NBA owners have loosened their rules governing private equity backers, according to multiple people familiar with the process, allowing institutional funds to invest in more teams than initially proposed.
Under the league’s original rules, funds were capped at passive, minority investments in five NBA franchises. The league’s board of governors voted recently to increase that number to eight, said the people, who were granted anonymity because the details are private.
The news was originally reported by Sports Business Journal. A representative for the NBA declined to comment.
While every major U.S. league now allows institutional ownership in some capacity, they vary in the specifics of their rules. That’s especially true in their approach to deal limits, presumably put in place to cap the influence or data capture available to funds, some of which have raised billions to deploy into big-time team sports.
Baseball, for example, has no limit to how many team stakes that a single fund can own. The NFL’s limit is six. Original rules in the NHL (five), MLS (four) and NWSL (three) all vary as well. The NWSL is the only one that also allows institutional funds to control a franchise.
It’s unclear exactly why the NBA rules were loosened. Arctos Partners, which is buying a stake in the parent company of the Washington Wizards, already had at least four other NBA franchises in its portfolio—the Golden State Warriors, Utah Jazz, Sacramento Kings and Philadelphia 76ers. SBJ reported the group is also in talks to buy a stake in the Memphis Grizzlies, which would be a sixth.
Though Arctos has been the most prolific investor in this new private equity era, it is not the only one. Sixth Street and Blue Owl are among the others invested in NBA teams.