In 2019, North American sports leagues started amending their ownership regulations to permit private equity investments in professional sports franchises. This regulatory evolution signaled a decisive shift toward more inclusive and diversified investment structures. The National Football League (NFL) was the last holdout. It had traditionally maintained stringent limitations. Recent modifications to its rules now facilitate more flexible ownership. Empirical financial performance, which has notably outpaced traditional investment vehicles such as premier index funds, underscores the appeal of these sports franchises as investment opportunities for private equity, sovereign wealth funds, large institutional investors and high-net-worth individuals.

Legal Challenges for Escalating Franchise Values

Huge franchise valuations have become the new limitation, thereby tempering the effect of relaxed ownership rules. Full, or even partial, ownership is increasingly attainable only by entities and individuals possessing substantial financial resources. For instance, the National Basketball Association’s (NBA) Boston Celtics was recently acquired by a group led by Bill Chisholm for $6.1 billion, securing just a 51% initial stake. The remarkable appreciation in franchise values has been driven primarily by lucrative television rights, sponsorship agreements, and robust merchandising.

For legal professionals advising on sports investments, structuring acquisition deals in light of these soaring valuations and restrictive regulatory frameworks can be challenging. The challenges of international investment further complicate the landscape. For example, European football clubs demonstrate alternative ownership structures, with entities such as the Glazer family, Sheikh Mansour, and Qatari-backed investors holding significant stakes in clubs like Manchester United, Manchester City, and Paris Saint-Germain. Similar dynamics are emerging in the U.S., as evidenced by international investments in franchises such as the Brooklyn Nets and Sacramento Kings. These developments invite careful legal analysis concerning antitrust implications, governance issues and securities compliance.

Evolving Ownership Models: Key Trends

Notable models have evolved from the new realities of franchise values and new ownership guidelines. These models evidence industry innovation driven, in some instances, by new legal structures. Since each team’s reason for ownership expansion is different, each solution will differ. Here are just a few of the solutions being implemented:

Consolidation of Ownership –– Traditionally, sports franchises were controlled by single individuals or families. Today, a trend has emerged favoring consortium ownership, wherein multiple parties invest under a legally binding framework defined by membership agreements, charters, and bylaws. Such frameworks not only distribute financial risk but also allow for the injection of significant capital. For instance, a consortium led by Josh Harris acquired the Washington Commanders for $6.05 billion in 2023, a transaction that underscores both the scale and complexity of modern sports investments.

Public and Community Ownership –– Some franchises have experimented with ownership models that incorporate public or community participation through either for-profit or not-for-profit arrangements. The Green Bay Packers serve as a notable example, with a unique corporate structure that allows fans to purchase shares, subject to oversight by an elected executive committee. Legally, this model introduces distinct governance challenges and offers a counterbalance to the risks of franchise relocation.

Franchise Relocations and Expansions –– Changes in ownership often correlate with franchise relocations, league expansions, or restructurings intended to preempt antitrust concerns. The emergence of new local ownership groups can significantly reshape market dynamics. For example, the NHL’s Arizona Coyotes underwent an ownership restructuring during their relocation to Utah, resulting in the sale of a 50% stake to the Smith Entertainment Group. Each such transaction demands careful contract negotiation and regulatory review.

Enhanced Revenue Sharing Mechanisms –– In pursuit of competitive balance, many leagues have instituted sophisticated revenue-sharing arrangements. These arrangements, typically governed by pre-negotiated agreements, require that financial performance metrics dictate the flow of funds between the franchise and the league. Legal advisers must examine these structures closely, as they directly influence ownership strategies and financial planning.

Investment from Non-Traditional Sources –– There has been an observable influx of capital from sectors traditionally viewed as peripheral to sports investments—namely, technology, finance, and entertainment. The entry of high-profile investors such as Natalie Portman, Jennifer Gardner, Snoop Dogg, and Serena Williams brings not only visibility but also fresh revenue streams and business methodologies. This participation often necessitates novel legal arrangements and risk assessments to accommodate the evolving landscape of sports ownership and operations.

Diversity of Ownership –– Despite progressive initiatives, enhancing diversity within ownership circles remains an ongoing challenge. Efforts to incorporate women and minority investors into the ownership fabric are increasingly scrutinized, particularly within leagues such as the NBA, thereby raising important legal questions surrounding equal opportunity and antitrust regulation.

Transition from Sole Ownership to Majority Ownership

Leagues are increasingly accommodating private equity investments, a shift illustrated by the 2023 transaction in which QSI divested a minority stake in Paris Saint-Germain to U.S. private equity firm Arctos Partners. This transaction, which secured up to a 12.5% interest for Arctos and valued the club at over $4 billion, exemplifies the evolution of ownership structures across various sports, including investments in Aston Martin F1, teams in the National Women’s Soccer League, and the NHL’s Tampa Bay Lightning.

Regulatory adaptations have accompanied these market changes. For example, in August 2024, NFL owners authorized the sale of stakes in teams to private equity funds, although these stakes are presently capped at 10%. This marked a departure from earlier regulations that permitted only limited partner arrangements and precluded institutional investment. Legal professionals must now contend with the implications of these regulatory reforms.

Conclusion

In summary, while regulatory reforms have broadened the range of potential investors in professional sports franchises, legal and financial challenges persist. Without further adjustments to ownership structures, the sports industry may face imbalances that continue to drive franchise valuations to unsustainable levels and invite extensive international competition. Attorneys advising clients in this dynamic market must remain alert to evolving antitrust precedents, regulatory amendments, and the complexities inherent in cross-border investments.

New ownership structures offer innovative methods to accommodate the unique challenges of this industry. On a broader scale, sports leagues, clubs, and fitness organizations must consider how best to structure ownership, secure capital, and ensure compliance with statutory requirements—areas where attorneys at Anderson Kill are well-equipped to assist. As the sports landscape continues to evolve, legal practitioners in this field should focus on risk mitigation strategies and compliance frameworks, which will be central to shaping the next era of sports law and new ownership models.