Batting Around Section 363: Sports Franchise Sales, League Consent, and the Boundaries of Bankruptcy
Document Type
Research Memorandum
Publication Date
2026
Abstract
(Excerpt)
The question presented is whether a bankruptcy court may authorize the sale of a professional sports franchise without league consent, and whether bankruptcy courts should permit such sales as a matter of policy.
The client, The New York Bets (“the Bets”), is a professional baseball franchise experiencing financial distress and is considering filing for Chapter 11 bankruptcy to facilitate a sale to a new owner. The MLB’s governing documents require league approval, a three-quarters vote of all club owners, for any ownership transfer. The client is now considering Chapter 11 bankruptcy to avoid this approval process and instead have the bankruptcy court approve a sale without league approval.
Probably not. Franchise rights are property of the estate under Section 541 and can generally be sold under Section 363 with a valid business justification, potentially even “free and clear” of other interests. However, the court will likely find that the MLB’s approval rights do not fit within Section 363(f)’s categories and, under Section 363(e), cannot be adequately protected. Additionally, the franchise agreement is likely an executory contract under Section 365, meaning it must be assumed with all its burdens, including ownership approval provisions. While Section 365(f) allows assignment despite restrictions, courts may still uphold league approval rights as integral to the agreement.