Minority Ownership with Majority Control: The Legal Loophole Influencing Professional Sports

Theo Kuo | May 7, 2026

When the NBA introduced rules permitting private equity to buy into franchises, it was framed as a modernization of the league's ownership model. Teams had become immensely valuable, but many ownership groups simply lacked the liquidity to operate them effectively. Operating demands from rising player salaries and luxury tax exposure to arena investments require substantial cash outlays. Many ownership groups are asset-rich but cash-constrained. Private equity offered a solution. However the rules of this arrangement have a significant flaw: The league can regulate how much equity a firm can hold, but says very little about how much control that firm can actually exercise.

As of December 2025, a single private equity fund can hold up to 20% of an NBA team, with total institutional ownership capped at 30% per team. On paper, this limit looks like a meaningful restriction but in practice, it’s not as effective as it seems.

How the Deal Actually Works

The mechanism that exposes this gap is preferred equity. When Sixth Street Partners put in close to $1 billion to back Bill Chisholm's acquisition of the Boston Celtics, the San Francisco based equity firm initially provided more capital than the NBA's rules technically allowed. The ownership structure was later adjusted through other investors, but because Sixth Street helped structure the deal, provided critical capital early, and negotiated preferred shares protections, they gained leverage in the relationship. When the deal was finalized, the preferred equity position cemented their control of the team through contractual control rights over key financial and strategic decisions, and priority over cash flows.

This matters because preferred equity works differently from regular ownership stakes. Rather than simply sharing in a team's profits and losses proportionally, preferred equity holders are first in line for financial returns and hold downside protections, that ensure they recover their capital or receive priority payouts before other owners if the investment underperforms or is sold at a loss. This gives them structural leverage that a simple ownership percentage doesn’t capture. When you combine that with the reality that Chisholm could not have bought the Celtics without Sixth Street's capital, the relationship begins to look less like a passive investment and more like a financial dependency with governance consequences attached.

The Regulatory Gap

Leagues have built their rules around the traditional assumption that ownership percentage determines control but that no longer holds. Preferred equity structures, revenue sharing agreements, and board rights can all grant meaningful influence without crossing any league ownership policies. 

Sixth Street Partners also holds minority stakes in the New England Patriots, San Francisco Giants, and has invested over $530 million into FC Barcelona in exchange for a 25% share of LaLiga, the club’s broadcasting and media rights over the next 25 years. Other firms like Arctos Sports partners own equity in all five North American professional leagues. These firms aren’t passive investors diversifying across asset classes, they are private equity firms embedded across multiple teams, leagues, and sports while exercising financial influence in each. 

Notably, Sixth Street also has a 20% stake in the San Antonio Spurs. When two teams in the same league share a financial backer, it raises obvious questions about competitive independence and antitrust, especially considering trades the Celtics have made recently. For context, the 2024 NBA champion Boston Celtics traded Jrue Holiday and Kristaps Porzingis partly to exit the second apron, a salary threshold that restricts a team's ability to aggregate salaries in trades, use the mid-level exception, or send cash in deals. Any team might weigh those constraints carefully, especially a team that just won the championship. But for a PE-backed ownership group with preferred equity obligations and downside protection commitments, the pressure to avoid expensive roster decisions is no longer just a basketball calculation. It is a financial one. Currently, nothing prevents this type of cross-team exposure, and nothing requires leagues to examine how PE deal structures interact with the incentives that shape on-court decisions.

A Familiar Pattern

A useful parallel here is baseball's antitrust exemption. Since Federal Baseball Club v. National League in 1922, Major League Baseball has operated largely outside the reach of federal antitrust law, a protection that has survived for over a century despite courts eventually admitting in Flood v. Kuhn that it is, in their own words, "an anomaly." The exemption has endured not because it is legally sound, but because no institution with real power has been motivated to change it. Congress faces little political upside but meaningful risk in disrupting a league with concentrated economic influence, while the Supreme Court in Flood v. Kuhn explicitly deferred the issue to the legislature despite recognizing the inconsistency of it. Additionally, the MLB itself has no incentive to challenge a structure that benefits owners and preserves its market power. The result is a stable equilibrium because every relevant actor is better off leaving it in place. The lesson for private equity in sports is similar. The current ownership rules could persist in their present form unless either a league or a court decides the gap is too large to ignore.

Fortunately, there have been areas of progress. In 1998, Congress made a targeted correction to baseball's exemption with the Curt Flood Act, removing antitrust protections specifically in the area of labor relations while leaving the rest largely intact. That kind of policy adjustment is exactly what NBA (and other league) ownership rules need now.

The path forward requires leagues like the MLB and La Liga to shift the focus of their ownership regulations from equity percentages to actual control. This means defining what governance rights are permissible, placing limits on financial dependencies between teams and their investors, and requiring meaningful transparency around deal structures. The truth is, private equity is not leaving professional sports anytime soon. However the current framework, which polices how much of a team a firm owns and not at how much influence it holds, is structurally outdated.

Sports leagues have always had to update their rules as the business of sport evolves. Free agency in baseball didn’t come from the courts, but from union power filling the gap that law left open. The NBA may be having a similar moment. The question is whether or not leagues will act before the gap becomes a problem they can no longer control.