The Contenders in the Legal Arena
The lawsuit, filed in October 2024, accuses NASCAR of employing monopolistic practices that restrict the income and independence of the teams. 23XI Racing, founded five years ago, competes with Toyota vehicles driven by Bubba Wallace, Tyler Reddick, and Riley Herbst. The team is co-owned by Denny Hamlin and Michael Jordan, along with their business partner Curtis Polk.Front Row Motorsports, led by Bob Jenkins, has participated in the Cup Series since 2005 and currently fields Noah Gragson, Todd Gilliland, and Zane Smith behind the wheel of their Fords. NASCAR, founded in 1948 by Bill France, is still owned by the France family, with Jim France and Lesa France Kennedy at the helm, along with Steve Phelps and Steve O’Donnell.“I did it for the smaller teams too. It’s not just me,” Jordan said last year after the lawsuit was filed. “I think everyone should have the opportunity to succeed in any business. My voice says that hasn’t been happening.”
Michael Jordan
The Core of the Dispute
23XI and Front Row argue that NASCAR’s current practices prevent teams from reaching their full potential. The lawsuit points out that for a “top-tier stock car racing series” to truly be top-tier, it must have top-tier racing teams. NASCAR, for its part, compares its model to other major sports leagues such as MLB, NFL, NHL, and NBA. The accusations focus on the Next Gen car, introduced in 2022, which, according to the plaintiffs, has limited creativity and performance by requiring teams to purchase parts from NASCAR-approved suppliers. In addition, they criticize NASCAR’s control over most circuits and contractual agreements with those it does not own, which restricts the growth and expansion of motorsports. The basis of the dispute lies in NASCAR’s franchise system, where 23XI and Front Row believe the organization is unfair in the distribution of revenue and limits the potential for value.The Franchise System at the Center of the Debate
In 2014, NASCAR team owners, represented by the Race Team Alliance (RTA), raised concerns that led to the introduction of franchises in 2016. These franchises guarantee starting spots and a portion of the prize money in each Cup Series event, with a limit of four per team. Teams can sell or lease these franchises. NASCAR highlights the increase in franchise value as proof of the model’s success. For example, in 2018, Spire Motorsports bought a franchise for $6 million, and in 2023, the cost was $40 million.
The Breaking Point
Franchises are renewed through contracts with NASCAR. Polk has expressed his dissatisfaction with this situation. When the initial 2016 franchise agreement was nearing its end, NASCAR and RTA representatives negotiated an extension that would begin in 2025 and last until the 2031 season. The main disagreement was the distribution of revenue from NASCAR’s new television deal, worth $7.7 billion. The teams ultimately obtained 49% of the share. The teams failed to secure “perpetual” franchises that would automatically renew every seven years at the owner’s discretion. On September 6, 2024, the teams received NASCAR’s final proposal and were given until midnight to sign. 23XI and Front Row refused, questioning the revenue distribution and the lack of permanent franchise agreements. Documents revealed in November provided financial details of NASCAR and its teams. Franchised teams receive approximately $185,000 per event. The average team earns around $330,000 per race, and the top teams, close to $500,000. The total payout to the teams in 2025 was $431 million, an increase from $333 million in 2024. The financial data from 2020-2024 revealed that car revenues varied from $43 million to $8.2 million. Only three teams made a profit in 2024, and owners lost an average of $2.2 million per car. NASCAR highlights improvements in margins since the pre-franchise era. In 2024, 23XI’s revenue increased from $27.8 million to $62.2 million, peaking at $3.5 million in 2023 and a loss of $2.1 million in 2024. Front Row, since the start of the franchise system, saw its revenue increase from $12.8 million in 2016 to $23.6 million in 2024, operating at a loss each year. In October, NASCAR’s financial statements from 2015 to 2024 were published. In 2024, the organization’s net income was $103 million. Phelps explained that most of the profits are reinvested in the sport, the teams, and the staff.Lawyers in the Legal Arena
Jeffrey Kessler, known for representing athletes in litigation against the NCAA, and Chris Yates, with experience in representing sports organizations, are leading the legal battle. Kessler is the lawyer for 23XI and Front Row, while Yates represents NASCAR. Both lawyers have extensive experience in antitrust litigation in the sports field.The Horizon of the Legal Battle
The initial trial is expected to last 21 days, but appeals are likely. The contest between Kessler and Yates promises to be intense. Documents such as transcripts of text messages between Phelps and O’Donnell have generated controversy. Although they will not be used in the trial, they have impacted public opinion and the world of NASCAR.“Are there things that Steve [O’Donnell] and I said that we wish hadn’t been made public? Yes,” Phelps confessed in October. “I know this is an incredible sport. We are a very resilient sport.”
Steve Phelps
The Ultimate Goal
The 23XI/Front Row lawsuit seeks damages, a restoration of fair competition, and, above all, more transparency from NASCAR. The debate over franchises and money is crucial: if 23XI and Front Row win and seek monetary damages, the amount will be determined by a jury and they will not be awarded franchises. If they seek franchises, this would take precedence over damages. If 23XI and Front Row win, NASCAR is expected to lose a key team, or its nearly 80-year-old business structure will be radically modified. The outcome of the trial will determine a significant change in motorsports.Hamlin commented that “I think both sides probably feel strongly about their case. I think one of us is on a suicide mission”.“The franchise system is a fundamental part of the sport, something we created with and for the teams,” Phelps said a month ago. “We will continue to defend it and preserve it, but make no mistake, the demand puts this at risk.”
Steve Phelps
