The Washington Nationals loved Terra. Then the cryptocurrency struck out.

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Last week, the Washington Nationals posted a tweet that read: “Crypto 101. You have questions. We’ve got answers.”

An accompanying video included frequently asked questions about cryptocurrency, asked and answered over a baseball highlight reel. One big problem, though, was that cryptocurrency was in free fall, spurred by the collapse of Terra, the sponsor of the social media posts and the Nationals’ most visible brand partner in 2022.

Fans quickly expressed anger with their favorite team pushing a plummeting cryptocurrency to its Twitter following of more than 780,000. The tweet was scheduled in advance, according to multiple people inside the organization, who also said that Terra’s collapse is stirring tension about how to proceed with the partnership.

The Nationals signed a five-year, $38.15 million deal this winter to promote Terra and received all the money up front. The internal debate, according to multiple people with knowledge of the discussions, is centered on whether the organization should honor its agreement with Terra and keep the company’s name on its luxury club behind home plate, where “Terra” is stripped across every seat, and elsewhere in the stadium.

As the fallout from Terra’s crash continues, the Nationals’ predicament highlights the potential pitfalls for athletes, teams and leagues that have tethered their brands to the volatile digital currency.

The terms of the Nationals’ contract with Terra include naming rights to its premier club, signage around Nationals Park, big-screen advertisements and continued promotion on the Nationals’ official social media accounts. In announcing what they called a “groundbreaking partnership” with Terra in February, the Nationals said Terra “has experienced a meteoric rise as a market leader through its blockchain and DeFi [decentralized finance] ecosystem.” The team called itself a “leading innovator in Major League Baseball.”

But that was when TerraUSD was trading at $1. By Friday, it had fallen to less than seven cents, in what crypto market analysts call an irreversible implosion. A spokeswoman for the Nationals, whose owners are exploring a sale, declined to comment on the partnership or the ill-timed tweet. Terra did not respond to a request for comment.

Terra marketed itself as offering a new form of digital cash, supported by its own financial ecosystem that would make it faster and cheaper than traditional payment options. The project revolved around a TerraUSD, a type of token known as a stablecoin because it aimed to keep its price at $1. Unlike other stablecoins that maintain reserves of dollars and other real-world assets to back up their tokens, TerraUSD — also known by its ticker, UST — relied on complex financial engineering to hold its price steady.

But Terra began unraveling May 7. For reasons not yet entirely clear, crypto traders started dumping UST, driving its price down to 99 cents. Instead of the trading mechanism behind the stablecoin restoring its price to a dollar, the sell-off became self-reinforcing, sending both UST and an associated crypto called Luna into what traders call a death spiral, as confidence in the coins evaporated. By Friday, UST was trading at less than seven cents, and Luna was priced at a fraction of a penny. Some major crypto exchanges have delisted the coins.

The collapse helped accelerate a broader plunge in the crypto market that erased roughly $500 billion in global value over the past two weeks. Top financial regulators, including Treasury Secretary Janet L. Yellen, are citing Terra’s implosion in highlighting the urgency for federal watchdogs to develop rules for the industry. Meanwhile, everyday investors who plowed money into the project are sorting through the wreckage. A Reddit subforum dedicated to Terra directs readers to suicide prevention hotlines.

“The fallout, if something is fraudulent or illegal or a gruesomely bad investment, could be more severe if we’re talking not just naming rights,” said Alexa Roberts, a law professor at the University of New Hampshire who specializes in trademark and false advertising. “Because now we’re saying we took some meetings, and we were enthusiastically pitching this company to our fans or followers.”

Other naming rights deals have gone bust for teams over the years, none more famous than Enron Field, which was home of the Houston Astros when the energy company collapsed. But the recent volatility of the crypto market has caused some teams and leagues to be more cautious about partnerships in cryptocurrency and non-fungible tokens (NFTs), said Tim Mangnall, CEO of Capital Sports Media & Capital Block, a sports consulting firm based in the United Kingdom.

Few teams are fully versed in the industry, Mangnall explained, meaning they often don’t fully grasp the risks or rewards of investing in cryptocurrency. He added that teams also have an obligation to their supporters. Mangnall pointed to soccer teams as a more responsible example.

“They’re gaining an understanding that they actually need to protect their fans,” Mangnall said. “And not just take the biggest check from an exchange platform or trying to push NFTs on them.”

As cryptocurrency boomed in recent years, sports has been one of its favorite targets for advertising. Dozens of companies, including the three largest trading platforms, spent hundreds of millions of dollars looking to turn sports fans into new customers. No league has been more receptive than the NBA.

Crypto.com inked a 20-year, $700 million naming rights deal for the former Staples Center in Los Angeles, home of the Lakers and Clippers, and is the jersey sponsor of the Philadelphia 76ers. The Miami Heat’s arena is now called FTX Arena. Coinbase is the exclusive crypto sponsor of the NBA and WNBA.

Plenty of the most well-known athletes have become pitchmen, too, including NFL stars Trevor Lawrence and Odell Beckham Jr., two-way baseball phenom Shoehei Ohtani and Stephen Curry of the Golden State Warriors. When the Nationals and Terra announced their partnership, Do Kwon, the founder of Terraform Labs, said in a statement that the “first-of-its-kind partnership between a DAO [decentralized autonomous organization] and a sports franchise opens a new world of opportunities for bringing crypto and DeFi to the masses.”

“The deal would have helped Terra not only from a marketing and branding perspective. It could have helped stabilize the coin because it would have given it a source of demand beyond speculators,” said Columbia Business School professor Omid Malekan, a crypto expert. “Terra needed people to want to use it. And while the volume at the Nats ballpark would have been purely symbolic, if it worked, they could have pointed to it as a pilot as they shopped this around to other companies.”

“A lot of people got hurt in this,” Malekan added, “and there are going to be severe legal and regulatory consequences.” While he did not expect those consequences to reach the Nats, Malekan said he would advise the team to donate some of the sponsorship money to a charitable cause.

The team had announced that, as soon as the 2023 season, TerraUSD could be used for purchases at Nationals Park. But those plans have been replaced by the uncertainty surrounding Terra and what’s ahead for this partnership. For a reminder, as the last-place club returns home next week, fans can look anywhere around the stadium.



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