Sports and the Law: Three New Opportunities for Fans to Invest in Sports

Sports and the Law 3 Above the Law blog.jpgUntil recently, fans were limited in their ability to become involved in the business side of sports. Now, however, three businesses are bringing fans a tad closer: (1) a soon-to-be launched, publicly owned professional football league known as the UFL; (2) a democratically run British soccer club called Ebbsfield United FC; and (3) an Internet-based business that sells future interests in the earnings of minor league baseball players.
UFL Public Offering
The story of fan ownership in pro sports inevitably begins with a New York Times article that ran last summer, announcing that financier Bill Hambrecht and Google executive Tim Armstrong were planning to launch a new publicly owned professional football league called the UFL. The UFL is slated to begin play in August 2008 with eight teams, each owned 50 percent by wealthy investors and 50 percent by public shareholders. A date for the initial public offering (“IPO”) is still pending.
The UFL is in the process of choosing its host cities, and it is doing so in an interesting way. With help from an online ticketing partner, prospective customers currently may purchase seating options in thirteen different cities. Whichever eight of these cities sells the most options will land the league’s first franchises.
Column continues, after the jump.

Soccer’s First Direct Democracy
On the other side of the Atlantic Ocean, an equally exciting opportunity is now allowing fans to obtain active day-to-day control of a real professional soccer club. On November 13, 2007, a company called MyFootballClub Ltd. acquired ownership of the longstanding British soccer club Ebbsfleet United FC, which plays its games in Kent, England. For those less familiar with British soccer, Ebbsfleet United FC was formed in 1946. The club competes in Conference National of the Football League.
Since purchasing Ebbsfleet United FC, MyFootballClub Ltd. has sold shares in the Ebbsfleet United FC club that contain full voting interests. Each of the available 53,000 shares costs just 35 pounds; however, the shares expire annually unless renewed. Fans from over seventy different countries have already purchased these shares, which carry rights to “vote on all the major decisions … from ticket pricing … to stadium development.” All voting is conducted on the Internet.
Buying Shares of Real Players
Finally, returning back to the United States, Cleveland Indians minor-league pitcher Randy Newsom recently launched his own sports business, Real Sports Investments. Newsom’s business seeks, if approved by authorities, to allow fans to buy shares in the future earnings of minor league baseball players. Although the Real Sports Investments website states that “[s]hares of Randy Newsom are no longer available,” the company is looking to make shares of the future earning interests of players available soon.
Indeed, Real Sports Investments faces two major obstacles. First, Newsom’s business will inevitably face at least some questions from the Securities Exchange Commission (“SEC”). In addition, Newsom’s plan may struggle to achieve support from Major League Baseball, which is traditionally risk averse when it comes to anything that may alter a player’s incentives to win ballgames. Even if Newsom is ultimately able to clear the SEC hurdle, he may be stymied by MLB Rule 21, which prevents players from engaging in certain gambling-related activities.
Final Thoughts
Indeed, each of these three concepts is at least a tad gimmicky. However, for hard-core sports fans, even a gimmicky concept is a big improvement over the fan’s historic isolation from the business of sports. As 2008 progresses, it will be interesting to follow the success of each of these three businesses. My gut instinct says that at least one of them will survive triumphantly into 2009.
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Marc Edelman is an attorney, business consultant, published author and professor, whose focus is on the fields of sports business and law. You can read his full bio by clicking here, and you can reach him by email by clicking here.

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