Democrats push to ban private equity from youth sports
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A group of congressional Democrats wants to stop private equity from investing in youth sports, arguing that a ban would bring down costs and be a political winner with beleaguered parents.
Driving the news: Sen. Chris Murphy (D-Conn.) and others recently introduced the Let Kids Play Act (full text here).
- Private equity firms would be prevented from investing in youth sports — including leagues, facilities, tournaments and targeted tech platforms — and forced to divest existing holdings within two years.
- It would also require firms to reimburse parents for previously collected "junk fees," eliminate debts and make PE investors personally liable for any infractions that occur under their ownership.
Zoom in: PE firms can request exemption from the "vulture capitalist" designation, but it's a steep hill. For example, they cannot have used debt to help finance their youth sports acquisition.
The big picture: Private equity interest in sports, including youth sports, is surging.
- So are youth sports expenses, with the bill's supporters claiming a 46% rise since 2019.
Zoom in: A Democratic aide acknowledges that correlation isn't necessarily causation, particularly in an era when other "experiences" like live concerts and pro sports have seen extreme price hikes.
- But he argues that there are several case studies in which private equity's playbook has been to create vertical integrations that can drive up prices.
- For example, owning not just the youth hockey clubs and leagues — but also the rinks where they're required to play. Or owning competitive cheerleading competitions, plus the related apparel maker and even sometimes requiring the families to stay in certain hotels. Or locking kids into full-year contracts, rather than letting them play seasonally.
- "Private equity supercharges the most high-cost, damaging practices and then scales them up," he says. "Getting private equity out of youth sports doesn't solve everything, but it would be a strong start."
State of play: There are several youth sports deals said to be on the market, including 3Step Sports and FloSports.
- League One Volleyball is fundraising, and GTCR just bought LiveBarn.
Reality check: Democrats need Republican co-sponsors, which don't typically happen on private equity ban bills. Even if they are politically popular.
- If the legislation were to pass, sponsors could possibly sidestep it by bringing their youth sports companies public.
The bottom line: Parents are pissed, even though many of them (us) are part of the problem. The question now is how many will turn that ire toward private equity.
