Courtside Counsel

Welcome to our newsletter with the latest legal news in sports from the Courtside Counsel. Our team of attorneys is actively monitoring the news for need-to-know legal developments and issues involving the sports industry. Below are today’s highlights.

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NIL REPORTING AND TRANSPARENCY

California bill could expose what Title IX lawsuit calls ‘shocking’ gender inequities in how college athletes are paid (msn.com)

What: California Senator Nancy Skinner has authored and introduced legislation (SB 906) that aims to increase the transparency of the monetization of college athletes’ name, image, and likeness (NIL). The legislation would require collectives and other entities that do NIL deals with college athletes to report certain information to the college or university the athlete attends.

Why this matters: Prior to the rule change allowing college athletes to be compensated for their NIL, they were solely “compensated” through scholarships issued by individual schools. Scholarships must comply with federal Title IX regulations to ensure equitable application across genders. Without such guardrails in place to ensure transparency, we may continue to see women athletes being paid significantly less than their male counterparts. For instance, freshman Bronny James, who is the son of Lebron James and averaged 4.8 points, 2.8 rebounds and 2.1 assists per game in the 2023-24 season, was the top-earning collegiate men’s basketball player this past season, with a net worth of at least $5 million, with most of those earnings tied to NIL deals. Comparably, senior Caitlin Clark, who has amassed the leaderboard since her freshman year and averaged 31.6 points, 7.4 rebounds and 8.9 assists per game this season, leads the women’s basketball roster with a reported $3.2 million valuation from NIL deals.

Legislation Tracker: The bill was initially introduced on January 4, 2024, and is now set for hearing on April 16, 2024.

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OPERATIONS

MLB’s brave new ticketing experiment - ESPN

What: The Phillies, Giants, Astros and Nationals are the first clubs to introduce “Go-Ahead Entry,” an MLB-backed program that uses facial authentication technology to allow ticketholders who have registered and submitted selfies via the MLB Ballpark app to enter ballparks at dedicated gates at full walking speed without stopping. The technology works by converting each selfie into a unique numerical token associated with the fan’s account before the image is deleted, and the stadium’s facial authentication cameras set up at the gates scan the ticketholder’s face as they walk in to match it with the enrolled token in the system and allow access.

Why this matters: While many fans have eagerly embraced this hands-free ballpark entry experience so far, groups focused on privacy issues have raised concerns over the potential misuse of biometric data, citing past examples of how facial recognition software has been used within the sports industry for other purposes. One of the most egregious examples was the use of facial recognition software by James Dolan, the owner of the Knicks and Rangers, at Madison Square Garden and other venues owned by his company “to identify lawyers at firms involved in litigation against his company” who were subsequently blocked from attending events in such venues by Dolan’s employees. In response to these privacy concerns, proponents of MLB’s Go-Ahead Entry program stress that the program is optional, images of fans’ faces are not saved or stored in a database, and the teams are not selling biometric data to any other companies.

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TAX

Voters reject stadium tax for Royals and Chiefs | AP News

What:  On April 2, 2024, voters in Jackson County, Missouri, rejected a ballot question that would have replaced an existing three-eighths of a cent sales tax with a new three-eighths of a cent sales tax that would have extended for the next 40 years. The existing tax has been used on the Truman Sports Complex, the home of the Kansas City ’Royals’ Kauffman Stadium and the Kansas City ’Chiefs’ Arrowhead Stadium. The extended tax would have contributed to renovations for Arrowhead and a new downtown stadium for the Royals in Kansas ’City’s Crossroads district. The current lease for both teams runs through January 31, 2031, but now the Chiefs and Royals will both explore their potential options as the teams reassess their future homes.

Why this matters: The rejection of this ballot measure could lead to a couple of different next steps. The Truman Sports Complex could try again with a reworked plan more agreeable to voters, change their entire funding approach to include more private investment or they could even listen to offers from competing cities and states — such as Kansas, just across the state line to the west — that would provide the public funding they desire.

Trend Alert: We’re seeing issues related to public funding and stadiums throughout the United States (e.g., Chicago Bears meeting with city and state officials to discuss public subsidies for Soldier Field 2.0; a majority of voters are against using public funds for a new A’s stadium in Las Vegas). This will continue to be an issue as stadium and arena owners work to think of ways to fund existing and new stadiums.

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SPORTS GAMBLING

Article: New York sports betting handle hits $19.64bn in FY23 (igamingbusiness.com)

What: Top dollars in New York as online sports betting reaches $19.64 billion.

Why this matters: From March 2023 to March 2024, online sports betting went up by 19.8% in New York, making New York the highest yearly online sports betting spend of any regulated state within the United States—which is an impressive feat as this was the first full year since New York opened its legal online sports betting market. Still, the various online sports betting market players (like FanDuel and DraftKings) face declining revenue numbers.

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ENTERTAINMENT

Article: Netflix and tennis: Why did Break Point fail? – The Athletic

What: Netflix has been keen to replicate its success with the hit docuseries Drive to Survive following the Formula One racing series. Numerous other sports docuseries followed on the streaming platform, including “Break Point.” The announcement back in 2022 excited fans who were promised “access to professional tennis like you’ve never seen before.” However, flash forward to 2024, where it was confirmed that Break Point would be cancelled and not renewed for a third season, only shortly after the second season had been released.

Why this matters: Netflix cited two seasons of disappointing viewing figures. However, it has left critics and fans assessing whether an opportunity has been missed for both Netflix and Tennis. For professional sports stars, access to their lives is treated and forms part of their intellectual property, with one top player’s agent commenting, “why should we work with them when we can just make our own movie?” Key reasons cited for the series failure included players resisting giving access to cameras and further complaints from players (and their agents) about less than desirable editing and compensation packages. This is indicative of the state of relation between players and the people who run their sport. Often, players don’t see things that tennis officials tell them are both good for the sport and good for them in the same light. While Tennis officials may have signed the original deal, it is the players (who are not employees but independent contractors) who are supposed to allow the camera crews “access like you’ve never seen before.” However, American players Frances Tiafoe, Taylor Fritz and Tommy Paul co-operated with producers the most, contributing to a number of episodes. Tommy Paul even participated in the series, making him far more recognizable.

Trend Alert: Perhaps a key lesson to Netflix and other streaming companies is that they may have been victims of their own success with Drive to Survive, which caused a huge surge in the market for sports documentaries across all streaming platforms. However, there is no sign of this trend slowing down, with Netflix and Carlos Alcaraz announcing in Tennis Paradise during the BNP Paribas/Indian Wells Open a new docuseries coming to Netflix in 2025. The Tennis organizations alluded to potential further attempts at the streaming game, stating they will “continue to explore new opportunities to elevate the profile of our sport and reach new audiences across platforms.” Watch this space and keep an eye out for further collaboration between sports and entertainment streaming giants.

 

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M&A

Article: Minnesota Timberwolves sale takes dramatic turn – WSJ

What: On March 28, 2024, the owner of the Minnesota Timberwolves, Glen Taylor, announced that his planned sale of the team had fallen through. The purchasers, Marc Lore and Alex Rodriguez contend that Taylor withdrew from the sale because of “seller’s remorse.”

Why this matters: Legal controversies have plagued this sale since its inception three years ago, when one of Taylor’s limited partners brought suit in federal court alleging the team’s sale violated the limited partner’s “Tag-Along Rights.” That action ultimately failed. Now, Taylor, Rodriguez and Lore will likely fight over the proper interpretation of the sale contract—each arguing that the other party is in breach. All of this could likely hinge on a provision of the sale contract that allows the buyer to extend its Call Option to ninety days past the closing date. Rodriguez and Lore exercised that Call Option, which extended the due date of their final payment to March 27, 2024. However, the provision at issue may include a further extension: “the ninety (90)-day period shall be automatically extended by an additional ninety (90) days if all NBA approvals or other required approvals of any Governmental Entity have not yet been obtained.” In battling public appearances since the March 27, 2024 deadline, the parties have offered competing interpretations of this extension provision, with the buyers arguing that their deadline to make the final purchase installment had not yet passed. It is unclear which way the ball will bounce on the failed sale, but it would not be surprising to see this played out in court.

^{*some of these articles may be behind a paywall}

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.