23XI Racing and Front Row Motorsports have every intent of participating in the NASCAR Cup Series next season even as both teams navigate how to compete in a league they have just filed a lawsuit against.
The two organizations have jointly filed an antitrust suit against NASCAR and league CEO Jim France. They were the two teams that did not take what was described as a take it or leave it offer from the sanctioning body last month following two years of negotiations over a revenue sharing and sporting governance system extension.
The two sides have argued in its initial filing, which has been summarized here, that the extension signed by the 14 other teams limit competition by unfairly binding them to the league, its tracks and suppliers while also not fairly compensating its contributions to the ecosystem.
Both teams have retained Jeffrey Kessler, a lawyer from Winston & Strawn LLP, who has secured major victories leading to college athletes getting paid for their name, image and likeness (NIL) and equal pay for the U.S. Women’s National (Soccer) Team.
Kessler feels very confident that this is a winnable case for 23XI and Front Row.
“I have spent much of my professional career bringing antitrust action to different professional sports to try to create a fairer, more beneficial, more innovative system for those sports that benefits all the stakeholders in those sports,” Kessler said during a press conference on Wednesday morning. “There has never been a case that I have found that is as egregiously anti-competitive as this one.
“Here, we have a sport where one family has basically used its power to create an absolute monopoly to the benefit of that family as opposed to for the teams, drivers, sponsors, broadcasters and fans. This monopoly did not happen because a superior product because of the family’s investment or their innovation.
“This monopoly happened because of illegal monopolistic practices. Where there was a competitor, that competitor was acquired. When there were tracks that would enable another competitor to be formed, those track were acquired or subject to a grievance that prevented them from being available to any other competitor.”
Further, the two teams and their lawyers argue that NASCAR has enriched itself on the backs of the efforts of the teams without rewarding them commensurate value for those efforts. Kessler said on Wednesday that teams are currently only receiving 13 percent of the total value generated by NASCAR and that drivers only get three percent.
A comparison was made to the NBA, in which players make 49 percent of revenue generated by the league.
Specifically, 23XI co-owner Curtis Polk, who was also a managing partner with team co-owner Michael Jordan when they co-owned the Charlotte Hornets made a comparison for how they believe NASCAR has not kept up with the times financially.
“Over the past two years, me on behalf of 23XI, I have dedicated myself to championing a more equitable and transparent system within NASCAR, one that respects the interest of all the stakeholders,” Polk said during the press conference. “Our passionate fans and hard-working teams deserve a structure that not only promotes growth but ensures sustainability for everyone involved.
“Today’s actions is more than just about charters. Due to their unprecedented power and willingness to exert it, the France family has dictated every aspect of Stock Car racing in America, from the gas and tires we use to the parts we have to purchase for the race cars, to the schedule, rules, tracks we race at, the fees we have to pay to race and how are races are consumed by the public.
“This control has caused a depressing economic impact on the teams’ profitability, their enterprise value, as well as driver, crew and race shop salaries. This behavior has also been detrimental to our sponsors and fans. The economic structure has made it more difficult to create iconic recognizable branding that fosters loyalty and authentic connections to their favorite cars and drivers.”
For the past two years, NASCAR and the teams have negotiated an extension to the charter system that was inaugurated in 2016 that granted guaranteed entries to teams that owned the 36 figurative tokens that also provided guaranteed revenue instead of a more traditional winner’s circle style program.
Each charter has a rolling three-year value which determines how much guaranteed value each entry gets based on that car’s performance. It ran concurrent to the previous broadcast rights agreement and needed to be renewed alongside the next one.
This time, teams wanted significant revenue increases but also charter permanency and to make the system similar to a stick-and-ball franchise model, wanting to become less reliant on a model that generates a majority of revenue through sponsorship money — with the league often competing with teams to ink those same endorsements.
NASCAR rejected most of that, offering teams a modest increase in revenue, but also placing provisions like an anti-disparagement clause and an inability to sue the league on anti-trust claims, and issued it in the form of a take it or leave it offer on September 6.
23XI and Front Row were the only teams to not sign the extension. This is what Justin Marks and Brad Keselowski said about their teams’ decision to sign the document.
“The charters that were forced on the teams with only hours’ notice furthers this monopolistic control,” Polk argued. “The new charter is an attempt to further marginalize the teams’ voices in the sport, surrender control of intellectual property and create conflicting financial relationships with our drivers.
“Its goal is to consolidate the power of the France family to themselves alone. These actions threaten to stifle competition and diminish the ability of the teams to succeed. This is not merely a business matter. It strikes at the core of integrity and fairness within NASCAR.”
Kessler said the two teams are not pursuing the modest changes that the charter extension offered but ‘big changes’ instead, while targeting the France family that has privately run NASCAR since 1948.
“There is no other major sport where one family has run that sport as its own personal fiefdom and piggy bank,” Kessler said.
“In every antitrust case, the victims are taking what they can get. … A lot of the victims will continue to be victimized until the wrongs are righted.”
While this process plays out, the two teams will file an injunction to make them eligible for the charter agreement the other 14 teams signed. If that doesn’t work, both Polk and Front Row owner Bob Jenkins says they will race without a charter as an open team.
What NASCAR would choose to do with the two charters 23XI Racing owns and the two Front Row has used in recent years remains unclear. Both teams were expected to purchase one of the three charters made available due to the closure of Stewart-Haas Racing.
NASCAR regulations permit all 36 charter holders entry into every race with four spots available for teams without charters, but those teams only receive a small fraction of revenue that those who hold charters receive.
