NASCAR Faces Scrutiny Over Financial Practices as Teams Push Back in Court

In a legal battle that underscores deep divisions within the sport, 23XI Racing and Front Row Motorsports are challenging NASCAR’s financial structuring and its impact on competition. The trial, now in its eighth day, hinges on whether NASCAR, as a monopsony buyer of premier stock car racing teams, has leveraged its market power to disadvantage competitors and stifle overall performance. While the court has already established NASCAR’s monopsony status, the current focus is on whether this power has been used to the detriment of teams, particularly through the contentious charter system.

The core of the dispute revolves around differing interpretations of financial data. NASCAR’s Chief Financial Officer, Greg Motto, testified extensively regarding the $400 million in distributions to the France family trust, highlighting NASCAR’s structure as a private S Corporation. This structure, where profits and losses are passed to shareholders—in this case, France-Kennedy family members—is central to the teams’ arguments.

Jeffrey Kessler, lead counsel for 23XI and Front Row Motorsports, contends that NASCAR could afford to pay teams $720 million annually in charter payments, significantly more than the $431 million allocated for 2025. Kessler’s argument posits that such increased payments would not bankrupt NASCAR, directly contradicting the projections presented by Motto and NASCAR’s financial expert, Mark Zmijewski. In contrast, the teams’ financial expert, Dr. Edward Snyder, supports the notion that higher payouts are feasible.

Kessler has consistently argued that NASCAR’s financial analyses, presented by executives and experts, fail to account for potential operational adjustments. He points to the 2020 COVID-19 pandemic, which necessitated widespread salary cuts, as an example of how NASCAR could manage its finances differently. According to Kessler, if teams were receiving what they believe is equitable compensation—free from anticompetitive practices—then all levels of NASCAR operations, from top executives to track maintenance crews, would have experienced similar adjustments.

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Further complicating the financial picture is NASCAR’s sale of a significant portion of the land formerly occupied by Auto Club Speedway for $544 million. Kessler argues these proceeds could have been directed toward team payments rather than debt reduction stemming from the 2019 International Speedway Corporation merger. He also notes that as an S-Corp, NASCAR is not obligated to distribute dividends to the France family. Motto maintains that tax obligations necessitate these distributions, while Kessler counters that the sale of assets improves NASCAR’s equity by reducing debt, suggesting a circular flow of funds within the family structure.

"You do whatever you can to minimize the taxes to the France family," Kessler stated to Motto during cross-examination, implying a deliberate strategy to benefit the family ownership. When Motto cited a projected $10 million year-over-year revenue loss for 2025, Kessler dismissed it as a "rounding error" for an entity of NASCAR’s scale.

The trial also saw cross-examination of Mark Zmijewski, referred to as "Professor Z," by Kessler. Zmijewski was accused of not adequately factoring in the "but for" scenario in his financial assessments—that is, how NASCAR’s financial records might look if teams were not subject to anticompetitive harm and were thus healthier. This highlights a recurring theme: both sides analyzing the same financial data and arriving at diametrically opposed conclusions.

Following the presentation of the plaintiffs’ witnesses, the defense began its case on Wednesday afternoon. NASCAR’s legal team called John Probst, Senior Vice President of Innovation and Racing Development, to the stand. Probst’s testimony primarily focused on the development of the NextGen car and NASCAR’s assertion that teams have a tendency towards "reckless" spending.

Probst, who has a background in motorsport including IndyCar and as a driver and executive with Red Bull Racing and Chip Ganassi Racing before joining NASCAR in 2016, was initially questioned about the historical "American Open Wheel Split." However, Judge Kenneth D. Bell sustained objections from the plaintiffs’ counsel, deeming the line of questioning "a little bit out in left field." Probst was permitted a brief overview of the split, explaining how the Indy Racing League (IRL) emerged from a division within open-wheel racing, including the creation of its own series and teams.

The prosecution used Probst to explain the function and cost of wind tunnels, referencing a tunnel owned by Chip Ganassi. Probst detailed how teams spend thousands of dollars per hour to utilize such facilities. Kessler objected to a lengthy explanation of wind tunnel testing history, prompting Judge Bell to urge the prosecution to "move on."

Probst explained that the NextGen car, a spec series car with a single-source supplier for parts, was designed with the philosophy that fans are primarily interested in manufacturer-specific engines and bodies. Components not visible to fans, he argued, were deemed less critical, theoretically reducing the need for extensive wind tunnel testing and proprietary part development by teams. Probst stated that the concept of the NextGen car received endorsement from 30 of the 36 charter holders before its formal development began. He highlighted that NASCAR has invested $14 million in its development, with no direct cost to the teams for research and development. "I thought that was a pretty compelling endorsement by the team owner council," Probst remarked.

Probst also testified that NASCAR monitors team part purchases from approved vendors, collecting this data to demonstrate that increased part acquisition does not necessarily correlate with race wins. He cited Team Penske as an example of a consistently winning team that purchases fewer single-source parts, contrasting this with 23XI Racing, which he stated has spent the most on parts over the past two years.

Addressing the issue of part repairs, Probst explained NASCAR’s policy against it. He stated that while some teams, like Front Row Motorsports, might find it more economical to repair parts, NASCAR’s stance is that "repair" by teams often translates to "modify" and "improve." Allowing such modifications, Probst testified, would negate the parity intended by the NextGen platform and potentially ignite a costly spending war among teams.

During cross-examination, Kessler pointed out that his clients are not challenging the NextGen car itself but rather the non-compete restrictions within the charter agreement. Kessler questioned Probst about studies supporting the prevention of Cup Series cars from being used in other leagues as "pro-competitive." The exchange became a back-and-forth over legal terminology and the precise framing of questions.

Kessler then presented internal emails where Probst and other NASCAR executives, including Steve Phelps and Steve O’Donnell, explored the cost of establishing a Cup Series team from scratch. Probst explained this was an effort to gain a clearer understanding of actual competition costs, citing perceived inaccuracies or omissions in cost reporting by teams. Kessler suggested this exercise was part of "Project Gold Codes," NASCAR’s contingency plan to potentially operate the Cup Series internally if charter extensions were not agreed upon. Probst maintained the exercise was altruistic. He acknowledged contributing to the Gold Codes document and using data from the cost study.

The cross-examination concluded with a discussion of text messages between Probst and his chief of staff, Tom Swindell, following the charter extension deadline. Swindell’s message, "RIP Project Gold Codes," and Probst’s affirmative reply, along with Swindell’s query about the leverage of holdout teams, were presented by Kessler to suggest Project Gold Codes was a serious threat, not merely a contingency. Probst characterized the exchange as a personal conversation between friends.

Earlier in the trial, Jim France, NASCAR Chairman and CEO, concluded his testimony. After a previous session marked by numerous "I do not know" or "I do not remember" responses, France directly addressed his opposition to permanent charters. "I don’t have a sightline to the future, and I don’t feel comfortable making a promise I don’t know if I can keep," France stated. He was shown letters from prominent team owners like Roger Penske and Rick Hendrick advocating for "evergreen" charters that would enhance team equity without cost to NASCAR. France reiterated his discomfort with making agreements that are "permanent" in a "changing world."

France acknowledged that NASCAR had made concessions during negotiations, though an internal NASCAR graph presented during his testimony indicated 21 wins or neutral outcomes for NASCAR and only one for the teams. However, he remained firm on the issue of permanent charters. When asked about the certainty required for such a commitment, he responded, "Don’t know ’til we get there."

The trial is expected to conclude its defense phase soon, with closing arguments anticipated early next week. The court is also addressing a dispute regarding information NASCAR’s attorney obtained about Richard Childress’s potential sale of a portion of his team, which was reportedly protected by a non-disclosure agreement. Teams’ counsel has expressed concerns about NASCAR’s access to this information and the source of it, with Judge Bell indicating he would issue an order if a resolution was not reached by Thursday morning.

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