Few issues garner genuine bipartisan agreement amid widening political divisions in Washington, but access to youth sports transcends the divide. Republicans and Democrats alike champion athletics for what they offer children: health benefits, social and emotional development, an antidote to social media and screen time, and a pathway to future opportunity. But even this consensus is beginning to fray. Rising costs and the “professionalization” of youth sports have raised concerns that the playing field is no longer level, with more families priced out and kids left on the sideline. Over the past year, a steady stream of coverage in major publications has chronicled key trends: the push toward early single-sport specialization, mounting travel and equipment costs, and even gate fees that charge parents to watch their own children play. Lawmakers and regulators have taken notice. Many Democrats have folded the growing price tag of youth sports into their broader affordability agenda. And, as in healthcare and housing, private equity has emerged as a favored target for blame. For investors in this estimated $40 billion industry, youth sports has become a nuanced, multi-front policy story that demands attention.
The most high-profile legislative response to those criticisms comes from Democrats, who have put forward the Let Kids Play Act, an aggressive legislative attempt to address the perceived evils of youth sports by attacking a favorite target: private equity and outside investors. While the bill’s aims are noble—making youth sports participation affordable and available to all—Capstone believes the means are headline-seeking, polarizing, and very unlikely to generate enough bipartisan support to ever become a reality.
The Let Kids Play Act, if passed in its current form, would attempt to push private equity and other investors out of youth sports. Specifically, the bill would designate PE firms and other entities that own a broadly defined category of youth sports entities as “vulture investors,” engaged in so-called “vulture practices,” and require those investors to divest themselves of any ownership of a youth sports entity within two years of the bill’s effective date. Theoretically, PE firms and other investors can rebut the vulture investor designation by indicating that they have never engaged in a wide variety of these vulture practices. To date, the Senate and House versions of the bill have four and 15 Democratic cosponsors, respectively, with no Republican participation.
Potentially in response to the introduction of the “Let Kids Play Act,” a bipartisan alternative was introduced. The STRONG Kids Act would attack affordability concerns in youth sports in a very different manner, creating a new competitive federal grant program to provide funds to non-profits and government youth sports operators to improve sports programs, overall participation, and safety.
Capstone believes that neither bill has a viable path to passage in this Congress or the next. First, Congress has very little time to pass anything this session, and there is little appetite to move controversial legislation that is not considered “must pass.” As we look forward to the next Congress, however, the odds of either bills’ passage do not materially increase. Any analysis of a path to a proposed legislation’s enactment must begin with recognition that any legislation is difficult to pass. Next, we consider the potential partisan composition of Congress and key priorities. Congress may change hands, and current polling suggests Democrats are likely to control one, and potentially both, chambers. Narrow majorities, however, do not provide significant mandates to enact controversial legislation that lacks bipartisan appeal. Given the realities of the Senate filibuster and the need for the Let Kids Play Act to pass through multiple committee votes, unanimous Democratic support is required along with backing from several Republicans. Capstone’s extensive conversations with Republicans and Democrats indicate that Let Kids Play, and its dramatic targeting of investors, has no momentum among Republicans, to say nothing of potential concerns from moderate Democrats. Beyond partisan differences, Capstone is unconvinced that youth sports grant programs or a blanket prohibition on PE in the sector is a significant legislative priority.
Beyond political divides, procedural hurdles to the passage of federal youth sports regulation further diminish the likelihood of Let Kids Play or the STRONG Kids Act from ever passing into law. Neither bill is an obvious candidate to be attached to a larger piece of “must pass” legislation, nor do they appear to be easily included in a reconciliation package (should Dems control Congress). As a result, each bill would likely have to proceed as standalone legislation, and very few standalone bills are passed into law.
While the federal response to concerns in youth sports has generated more news coverage, Capstone is more keenly interested in how state policymakers and regulatory entities may react to youth sports access and affordability concerns. New York has already introduced legislation to eliminate certain youth sports business practices, such as filming restrictions and “stay-to-play” rules. Other states have created youth sports commissions to provide recommendations to increase access, affordability, and safety. Finally, state agencies are looking at alleged non-competitive practices in youth sports, particularly hockey. Just this week, California Governor Gavin Newsom instructed his secretary of the newly formed Business and Consumer Services Agency, Rohit Chopra, to investigate private equity in California sports. While Capstone believes there is a low probability of a federal mandate that forces PE firms to divest their youth sports portfolios, scrutiny at the state and enforcement agency level is likely to persist, and Capstone will be monitoring developments closely.
Read more from Capstone’s Financial and Business Services team:
Rent Control Policies Will Threaten Real Estate Investment Trusts
What Regulators Are Doing About Insurer Investment in Private Assets
The IRS Ruling Targeting Tax-Aware ETF Strategies
