USA - NATIONWIDE: An Introduction to Sports Law

Access to Capital 

There has been significant competition and demand for capital transactions in sports. Teams and leagues seeking capital have increasingly looked towards private credit markets, which can provide flexible and sophisticated financing solutions. Private equity investment has also proliferated, as leagues continue to permit and facilitate equity investments by firms. These transactions help teams to bolster balance sheets and provide liquidity to existing investors.

In 2024 the NFL became the latest major US sports league to allow investments by private equity (PE) funds. Previously, the NFL banned PE firms, public corporations and sovereign wealth funds from owning interests in teams. However, with team valuations continuing to rise, and the strong demand from firms and limited liquidity options for existing investors, the NFL adopted private equity guidelines similar to other prominent US leagues. Each league restricts the number of teams in which a private equity firm may acquire an interest, caps the interest a firm might acquire in any one team, and restricts the firms’ governance rights. Despite these limitations, demand remains high.

As competition for team investment increases in the US, firms have explored other markets in the sports industry. For example, PE has invested in sports-adjacent real estate opportunities, including stadiums, arenas and entertainment districts. International soccer teams and women’s sports have also become areas of increasing interest for PE firms. Finally, firms are evaluating college sports as a potential new investment opportunity.

Sports Betting 

Sports betting is an increasing part of popular sports culture. Since the general prohibition on state-sanctioned sports gambling was overturned in 2018 many states have passed legislation to legalise sports betting, including mobile sports betting with multiple sportsbooks options, one mobile betting option, in-person online betting (ie, geographic proximity to brick-and-mortar sportsbooks) and physical sportsbooks.

Currently, almost 40 states permit sports betting in some form, with over half of states allowing mobile betting. There is significant growth in sports betting in the US year-over-year, in part due to the proliferation of online sports books. Mobile wagering apps allow gamblers to bet not just on the outcome of a game, but also on an increasing number of metrics such as specific events within the game and players’ performances. The rise in artificial intelligence (AI) has also impacted the sports betting industry, allowing gaming companies to use predictive analytics to analyse historical data to identify patterns.

As sports betting becomes more ubiquitous leagues and teams are increasingly partnering with gaming companies, allowing access to new revenue streams. Integrity monitoring and responsible gaming initiatives are also becoming more prominent as part of the regulatory landscape.

Name, Image and Likeness 

In a ground-breaking development, National Collegiate Athletic Association (NCAA) rule changes in 2021 allowed college athletes for the first time to financially exploit their name, image and likeness (NIL). Following the NCAA rule change, regulation of NIL opportunities was delegated to the states.  A new world of licensing opportunities has become available to athletes, from sponsorships, endorsements, custom apparel, personal appearances and sponsored content on social media. This has led to the formation of entities known as "collectives" that exist to generate and pool revenue for NIL opportunities.

Regulating and enforcing NIL rules at the state level resulted in a patchwork of laws and, subsequently, a “race to the bottom” as each state sought to ensure it would not be at a competitive disadvantage in recruiting college athletes. The potential collision between state laws and the NCAA led some to call for federal regulation of NIL opportunities. However, the House settlement (discussed below) could eventually bring more structure to NIL rules.

College Athletes as Employees

An ongoing issue in college sports is whether college athletes are employees with the right to unionise. In February 2024, a regional director of the National Labor Relations Board (NLRB) ruled that a group of college basketball players who had voted to unionize are considered employees of their school, based on the compensation they received in the form of equipment, apparel, financial aid, and other benefits. After the college declined a request to bargain with the players, the players petitioned the full NLRB for official recognition as a union. However, while the issue was still pending before the NLRB, the team withdrew its petition following the 2024 presidential election and the resulting change in composition of the NLRB. The regional director’s decision recognizing the basketball players as employees remains the most recent ruling on the issue.

The pending settlement in the House antitrust cases against the NCAA also significantly impacts the right of athletes to receive compensation. The proposed settlement follows three federal antitrust lawsuits alleging that NCAA rules restricted the earning potentials of athletes, including by prohibiting the sharing of revenues generated by media rights. If implemented, the settlement would create a new system under which schools could pay players directly pursuant to a revenue sharing formula (up to a cap). This structural change may bolster future unionization efforts by further aligning college athletes with the traditional characteristics of employees.

The settlement framework would also establish a new regulatory body outside of the NCAA to oversee and regulate NIL deals. The regulators would be tasked with ensuring that NIL deals are “fair market value” endorsement contracts.

Women In Sport 

The evolution in sports media and the increasing demand for investment opportunities has created new opportunities for women and women’s sports. NCAA women’s basketball remains one of the top collegiate sports in generating NIL revenue. Professionally, the WNBA, a high-profile professional women’s athletic league, completed one of the largest-ever capital raises for a women’s sports property in 2022 and announced a significant new media rights deal in 2024 with major carriers such as Disney, Amazon Prime and NBC. New league properties such as Unrivaled, a women’s 3-on-3 basketball league, have attracted significant investment.

The ongoing competition for sports programming has also created openings for women’s sports content. The All Women’s Sports Network, a new streaming service which debuted in 2024, provides continuous coverage of female athletes on and off the field, with original programming and live sporting events. The service is available in over 60 countries, making it the first global network dedicated entirely to women’s sports.

Industry Trends 

Team valuations continue to increase, resulting in both a shrinking pool of individual qualified buyers and increasing demand from PE firms seeking higher returns. Key drivers of team valuation growth include:

• the limited number of teams;
• teams being viewed as “trophy assets”;
• increased distribution outlets for sports programming and resulting increasing rights fees; and
• sporting events being the last bastion of must-see live video programming.

The rise in streaming services has resulted in new ways of viewing sports programming and new industries entering the streaming market. This has caused an increase in competition among streaming platforms, as providers seek to gain exclusive streaming rights over various sports properties to provide unique content to their subscribers. Streaming services are paying significant fees to exclusively carry games, such as Amazon Prime’s Thursday Night Football and Netflix’s exclusive streaming of the NFL’s Christmas Day games.

Sports teams and leagues are working to maximise revenue streams, mine data and provide novel services from increased streaming of programming. There has also been an increase in focus and availability in fan engagement technology including virtual reality and augmented reality experiences. Finally, the use of AI has become pivotal in the sports world in everything from sports wagering to training programs to fan experience and interaction.