of the largest cryptocurrency exchanges in the world and had a well-curated public image. You may remember the company's ad featuring Larry David at the Superbowl, something that was kinda funny but mostly sad at the time, and is now absolutely hilarious in hindsight. At the time of writing, FTX still holds naming rights to Miami's FTX Arena (formerly the American Airlines Arena), the home of the Miami Heat.
Internal documents showing massive discrepancies in FTX's bookkeeping leaked to the public last month, with mass withdrawals from customers and a declaration of bankruptcy following soon after. Bankman-Fried had continued to run PR damage control before eventually stepping down from his position as CEO then getting arrested in the Bahamas earlier this week.
FTX is virtually insolvent, but according to Riot's motion still owes the company half of its $12.5 million payment for 2022. That yearly payment was only set to increase over the lifespan of the seven-year sponsorship deal. It only makes sense that Riot would want off this sinking ship, but the company also cites the association as being damaging to its brand.
Humorously, Riot points to Sam Bankman-Fried's infamous League of Legends habit as a particular sticking point. "Media outlets and Twitter commentators splashed images of Mr. Bankman-Fried playing League of Legends—Riot's game—at the same time that FTX was crashing," the motion reads. Maybe the reputational damage would have been less severe if Bankman-Fried was actually good at the game, though ideally he would have just been better at running a cryptocurrency exchange.
Before your heart bursts with too much sympathy for Riot, the company is actively looking for an explicitly crypto-focused advertising partner to replace FTX. "The longer Riot is prevented from commercializing the crypto-exchange sponsorship category and the assets currently owned by FTX," the company explains, "the more damages Riot incurs."
It's hard to imagine this motion not being sustained—there's simply no universe in which FTX could pay Riot what it already owes, let alone be in a position to sustain multi-million dollar esports sponsorships ever again. The only question in my mind is whether Riot will extricate itself in time to have another crypto sponsor for the LCS in 2023, and then have to make another motion to compel to get out of that deal when the next bank run rolls around.
If the story of an esports organization trying to cut ties with FTX sounds familiar, you may be thinking of TSM and Furia's efforts on that front. TSM had signed a $210 million, 10-year deal to change its name to TSM FTX in 2021, while Furia had entered a one-year, $3.2 million arrangement with the failed exchange. Both teams moved to void their partnerships with FTX last month.