Insider unearths Steve Phelps’ “charters are not franchises” claim as NASCAR is set to retaliate against 23XI and FRM

Insider Joseph Srigley has resurfaced NASCAR president Steve Phelps' comments from August 22, 2024, about charters being different from franchises. This comes after Judge Kenneth Bell ruled in favor of 23XI and FRM, following which NASCAR filed a brief to dismiss the motion, mentioning that the charter is not a franchise model.

On December 23, the federal court quashed NASCAR's emergency plea to dismiss the lawsuit. Thus, the Judge's previous grant of a preliminary injunction to 23XI and FRM prevailed. Currently, FRM and 23XI will race as chartered teams in the 2025 Cup Series season.

However, NASCAR has subsequently filed a brief arguing that the transaction involves a charter, not a franchise, and that the teams are not sidelined from the sport as they can compete without a charter, despite the ongoing lawsuit.

With that being said, Insider Joseph Srigley resurfaced Phelps' comments about charter sales being starkly different from a franchise.

"What you do is you buy a franchise. The charter is not a franchise. With the charters, you are buying a guaranteed starting spot, you are buying some known revenue -that's fixed, and then you compete for the rest of the revenue," Phelps' said to Kevin Harvick during a conversation on August 22 (0:15).

From NASCAR's perspective, franchises would be the teams registered with the sanctioning body, namely, Joe Gibbs Racing, Hendrick Motorsports, Richard Childress Racing, and more. But buying a charter would add value to that franchise by guaranteeing a spot in every points-paying race.

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Judge Kenneth's NASCAR lawsuit ruling benefitted FRM more than co-accuser 23XI Racing

The fierce legal battle ensued on October 2 and has undergone major developments. After the previous Judge Frank Whitney denied the preliminary injunction, the current Judge overruled the verdict, favoring the plaintiff teams.

Judge Kenneth gave a window to NASCAR to retaliate by postponing the sales closing date to December 23 from December 20. However, the defendant's attorney Chris Yates' arguments didn't convince the Judge, instigating him to approve the charter transfer.

Notably, Judge Kenneth significantly altered the decision. He instructed NASCAR to approve Front Row Motorsports' charter deal with Stewart-Haas Racing, but not 23XI Racing's. 23XI Racing was not granted the same benefit because it did not include the charter transfer approval in its original filing. Judge Kenneth has granted 23XI leeway to file a separate motion requesting the approval of the SHR deal.

NASAR argued that granting charter sales would guarantee 23XI and FRM's entry into every points-paying race for seven-to-14 seasons (as NASCAR could extend the charter at its discretion). Judge Kenneth responded that if the teams lost the charter battle, he would order them to sell or lease the invaluable asset to another outfit.