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UC Law Business Journal

Nicole Medeiros

Abstract

With the advent of Yahoo! Fantasy Sports, FanDuel, and DraftKings, and other online platforms, sports enthusiasts can not only cheer for their favorite teams, but they can also draft a team of professional athletes, regularly monitor their players’ performances through detailed analytics, and even place friendly wagers. The recent launch of Fantex, a brand marketing and acquisition company, has taken fan engagement to the stock exchange by providing investors an opportunity to purchase stocks linked to their favorite athletes’ earnings. While income-share agreements are not entirely novel, Fantex is the first company to create and securitize income-share agreements with professional athletes. Though existing scholarship has explored important public policy and regulatory considerations regarding incomeshare agreements, one of the issues not yet explored are the internal agency costs of income-share agreements.

This Note examines the economic agency costs of Fantex’s income-share agreements with professional athletes. Specifically, this Note describes the recent proliferation of income-share agreements, highlights the unique features of Fantex’s brand contracts, and identifies and analyzes possible moral hazards resulting from asymmetric information between Fantex and its contracting athletes. This Note suggests that Fantex and contracting athletes may mitigate those agency costs by incorporating earnout provisions in the agreements. Ultimately, this Note seeks to spark dialogue about Fantex’s innovative model in order to equip stakeholders and affiliated professional athletes with additional insights that will improve the long-term efficacy of the agreements for both parties

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