Antitrust Law Daily Wrap Up, ANTITRUST—W.D.N.C.: NASCAR ordered to allow 23XI Racing and Front Row Motorsports to compete as charter teams in 2025, (Dec 20, 2024)

By George Basharis, J.D.

Court finds NASCAR’s charter requirements likely violate antitrust laws, grants preliminary injunction allowing teams to race while lawsuit proceeds.

In a significant ruling for NASCAR’s team ownership structure, a federal court has ordered NASCAR to allow 23XI Racing and Front Row Motorsports to compete as chartered teams during the 2025 season while their antitrust lawsuit against the racing organization continues. The U.S. District Court of the Western District of North Carolina found that NASCAR likely holds monopoly power over premier stock car racing and that its requirement for teams to sign a broad legal release to obtain charter status could violate federal antitrust laws. The court granted a limited preliminary injunction allowing both teams to each enter two cars in all 2025 NASCAR Cup Series races under standard charter terms, except for the contested release provision (2311 Racing LLC v. Stock Car Auto Racing, LLC, No. 3:24-CV-00886-KDB-SCR (W.D.N.C. Dec. 18, 2024)).

The ruling comes as NASCAR has been negotiating new charter agreements for 2025 and beyond. Despite what many teams considered unfavorable terms, 13 of 15 teams signed new charter agreements in September 2024 under what the plaintiffs characterized as pressure from NASCAR. Only 23XI Racing, co-owned by basketball legend Michael Jordan, and Front Row Motorsports refused, arguing that NASCAR’s requirement that they release potential antitrust claims was unlawful given NASCAR’s monopoly position in stock car racing.

Background. The dispute emerges from NASCAR’s charter system, implemented in 2016, which guarantees chartered teams entry into Cup Series races. While unchartered teams can still compete for a limited number of “open” slots in each race, the charter system provides crucial stability for teams and their sponsors.

This latest ruling reverses a November 8, 2024, decision where the same court initially denied the teams’ request for an injunction. At that time, the federal court in Charlotte found the teams had not shown immediate irreparable harm, only speculative, possible harm. However, the court left the door open for the teams to renew their motion if circumstances changed.

The case reflects broader tensions arising from NASCAR’s 2018 “Next Gen” program, which requires teams to purchase approximately $3 million worth of parts per car annually from NASCAR-designated vendors. Under this program, NASCAR maintains ownership of the parts and prohibits teams from using them in non-NASCAR events, adding to teams’ concerns about NASCAR’s market control.

Impact on drivers and sponsors. The court found that without charter status, the teams faced imminent irreparable harm, particularly regarding driver contracts. Tyler Reddick, who finished fourth in the 2024 Cup Series for 23XI, had notified the team it was in breach of his contract requiring a chartered car and gave them until December 18 to cure the breach. Other drivers including Bubba Wallace, Riley Herbst, Noah Gragson and Corey Heim faced similar contractual issues. The court emphasized that this was not speculative harm—without an injunction by December 18, Reddick would become a free agent, allowing other teams to sign him to multi-year contracts.

The court specifically noted that the loss of star drivers constitutes irreparable harm that “cannot fully be rectified by the final judgment after trial.” It rejected NASCAR’s argument that drivers’ concerns were insincere, explaining that “while the Court of course can’t completely discount that possibility, the reality of the situation for both the drivers and the Plaintiffs is clear and immediate.”

The uncertainty had also begun impacting sponsor relationships. Monster Energy informed 23XI it was delaying promotional activities and reconsidering its entire relationship due to charter uncertainty, specifically citing concerns that both 23XI cars could miss the Daytona 500 and that Reddick might leave the team. Front Row’s largest sponsor, Love’s Travel Stops, expressed concerns about the team's ability to meet contractual obligations without a charter. Although the court found these sponsorship impacts represented real economic harm, it determined they were not technically irreparable because money damages could compensate for lost sponsorship revenue.

Beyond the commercial implications, the court emphasized the incalculable opportunity cost of denying teams their best chance to compete. “What would it be worth for each of the Plaintiffs and their drivers to be able to forever say they won the 2025 Daytona 500 or the NASCAR Cup Series Championship?” the court asked, noting that such lost opportunities constitute irreparable harm that cannot be remedied after the fact.

Monopoly power. The court found NASCAR has monopoly power in premier stock car racing, noting it operates the only such series in the United States with specialized cars and teams that have no real substitutes. The court determined NASCAR “fully controls which race teams can compete at the highest level of stock car racing—effectively, it has a 100% market share.”

While not ruling on the full merits of the antitrust case, the court found the teams were likely to succeed in arguing that NASCAR cannot require them to release antitrust claims as a condition of doing business. “The question before the Court is—Can a monopolist require that a party agree to release the monopolist from all claims that it is violating the antitrust laws as a condition of doing business? The answer is no,” the court determined.

The court dismissed NASCAR’s argument that other sports options for fans and investors negated its monopoly power, drawing a parallel to a recent Supreme Court case involving the NCAA. Just as the availability of professional basketball and football did not prevent the NCAA from being considered a monopolist in college sports, the court reasoned that the existence of other motorsports does not diminish NASCAR’s control over premier stock car racing. The court also noted that NASCAR’s own arguments in other contexts about needing to protect its unique racing offering through noncompete restrictions effectively admitted its distinct market position.

Injunction scope. The preliminary injunction only covers the 2025 season. The court ordered an expedited schedule to resolve the full case before the 2026 season begins. The ruling also requires NASCAR to approve the teams’ pending purchases of two charters from Stewart-Haas Racing under the same terms.

The court emphasized that fans’ interests supported allowing the teams to compete with charter status, writing that “NASCAR fans (and members of the public who may become fans) have an interest in watching all the teams compete with their best drivers and most competitive teams.” While a significant win for the teams, the practical impact on NASCAR may be limited in the short term. The court noted NASCAR had already offered to let the teams compete as open entries without requiring the release, suggesting there should be no practical difference in having them run as charter teams without the release provision.

The court ordered NASCAR to adjust prize money schedules back to what teams expected with 36 chartered entries in 2025. However, the ruling leaves open the possibility that if NASCAR prevails in the full case, it would not be required to continue doing business with teams that won't agree to its standard terms. Moreover, NASCAR filed a notice of appeal of the ruling to the Fourth Circuit Court of Appeals on December 19, 2024.

The Case is No. 3:24-CV-00886-KDB-SCR.

Judge: Bell, K.

Attorneys: Jeanifer E. Parsigian (Winston & Strawn LLP) for 2311 Racing LLC. Christopher J. Brown (Latham & Watkins LLP) for National Association For Stock Car Auto Racing, LLC.

Companies: 2311 Racing LLC; National Association For Stock Car Auto Racing, LLC

Cases: Antitrust NorthCarolinaNews