USA - Nationwide: A Sports Law Overview

The following is an overview of current considerations, trends and evolving legal issues that are at the forefront of the sports industry.

Access to Capital

Sports continue to represent a highly attractive asset class for investors, and competition and demand for capital transactions in sports continue to intensify. Investments by private equity funds and other institutional investors have 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 funds and adopted private equity guidelines similar to those of other prominent US leagues. Each league restricts the number of teams in which a private equity firm may acquire an interest, caps the interest that a firm might acquire in any one team, and restricts firms’ governance rights. Despite these limitations, which private equity firms would be reluctant to accept in other circumstances, demand remains high and private equity funds continue to acquire additional interests in NFL teams and teams in other major sports leagues.

As competition for team investment increases in the USA, firms have explored other markets in the sports industry. Private equity 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 private equity firms. New start-up leagues and the franchising of existing sports properties, such as the X-Games, provide additional opportunities for investors. Finally, firms continue to evaluate 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 legalize sports betting in varying forms. Such forms include 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 USA year-over-year, in part due to the proliferation of online sportsbooks. 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 analyze historical data to identify patterns.

Recently, prediction markets have gained traction in sports betting, offering participants an alternative way to gamble on game outcomes and player performances with prices that reflect real-time sentiment and probability. As these platforms continue to evolve and increase in popularity, disputes are beginning to arise with states regarding the applicable regulatory framework.

Name, Image and Likeness

In a groundbreaking 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 various states. A new world of licensing opportunities has become available to athletes, including sponsorships, endorsements, custom apparel, personal appearances and sponsored content on social media.

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 that it would not be at a competitive disadvantage in recruiting college athletes. The potential collision between state laws and the NCAA has led to continuing calls for federal regulation of NIL opportunities. Following the settlement in the House litigation (discussed below), NIL deals over a specified threshold are reviewed by a third-party clearinghouse to ensure that the terms reflect fair market value and a legitimate business purpose, preventing “pay-for-play” and bringing some structure to the NIL market.

College Athlete Compensation

The settlement in the House antitrust cases against the NCAA also significantly impacts the right of athletes to receive compensation. The settlement followed three federal antitrust lawsuits alleging that NCAA rules restricted the earning potential of athletes, including by prohibiting the sharing of revenues generated by media rights. Following approval, the settlement created a new system under which schools can pay athletes directly pursuant to a revenue-sharing formula (up to a cap). However, it remains to be seen whether the new model will foster long-term sustainability, as some schools and programs may face budgetary pressure and uneven resource allocation to remain competitive for top college athletes.

Women In Sport

The evolution in sports media and the increasing demand for investment opportunities has created new opportunities for women athletes, as well as for women’s sports generally. 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, 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, and expansion fees for teams in both the WNBA and the NWSL, the highest level of competition for women’s soccer in the United States, continue to increase dramatically.

The ongoing competition for sports programming has also created openings for women’s sports content. The All Women’s Sports Network, a new global streaming service which debuted in 2024, provides continuous coverage of female athletes on and off the field, with original programming and live sporting events.

AI

The use of AI across the sports industry has expanded rapidly, creating new opportunities as well as new legal considerations. AI is increasingly used in areas such as player performance analysis, sports wagering, ticketing, fan engagement and content creation. As adoption grows, sports organizations must consider issues relating to data privacy and cybersecurity, ownership and use of data, intellectual property rights, consumer protection and appropriate governance over automated decision-making. While AI offers significant potential benefits, it also raises evolving legal and regulatory questions that teams, leagues and other industry participants will need to monitor closely.

Industry Trends

Team valuations continue to increase, resulting in both a shrinking pool of individual qualified buyers and increasing demand from private equity 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 maximize 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 more sophisticated training programs, and fan experience and interaction.