Unlocking The Future - Can India Embrace Athlete Contract Securitization
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Category: General Law
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UNLOCKING THE FUTURE: CAN INDIA EMBRACE
ATHLETE CONTRACT SECURITIZATION?
Aarsha Narayanan, Alliance University, Bangalore
ABSTRACT
Over the past few decades, the sports industry in India has changed a lot. Nowadays, sports not only appeal to millions of fans across the country but also serve as a lucrative investment opportunity for businesses. The creation and rise in popularity of professional sporting leagues like the “Indian Premier League” (IPL), “Pro Kabaddi League” (PKL), and “Indian Super League” (ISL) have not only elevated the commercial value of sports but also created pathways for grassroots talent to access global platforms. Interest in merging the world of sports and business is rising. There is also interest in using monetary tools previously reserved for corporate finance, like securitization, to unlock the economic value of athletes and teams.
This article studies the Indian sports ecosystem, delving deep into the fragile bond between corporate finance law and sports, focusing on athlete contract securitization. It analyses the legal, regulatory, and commercial rationality of implementing such financial instruments in India. This paper calls for dynamic laws that are capable of managing sophisticated funding mechanisms in sports and would, in turn, strengthen the sports economy and make it more attractive to investors. Keywords: sports industry, corporate finance, financial tools, securitization, athlete contract, legal framework.
1 INTRODUCTION
The sports industry in India has transformed from just a hobby pursuit into a commercially viable unit over the last twenty years. 1 The “Indian Premier League” (IPL), “Pro Kabaddi League” (PKL), and “Indian Super League” (ISL) are now major entertainment institutions that interest corporate funding, advertising, and telecommunications. This transformation has not only elevated the financial stakes but also positioned athletes as valuable economic assets with predictable future income streams. In this dynamic environment, innovative financial instruments that are common in global markets are now being considered in the Indian context. 2 Securitization began with company debt and mortgages but has expanded to include things like car loans, credit card payments, and royalties.
The main point behind that is that when you combine lots of similar payments, you can spread the risk and borrow money more cheaply, because investors feel safer knowing the income is coming from many sources, not just one. 3 But now, there’s a rise in the securitization of contracts of athletes, which refers to the process of consolidating an athlete's future earnings (salaries, endorsements, and league revenue) into a single financial product and selling it to investors. 4 This allows athletes or their management receive capital in advance while investors get an opportunity to speculate on the financial trajectory of the developing sports stars. 5 While other countries have experimented with such models, India is yet to explore this intersection of sports finance and structured legal frameworks.
Therefore, this article delves into the fact if India’s legal system can fit into the field of athlete contract securitization and to identify its potential benefits and risks, and the urgent need for a forward-looking policy infrastructure that bridges the gap between law, finance, and sports innovation. KPMG, The Business of Sports: Playing to Win (Oct. 2016), https://assets. kpmg. com/content/dam/kpmg/in/pdf/2016/10/The-business-sports. pdf.
2 Ibid.
3 Arya Rahimian, ‘Securitizing Sports
How the Dodgers Ownership Group Transformed Media Rights into Financial Assets’, [post], LinkedIn, (Aug 2024). 4 Tom Burns, ‘Structured Finance and Football Clubs: An Interim Assessment of the Use of Securitisation’, 4(3) Ent. & Sports L.J. https://warwick.ac.uk/fac/soc/law/elj/eslj/issues/volume4/number3/burns/. (2006)
5 Ibid.
2. ASSETS AND ITS SECURITIZATION
Securitization originated in the U. S. , but it is no longer just an American interest. 6 Securitization has developed worldwide as a significant method for consolidating assets and separating risks into tradable securities. It consists of dividing and selling groups of qualifying assets by the asset-owning company to a Special Purpose Vehicle (SPV), which issues debt securities to fund the acquisition of these assets. 7 According to John Henderson & Jonathon Scott, Securitization is a financial process by which future income streams are pooled together and converted into marketable securities. 8 In simple terms, the originator receives an upfront lump sum from the SPV, which then collects the future income and passes it to investors.
There are three main parties involved: the originator that one who owns the asset (usually a bank or finance company), Special Purpose Vehicle (SPV) is a separate company (often run by merchant bankers) that buys the asset and issues securities to investors at last the investors who buy these securities and receive payments. 9 The process happens in 3 stages:10 • Asset Identification: The originator chooses high-quality assets (like loans that generate regular payments). The assets should be reliable, similar in nature, and easy to sell. • Structuring the Securities (ABS): The SPV buys the assets and creates Asset-Backed Securities (ABS) based on them. These securities are made attractive to investors using credit enhancement (ways to reduce risk). However, RBI guidelines in 2012 restricted such enhancements in some cases, making investors take on full risk.
• Investor Servicing: Investors get paid in two possible ways – either regular interest and a lump-sum principal at the end, or both interest and principal paid in parts over time. 6 S. Chakraborty. “Securitization in India: A Strategic Tool for Competitiveness”. Indian Journal of Applied Research. 3. 29-32. 10. 15373/2249555X/MAR2013/101. (2013).
7 Ibid.
8 John Henderson, Jonathan Scott, ‘Securitization’, Woodhead Faulkner, ISBN-10, 0859414167 (1 July 1988)
9 Ibid.
10 “R. Devi. A Study on Securitization in India. International Journal of Advanced Research in Management, 8(4), pp. 22–29. https://iaeme. com/Home/issue/IJARM? Volume=8&Issue=4, (2017)” Investors accept the risk if it helps diversify their portfolio and gives better returns than what the originator would pay internally. First, let’s look into what kind of athlete assets can be securitized. Assets such as revenuegenerating from contracts related to endorsements and sponsorships, merchandise sales, IP rights, or any other contractual obligations. International sporting franchises are now relying on securitization as part of their self-financing. 11 It is apparent that almost all regions in the world have noted the growing trend of securitization in the sporting industry.
12 Therefore, in the sports industry, securitization allows a sporting franchise to receive immediate funds by selling securities backed by its future earnings, with repayment terms and interest rates decided based on the nature and risk of those future cash flows. For example, the Los Angeles Dodgers were sold in 2012 for over $2 billion, a record-breaking price justified by a smart financial strategy. 13 The new owners, led by Todd Boehly, securitized future media rights as a steady cash flow, securing a 30-year deal with Time Warner Cable that helped finance the purchase. 14 Also, since 1999, several football clubs used securitization to raise millions, mainly for stadium redevelopment due to lower costs than traditional bank loans. 15 Driven by strong interest from clubs and investors, nine football securitizations took place between 1999 and 2003.
16 Securitization boosts financial market efficiency by offering alternative funding routes, increasing liquidity, and attracting new participants. 17 It also spreads risk and enhances specialization by breaking lending into distinct, manageable parts. 18 Also, by turning sports income into tradable financial instruments, securitization brings in institutional investors who wouldn’t normally invest in sports.
11 MSG Team, ‘Types of Securitizations in Sporting Franchises’, Management Study Guide, (Feb 2025).
12 Ibid.
13 Arya Rahimian, ‘Securitizing Sports
How the Dodgers Ownership Group Transformed Media Rights into Financial Assets’, [post], LinkedIn, (Aug 2024).
14 Ibid.
15 Supra note 4.
16 Ibid.
17 Frank J. Fabozzi & Vinod Kothari, ‘Introduction to Securitization’, John Wiley & Sons, Inc, ISBN 978-0-470- 37190-9, (2008).
18 Ibid.
3. SPORTS SECURITIZATION IN INDIA
This financial instrument has become pertinent regarding athlete contracts, where salaries, brand endorsements, and shares in the league are becoming more certain and substantial. For instance, in India, a cricketer contracted to perform in the IPL with a guaranteed multi-year income can, in theory, securitize a portion of that income stream through upfront monetization. Such liquidity enables athletes to early invest in training, injury protection, and personal ventures, while investors gain exposure to a rapidly growing segment of the economy. Deals with franchises, especially cricketers with IPL contracts multi-season-wise, which constitutes as one of the multi-faceted opportunities in IPL. These contracts have a central revenue pool of broadcasting rights, sponsorships, ticketing revenues and other revenues while providing a stream of income that exceeds management costs.
This type of cash-flow mathematical relationship would deem the income predictable and hence qualify for securitization. Endorsements serve as an essential part of a professional athlete’s earning. Virat Kohli, P. V Sindhu, and Neeraj Chopra are some sport stars in India and these legends of the past have endorsed deals worth multiple crores, often spanning years at a time. Young athletes with prospective long careers ahead of them stand to benefit most as well. For those athletes who are for the most part untouched by media, receiving upfront capital through securitization could drastically change what world class coaching, world class nutrition, and mental conditioning entails. These are all investments that can strengthen the athlete's earning potential.
But securitization of human capital, more so in the highly volatile professional sports sector, demands precise legal and regulatory policies. Issues regarding contractual adherence, default risk and ethical questions, including autonomy and exploitation, need remedial provisions through relevant clauses in the legal framework and notifications. SEBI (Securities and Exchange Board of India)19 has an important part to play in monitoring any securitized product which is to be offered to investors. Securitized products, such as asset backed securities, must fit within SEBI regulations on disclosure requirements and listing norms. One of the additional complexities comes from the SARFAESI Act of 2002,20 as well
19 The Securities And Exchange Board Of India Act, 1992, Act No.15 of 1992.
20 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Act No.
44 of 2002.
the Indian Companies Act.21 The very act of pooling athlete contracts for the purpose of creating asset-backed instruments could give the impression that an NBFC or other financial institution is being formed, which raises the burden of licensing and compliance. Other jurisdictions such as the US has the NFL and NBA which both provide supervision on image and contract governance for players.22 FIFA and UEFA, in the Europe have also been enforcing restrictions toward third party ownership of players within their regions.23 India could adopt these frameworks but would need to tailor them to fit her socio-economic realities.
4 CONCLUSION
The coming together of athlete marketing, financial creative evolution, and growing investor interest has enabled the market for securing athlete contracts: the idea still relatively new in India but gaining steam internationally. With the transition of sports in India from a hobby to a commercialized entity, athletes have evolved from being mere players to prominent personal brands, the value of whose brand equity can be tapped and treated as financial resources. But the country’s ecosystem comprising of laws and regulations pertinent to the matter has not aligned with this evolving reality. Current legal landscapes governed by SEBI, RBI, and the Contract Act fail to provide adequate flexibility with regard to the securitization of personal service contracts or futures income streams.
On the other hand, the commercialized domain of sports, particularly with leagues such as IPL and increasing focus on Olympic players, presents an ideal market for the formulation of regulated financial products linked to the athlete’s commercial potential. Parts of corporate finance law in India should consider and develop more athlete-centric financial instruments protecting athlete rights and ensuring controlled access to information to investors. This would involve clarifying the assignability of personal income, defining athlete-linked securities under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act or its related legislations.
21 The Companies Act, 2013, Act No. 18 of 2013.
22 “European Commission. Study on the Economic and Legal Aspects of Transfers of Players. Directorate-General for Education and Culture, https://sport.ec.europa.eu/sites/default/files/report-transfer-of-players-2018-en.pdf. (2013).”
23 Ibid.