The End of the ‘No Fund League’: NFL Allows Private Equity Fund Team Ownership

Jakub Sobkowicz

Associate Editor

Loyola University Chicago School of Law, JD 2027

On August 22, 2024, the owners of the National Football League (NFL) teams voted to allow private equity funds to purchase ownership in the teams with 31 out of the 32 team owners voting in favor of the change. Critics of the change raise concerns that private equity investments will cause teams to more aggressively prioritize profit over quality, leading to a poorer fan experience. However, the league has drafted the change with appropriate safeguards to limit the influence of private equity owners while still achieving the goal of increasing funds available to teams to promote stability and growth throughout the league.

The newly approved ownership structure allows specific approved private equity funds to acquire a minimum of a 3% stake and a maximum of a 10% stake in a team’s equity to restrict the fund to being a silent partner with no formal decision-making power. Additionally, to mitigate private equity funds using teams as short-term investments, the funds will be required to hold their investment for at least 6 years before selling to promote stability in ownership. Further, to support diversity of funding sources across teams, each fund is limited to holding an investment in a maximum of 6 teams at once. These strict limitations help ensure that the new ownership structure will have little to no noticeable effect on the fans and viewers of the NFL by retaining decision-making authority with the traditional owners.

NFL team ownership structure prior to the change

Prior to this vote, the NFL had allowed teams to have up to 25 limited partners, but did not allow institutional investment. The ownership requirements prior to the change did not allow for any nonprofit organizations, corporations, or private institutions to purchase minority or majority stakes in a franchise. The only exception to this rule applies to the Green Bay Packers, which is structured as a publicly owned, nonprofit organization and was grandfathered into the current ownership requirements. The hesitation to include institutional investment comes from a concern that institutional investors lack the personal link to the communities the teams represent.

The vote against the change

When the change proposal was put to a vote, one vote stood out as the singular dissent against the change. This vote belonged to the owner of the Cincinnati Bengals, Mike Brown. Brown has long been criticized by the other owners for taking a more conservative approach and has been accused of not taking enough action to maximize revenue, which has led to the Bengals being the least valuable franchise in the league. Brown has notoriously voted against most change proposals indicating a preference to maintain status quo and tradition. Brown’s dissent on this proposal is based on an expectation that private equity investments in the most valuable teams will create exponential growth, driving a further wealth divide among the league and leaving the Bengals behind.

Private equity investment in other professional leagues

Private equity funds investing in professional sports teams is not a novel idea. In fact, the NFL is the last major American professional sports league to allow this type of ownership among the NBA, MLB, NHL, and MLS. Even still, the limitations set in place by the NFL remain stricter than any of the other leagues. Most notably, the 10% ownership cap set by the NFL is a significantly lower cap than the 30% maximum set by the other 4 leagues. While most of the leagues maintain a similar maximum number of teams a fund can own, typically setting the limit at 4 or 5 teams, the MLB has no maximum number of teams a fund can own. These stricter requirements set by the NFL will allow the league to enter this type of ownership structure slowly and increase the limits in the future if the structure proves successful.

Benefitting the public through allowing private investment

One common critique of the NFL is the reliance on taxpayers to subsidize new stadium development and enhancements. While NFL owners can afford these renovations on occasion, some of the developments require deeper pockets than the owners have access to which leads the teams to turn to local governments for assistance. For example, the city of Chicago may be expected to contribute $2.4 billion to build a new stadium for the Chicago Bears, Jacksonville could be supplying $1.45 billion to build a new stadium for the Jacksonville Jaguars, and Kansas City may be paying $1.7 billion to build a new stadium for the Kansas City Chiefs. This gap is where private investment is likely to help the public by placing a greater expectation on the teams to cover a more significant portion of the bill by providing the teams with the means to raise the required capital more effectively.

While the expectation by some fans that allowing private equity funds to own a stake in their favorite NFL teams could lead to some diminishing tradition and community ties are rational, the benefits expected by most team owners are likely to materialize. Additionally, the sensible and strict limitations on the amount of equity available for private fund investment will allow for a successful implementation of the new ownership structures. The increase in funding will allow the most valuable teams to cover more of the bill when it comes to stadium renovation and community development. Simultaneously, the opportunity to receive investments from private equity funds will allow the least valuable teams to enjoy increased stability to minimize the financial risks posed by competing in the smallest market cities in which NFL teams are an important component of the culture and tradition of these cities.