The Upcoming Legal Battle in NASCAR: 23XI Racing and Front Row Motorsports vs. NASCAR

As the legal showdown between 23XI Racing and Front Row Motorsports against NASCAR approaches, the stakes are incredibly high for the future of premier Stock Car racing in North America. Judge Kenneth D. Bell’s recent remarks hint at the intensity of the situation, warning both parties of the serious implications of their ongoing dispute. With the trial set to commence shortly after the Thanksgiving holiday, tensions are running high, and the outcome could drastically alter the landscape of the sport.

The Nature of the Lawsuit

The conflict stems from allegations made by 23XI Racing, co-owned by basketball legend Michael Jordan, veteran driver Denny Hamlin, and business partner Curtis Polk, against NASCAR. Filed on October 2, 2024, in the Western District of North Carolina, the lawsuit accuses NASCAR of engaging in anti-competitive practices that maintain a monopsony over premier Stock Car racing teams. A monopsony refers to a market condition where there is only one buyer for a particular service or good. In this case, NASCAR is accused of being that singular buyer, exerting undue influence over the premier racing teams.

According to the claims made by 23XI and Front Row Motorsports, NASCAR has imposed several contractual restrictions, including non-compete clauses, that hinder fair competition among racing teams. The charter agreement’s Section 13 contains a ‘no-sue’ provision, which the teams argue violates the Sherman Antitrust Act. Furthermore, Section 6 includes a non-compete clause designed to prevent teams from competing in rival racing series, although NASCAR has provided exemptions for certain organizations like Formula 1 and IndyCar.

The lawsuit contends that these anti-competitive tactics are designed to limit the revenue that teams can earn from NASCAR while simultaneously preventing rival series from attracting their talent and services. Additionally, the plaintiffs argue that NASCAR’s acquisition of the ARCA Racing Series and its merger with the International Speedway Corporation were strategic moves intended to solidify its alleged monopsonistic power.

The NextGen Car Controversy

The lawsuit also challenges NASCAR’s introduction of the fourth-year NextGen car, which is said to control the baseline costs for teams. The car’s components can only be purchased through vendors approved by NASCAR, raising concerns about the overall financial flexibility of the racing teams involved.

Background: The Charter Agreement Negotiations

This legal battle arose after 23XI and Front Row Motorsports opted not to sign the final charter agreement extension from NASCAR after a lengthy negotiation process that lasted nearly three years. The charter system serves as the foundational document governing the business and competitive aspects of the Cup Series, dictating the relationship between NASCAR and the teams that participate at the highest level.

The negotiations were primarily centered around financial aspects, particularly concerning the revenue share from NASCAR’s ongoing broadcast rights agreements with major networks such as FOX, NBC, Turner Sports, and Amazon Prime. Teams also sought to secure permanent charters, which have become increasingly valuable assets, rather than agreements that would need renegotiation every seven years. Disagreements also emerged regarding how NASCAR could utilize team intellectual property and governance matters.

Ultimately, the charter agreement that was signed by 13 of the 15 organizations for the 2025-2031 period saw a 62 percent increase in revenue from the previous contract. NASCAR claims this increase is due to new revenue generated from the updated broadcast rights agreement. Additionally, teams received $50 million that was previously allocated to tracks from the earlier charter agreement.

However, 23XI and Front Row did not accept these terms and subsequently filed their lawsuit within a month.

NASCAR’s Defense Strategy

In response to the allegations, NASCAR’s primary defense is that 23XI and Front Row are not genuinely pursuing an antitrust claim. Instead, NASCAR argues that the lawsuit is merely a reaction to the teams’ dissatisfaction with the charter agreement terms. Lead attorney Christopher Yates has characterized the claim as an attempt to engage in "negotiation through litigation."

NASCAR asserts that it is not in violation of antitrust laws, as it has not restricted competition and has, in fact, increased the enterprise value of owning a racing team since the implementation of the charter system in 2016. Yates has repeatedly pointed out that the value of a single charter has skyrocketed from approximately $1 million to around $50 million in recent transactions, suggesting that NASCAR is enhancing, rather than hindering, team revenues.

Documents unsealed during the pre-trial process reveal that Front Row Motorsports’ general manager believes that the value of a charter could potentially reach $200 million, which NASCAR will use to argue that the teams cannot simultaneously claim anti-competitive behavior while also anticipating such high charter values.

Furthermore, NASCAR will likely argue that both 23XI and Front Row have previously agreed to the very terms they are now contesting. Over the past decade, both teams have acquired charters from other organizations without raising concerns regarding the legality of any contractual sections until the end of the recent negotiation period.

NASCAR is also expected to defend its exclusivity and non-compete provisions as standard legal practices within the sports industry, aimed at promoting effective marketing and event promotion without causing confusion among fans and broadcasters.

What Lies Ahead

The trial is set to begin with jury selection on a Monday, scheduled to last for ten days, with sessions running Monday through Friday for two consecutive weeks. Each side has prepared an extensive list of witnesses, with 23XI and Front Row submitting 858 exhibits and NASCAR presenting 961. While the witness list remains confidential, it is anticipated to include various team owners, executives, and industry experts.

The case will be presented to a jury of six members, who will be tasked with reaching a unanimous decision. 23XI and Front Row bear the burden of proof, needing to convince the jury based on a "preponderance of the evidence," which essentially means demonstrating that their claims are more likely true than not.

The plaintiffs are seeking over $300 million in damages, with the jury responsible for determining the eventual payout. However, damages can only be awarded for the past four years. Judge Bell also has the authority to triple damages if he finds egregious conduct, as well as to impose antitrust remedies, which could include forcing NASCAR to divest tracks, eliminate the single-supplier system for the NextGen car, and address the charter system altogether.

It’s important to note that even if 23XI and Front Row win, it does not guarantee they will regain their charters. Following a preliminary injunction decision earlier in the year, both teams lost their chartered status, and their claims for damages include the loss of their charters. While the judge has the discretion to rule in various ways, it seems improbable that both teams could receive the monetary compensation they seek while also having their charters restored.

Judge Bell has shown some willingness to consider the possibility that the charter system, as currently structured, may be illegal. This has led to 13 non-party teams submitting affidavits urging both sides to settle before a ruling renders their investments ineffective.

On the other hand, should NASCAR prevail, 23XI and Front Row could face significant challenges, including the potential closure of their operations without charters, leading to their exit from the Cup Series by the end of the 2026 season. NASCAR would then have the option to sell those charters to other interested parties, as there have already been inquiries regarding the six charters currently in question.

Regardless of the trial’s outcome, it is highly likely that the verdict will be appealed to the Fourth District Court of Appeals in Richmond, Virginia. The losing party may then seek further recourse from the United States Supreme Court.

The upcoming trial is poised to be a significant moment in NASCAR history, with implications that could extend far beyond the courtroom. The outcome may influence not just the future of these two teams but also the broader dynamics of competition and governance within Stock Car racing as a whole. As both sides prepare for the impending legal battle, the racing community watches closely, knowing that the results could reshape the sport for years to come.