The New York Jets have sued sports betting company Fubo Gaming Inc. in the Delaware Court of Chancery in a dispute over payments in a sponsorship deal.
The case, filed Nov. 4, seeks the appointment of a receiver who would help the Jets recover money the team owes under the contract. Fubo Gaming, a subsidiary of fuboTV, recently filed for dissolution in Delaware and ceased operations — a move Jets attorney Andrew Lee of Foley & Lardner wrote in a letter to Fubo Gaming on Oct. 25 that the Jets were “shocked to learn.” “.
The Jets can keep fuboTV as the parent company is responsible for the actions of Fubo Gaming, a subsidiary. Lee’s letter emphasizes that Fubo Gaming’s dissolution is “at the direction of the [parent’s] Board of Directors,” a point suggesting the Jets plan to argue the breakup to avoid a contractual obligation.
The Jets say Fubo agreed to pay $12.4 million in sponsorship fees over five years but failed to pay about $1.2 million due Oct. 1. The Jets also claim that they have fully fulfilled their obligations under the agreement. The team says it has provided a suite and tickets to matches, as well as marketing and promotional support. As per the Jets letter, Fubo says it lacks sufficient assets to pay.
FuboTV (NYSE: FUBO) shares fell 16% on Wednesday.
The Jets aren’t the only major U.S. sports company to face the collapse of a key partner — far from it. Recently there have been a number of companies that have gone out of business shortly after signing major sports contracts. Cryptocurrency lender Voyager Digital filed for bankruptcy just months after signing one of the largest commercial deals in NWSL history, causing the league (and its players) to scramble to see where they belong as creditors. FTX, the crypto empire that collapsed this week, has a number of sports businesses including naming rights to an NBA arena (Miami) and a Pac-12 football stadium (Cal). Fubo Gaming’s partners also include the Cleveland Cavaliers and Houston Dynamo.
Some of this could probably be resolved with better care, but it’s also commentary on the broader sports marketing industry. Emerging companies in sectors like sports betting and crypto lending are often filled with investor money and in a frenzy for market share. Sports has proven to be a valuable place to do this, with high-visibility deals giving startups both a reputation and access to millions of tech-savvy future customers. As a result, the money dangling in front of teams and leagues often offsets the downside risk of a partner’s inability to fulfill the contract.
Fubo Gaming’s deal with the Dynamo, for example, was both a sponsorship deal and a market access deal and could have been worth $178 million over 10 years, making it one of the largest commercial deals in the world makes history of the MLS team. (A Dynamo representative did not respond to an email asking for comment on the status of their deal). Last year, the arena, formerly known as the Staples Center, was renamed the Crpyto.com Arena in a $700 million pact that will pay the venue’s owner, AEG, more payments in four years than Staples paid in paid for the full 20 years of his agreement.
Fubo Gaming’s formwork features at least one different fold. While the sportsbook won’t be operational, the company’s flagship product — its streaming service — will be. The Jets can keep fuboTV as the parent company is responsible for the actions of Fubo Gaming, a subsidiary.
Fubo will have an opportunity to respond to and challenge the allegations. The case could also end with a settlement at any time.