Riot Games filed a motion to compel (opens in new tab) yesterday to end its sponsorship of the League of Legends Championship Series with cryptocurrency exchange FTX (crypto researcher and Harvard Innovation Lab fellow information provided by Molly White). This follows the collapse of FTX (opens in new tab) and the arrest of its founder, Sam Bankman Freed, on fraud charges.

Coindesk (opens in new tab) reported on the agreement between Riot and FTX last August. The sponsorship agreement will last for seven years and the FTX brand will be prominently displayed during LCS events; Riot did not publicly disclose the amount of the deal at the time, but indicated that it was the largest esports sponsorship the company had ever obtained.

FTX was one of the largest cryptocurrency exchanges in the world and had a good public image. You may remember the company's ad (opens in new tab) featuring Larry David at the Super Bowl. As of this writing, FTX holds the naming rights to Miami's FTX Arena (formerly American Airlines Arena), home of the Miami Heat.

Internal documents showing massive discrepancies in FTX's books were leaked to the public last month, leading to massive withdrawals from customers and a declaration of bankruptcy shortly after. Bankman Fried continued his PR damage control until he finally resigned as CEO and was arrested earlier this week in the Bahamas (open in new tab).

FTX is effectively insolvent, but still owes the company half of its $12.5 million payment for 2022, according to Riot's complaint. That annual payment was only set to increase during the seven-year sponsorship period. While it is reasonable for Riot to want to get off this sinking ship, the company also states that the partnership is hurting its brand.

Humorously, Riot points to Sam Bankman-Fried's infamous League of Legends habits as a particular sticking point. Media and Twitter commentators spread images of Mr. Bankman-Fried playing League of Legends (Riot's game) at the same time FTX crashed." Had Mr. Bankman-Fried actually been good at the game, the reputational damage might have been less severe (open in new tab).

Before your heart bursts from too much sympathy for Riot, the company is actively seeking crypto-focused advertising partners to replace FTX." The more Riot is prevented from commercializing the crypto exchange sponsorship category and the assets currently owned by FTX, the more damage Riot will suffer," the company explained. [It is not hard to imagine that this motion will not be upheld, as there is no way that FTX will be able to pay Riot the amount it has already paid, let alone be in a position to retain its multi-million dollar esports sponsorship again. The only question I see is whether Riot will extricate itself in time to have another crypto sponsor for the LCS in 2023, and then have to file another enforcement motion to get out of that deal when the next bank deal is executed.

If the story of esports organizations trying to cut ties with FTX sounds familiar, you may recall the TSM and Furia effort (open in new tab) where TSM signed a $210 million, 10-year contract to change its name to TSM FTX in 2021. while Furia had a one-year, $3.2 million contract with the failed exchange. Both teams moved last month to void their partnership with FTX.