The CBA Glossary

The Luxury Tax Threshold

Player ownership of teams

As a general rule, no active NBA player is allowed to own, directly or indirectly, any part of an NBA team or any company that owns an NBA team. The only exception is that a player may own less than 1% of a publicly traded company that happens to own an NBA franchise (a reduction from 5% in the previous CBA). ⓘArticle XXIX (Miscellareous) Section 12 (Limitation on Player Ownership):

(a) During the term of this Agreement, no NBA player may acquire or hold a direct or indirect interest in the ownership of any NBA Team or in any company or entity, whether privately or publicly owned, that owns any interest in any NBA Team; provided, however, that any player may have an ownership of publicly-traded securities constituting less than one percent (1%) of the ownership interests in a company or entity that directly or indirectly owns an NBA Team.

However, the Players Association, acting on behalf of all NBA players, is allowed to invest in NBA teams through certain NBA-approved private investment funds. These investments must be passive, meaning the NBPA cannot influence how the teams are run, vote on team matters, or take part in management decisions. The NBPA's investment also cannot exceed 5% of the total capital committed to any such fund. ⓘArticle XXIX (Miscellareous) Section 12 (Limitation on Player Ownership):

(b) Notwithstanding Section 12(a) above, and subject to Sections 12(c) and 12(d) below, during the term of this Agreement, the Players Association or an affiliate of the Players Association may invest on behalf of all NBA players in one or more private investment funds approved by the NBA to acquire passive, non-voting minority interests in one or more NBA Teams in accordance with all applicable NBA rules and regulations (each, a “Private Investment Fund”); provided, however, that any such investments shall be subject to the following conditions and limitations:

(i) Any such investment must be passive and non-voting and may not, at any time, exceed five percent (5%) of the aggregate committed capital of such Private Investment Fund [...]

The NBPA must follow the same general rules that apply to other investors in these funds, such as meeting legal requirements for investors and minimum investment levels. In addition, the NBPA is prohibited from receiving special access, privileged information, advisory positions, committee memberships or any other role that would give it greater influence than a normal passive investor. If any of these requirements stop being satisfied, the NBPA must reduce or sell its investment. ⓘArticle XXIX (Miscellareous) Section 12 (Limitation on Player Ownership):

[...] (ii) The Players Association shall be subject to the same general restrictions and rules as applicable to other investors in such Private Investment Fund (e.g., compliance with applicable “accredited investor” requirements and minimum investment thresholds);

(iii) Notwithstanding subparagraph (ii) above, the Players Association shall be prohibited from holding or exercising any active participation rights or roles, and from receiving any enhanced information, with respect to a Private Investment Fund, including serving on limited partner or other advisory committees of a Private Investment Fund; and

(iv) The Players Association shall be required to divest or reduce its ownership interest in a Private Investment Fund if any of the conditions set forth in subparagraphs (i)-(iii) above cease to be met.

Any investment made under these rules must comply with all applicable laws, including securities regulations and federal labour laws. If a legal problem arises, then as with most things in the CBA, the parties must first try to modify either the investment arrangement or the CBA language so that it becomes compliant. If that cannot be done, the investment must be fully sold off and the offending portions of the rule become void. ⓘArticle XXIX (Miscellareous) Section 12 (Limitation on Player Ownership):

(c) Any Players Association investment in one or more Private Investment Funds shall be subject to compliance with all applicable laws, including but not limited to securities laws and federal labor law. If, at any point, any Players Association investment or provision of this Section 12 does not comply with applicable laws, then the Players Association shall use best efforts to, and cause the Private Investment Fund to, modify the terms of such investment and/or the parties will negotiate in good faith to modify the terms of this Section 12, in each case, to the extent necessary to fully comply with law and, if such modifications are not or cannot be negotiated, then (i) the applicable Players Association investment shall be divested in full and (ii) the applicable terms of this Section 12 shall be rendered void and of no further force and effect.

A joint NBA-NBPA Investment Committee exists to study these issues and explore whether broader forms of investment might be possible in the future. Potential topics include allowing players to invest collectively through a pooled investment vehicle or allowing players to invest in businesses affiliated with NBA teams. Before any such arrangements can be approved, both the NBA and NBPA must obtain legal advice confirming that the investments comply with labour laws. No new investment structure can be implemented until both sides are satisfied that it is legal and agree on any necessary rules governing it. The Investment Committee consists of three representatives chosen by the NBA and three chosen by the NBPA. At least one representative from each side must have expertise in private investment funds. Unless the NBA and NBPA agree otherwise, committee members cannot themselves have a financial stake in any of the private investment funds being discussed. The committee may also hire outside legal or investment experts, with the NBA and NBPA sharing those costs equally. ⓘArticle XXIX (Miscellareous) Section 12 (Limitation on Player Ownership):

(d) Immediately following the execution of this Agreement, the NBA and the Players Association shall form a joint advisory committee (the “Investment Committee”) to study and discuss in good faith any issues relating to (x) the Players Association’s or an affiliate of the Players Association’s investment in Private Investment Funds in accordance with Sections 12(b) and 12(c) above, as well as (y) a potential CBA modification pertaining to (i) investment in Private Investment Funds by individual players investing collectively through a pooled investment vehicle (a “Players Vehicle”), and/or (ii) investment by individual players in NBA affiliated businesses, in each case taking into account all appropriate legal, business, and other considerations. Prior to any such investment, the members of the Investment Committee, either jointly or independently through each respective party, shall obtain the advice of counsel to the satisfaction of both the NBA and the Players Association stating that such investment complies with applicable labor laws, including, without limitation, Section 302 of the Taft-Hartley Act of 1947 (Labor Management Relations Act of 1947). For clarity, (1) no investment contemplated under this Section 12(d) shall be permitted unless and until such time as the NBA and the Players Association confirm to their satisfaction that such investment would comply with all applicable laws, and (2) no investment by a Players Vehicle in a Private Investment Fund or investment by players in NBA affiliated businesses shall be permitted unless and until such time as the NBA and the Players Association agree upon any new structures and/or rules required for such investment.

(i) The Investment Committee shall consist of three (3) representatives appointed by the NBA and three (3) representatives appointed by the Players Association. At least one of the members appointed by each of the NBA and the Players Association must be knowledgeable of private investment funds and their structures. Unless otherwise mutually agreed by the parties, Investment Committee members may not have an ownership or other financial interest in any Private Investment Fund.

(ii) The Investment Committee may jointly retain such experts as it deems necessary in order to conduct its work, which the parties expect to include investment and legal professionals. The costs of such experts will be borne equally by the NBA and the Players Association.

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There is a bit more leeway when it comes to NBA player ownership of WNBA teams.

An NBA player may invest in a WNBA team only if that team is completely independent of NBA ownership. Some are, but some aren't. In other words, it must be a team in which no NBA team owner, nor any member of an NBA team owner's family, has a direct or indirect ownership stake in the WNBA franchise. The investment must also be approved by the WNBA and must generally be made on the same terms available to other outside investors. A player's ownership stake in an eligible WNBA team cannot exceed 4% of the team. Collectively, all NBA players together cannot own more than 8% of the same WNBA franchise, and an individual player can only own a stake in one WNBA team at a time. ⓘArticle XXIX (Miscellareous) Section 13 (Player Ownership in Independent WNBA Teams):

(a) Subject to Section 13(b) below and also subject to WNBA approval in each case, and notwithstanding anything to the contrary in Article XIII, Section 2(c), an NBA player may invest in a WNBA Team in which no Team Owner (or family member of a Team Owner) has a direct or indirect beneficial ownership interest (each such team, an “Independent WNBA Team”) on substantially similar terms to other third-party investors, subject to the following conditions and limitations:

(i) An NBA player’s ownership interest in an Independent WNBA Team may not, at any time, exceed four percent (4%) of such Independent WNBA Team;

(ii) NBA players may not in the aggregate hold more than an eight percent (8%) ownership interest in any Independent WNBA Team;

(iii) An NBA player may hold an ownership interest in only one (1) Independent WNBA Team at any one time;

(iv) Any NBA player investing in an Independent WNBA Team shall be subject to WNBA restrictions, rules, and penalties, as imposed and enforced by the WNBA, applicable to other WNBA team owners (e.g., relating to tampering, public comments on collectively bargained matters, and penalties for misconduct)

These restrictions apply not only to the player personally but also to any company, trust, relative or other entity acting on the player's behalf or under the player's control. Additionally, player agents and representatives are expressly prohibited from investing in WNBA teams. ⓘArticle XXIX (Miscellareous) Section 13 (Player Ownership in Independent WNBA Teams):

(c) For purposes of this Section 13, a “player” shall include any person or entity controlled by, related to, or acting with authority on behalf of a player. For clarity, and notwithstanding anything to contrary in this Section 13, no agent or representative of a player may invest in a WNBA team.

Any player who becomes an owner must follow the same basic rules that apply to other WNBA owners, including rules regarding tampering, public comments on labour matters and standards of conduct. However, players are specifically prohibited from having any governance role in either the WNBA team or the league itself. They cannot sit on boards, committees, governing bodies or otherwise participate in running the team or league. To further reduce potential conflicts, players are only entitled to receive very limited information about the team - their access is restricted to annual audited financial statements and any tax information they are legally required to receive. They are not entitled to broader business, competitive or strategic information. If any of these conditions stop being satisfied, the NBA can require the player to reduce or completely sell their ownership stake. ⓘArticle XXIX (Miscellareous) Section 13 (Player Ownership in Independent WNBA Teams):

(v) Notwithstanding subparagraph (iv) above, an NBA player shall be prohibited from holding any governance rights or roles with respect to an Independent WNBA Team in which he holds an ownership interest or with respect to the WNBA, including participation on WNBA team or WNBA league governing bodies; (vi) NBA players’ receipt of information with respect to the Independent WNBA Team and the WNBA shall be limited to annual audited team financials and any required tax information;

(vii) An NBA player may be required by the NBA to divest or reduce his ownership interest in an Independent WNBA Team if any of the conditions set forth in subparagraphs (i)-(vi) above cease to be met [...]

[...] (b) NBA player investment in Independent WNBA Teams shall be subject to compliance with all applicable laws, including but not limited to securities laws and federal labor law. If, at any point, any player investment or provision of this Section 13 does not comply with applicable laws, then the player shall use best efforts to, and cause the Independent WNBA Team to, modify the terms of such investment and/or the parties will negotiate in good faith to modify the terms of this Section 13, in each case, to the extent necessary to fully comply with law and, if such modifications are not or cannot be negotiated, then (i) the applicable player investment shall be divested in full and (ii) the applicable terms of this Section 13 shall be rendered void and of no further force and effect.

The agreement also addresses what happens if the WNBA team later becomes connected to NBA ownership. If the WNBA franchise proposes to sell a controlling interest to an NBA owner or a member of an NBA owner's family, any NBA player who owns part of the team must completely dispose of their investment. The team's governing documents must contain the necessary "tag-along" and "drag-along" provisions to ensure that players can be required to sell when such a transaction occurs. Even if the proposed sale is for less than a controlling interest, the player still cannot remain invested if the result would be an NBA owner acquiring an ownership stake. The player must first sell their entire interest to someone who is not an NBA owner or a family member of one. ⓘArticle XXIX (Miscellareous) Section 13 (Player Ownership in Independent WNBA Teams):

(viii) In the event an Independent WNBA Team in which an NBA player is invested proposes to sell a “controlling ownership interest” to a Team Owner (or family member of a Team Owner), any NBA player investor in such Independent WNBA Team will be required to dispose of its entire ownership interest in such Independent WNBA Team, including through the exercise of any tag-along or drag-along rights applicable to such ownership interest. For purposes of this Section 13, a “controlling ownership interest” means a majority of the voting or equity interests in, or contractual control of, the Independent WNBA Team. If the Independent WNBA Team’s existing governing agreements do not contain provisions with such rights, then such agreements shall be amended in connection with an NBA player’s investment to create customary tag-along or drag-along rights with respect to the player’s interests, and such amendment shall be a condition to such NBA player’s investment. For clarity, in the event an Independent WNBA Team in which an NBA player is invested proposes to sell less than a controlling ownership interest to a Team Owner (or a family member of a Team Owner), such proposed transaction will not be in compliance with Section 13(a)(1) above unless such NBA player disposes of his entire ownership interest in such Independent WNBA Team by selling to a person or entity that is not a Team Owner (or a family member of a Team Owner), prior to such proposed sale.

(Must comply with all security and labour law, yada yada yada, as above.) ⓘArticle XXIX (Miscellareous) Section 13 (Player Ownership in Independent WNBA Teams):

(ii) The Investment Committee may jointly retain such experts as it deems necessary in order to conduct its work, which the parties expect to include investment and legal professionals. The costs of such experts will be borne equally by the NBA and the Players Association.

Team rules

Each team is allowed to establish rules that players must follow both on and off the court, as long as they are in writing, reasonable, and not in conflict with the CBA or the UPC. This includes stuff like dress codes, curfews and attendance at team events. ⓘ Article XXVI: (Team Rules), Section 1. (Establishment of Team Rules):

Each Team may maintain or establish rules with which its players shall comply at all times, whether on or off the playing floor; provided, however, that such rules are in writing, are reasonable, and do not violate the provisions of this Agreement or the Uniform Player Contract.

Before a team distributes a new rule to its players, it must first provide a copy of the rule to the Players Association. If the Players Association believes a team rule is unreasonable, it may file a grievance within within 30 days after the player became aware, or reasonably should have become aware, of the rule/its violation. Any ruling in the player's favour rewards that player only - other players cannot automatically go back and undo prior discipline based on that same ruling. ⓘ Article XXVI: (Team Rules), Section 2. (Notice):

Any rule(s) established by a Team pursuant to Section 1 above shall be provided to the Players Association prior to the distribution of such rule(s) to that Team’s players.

Article XXVI: (Team Rules), Section 3. (Grievances Challening Team Rules):

The Players Association may file a Grievance challenging the reasonableness of a rule established by a Team pursuant to Section 1 above, and the Team’s imposition of discipline on a player for a violation of such rule, within thirty (30) days from the date upon which the imposition of such discipline on the player became known or reasonably should have become known to the player. No ruling by the Grievance Arbitrator finding a Team rule unreasonable may be applied retroactively as to any player other than the player on whose behalf the Grievance was filed.

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