Credit: Joe Pompliano (Huddle Up)
In the past year, one of the most common questions in sports business circles has been: Why are WNBA franchise valuations skyrocketing despite ongoing financial losses?
The numbers are eye-catching. The league reportedly lost around $40 million last season, yet franchise values have surged by an average of 180%. Sportico recently valued the Golden State Valkyries — still in their first season — at $500 million, while ownership groups in Cleveland, Detroit, and Philadelphia each paid a record $250 million expansion feeto join the league.
The surface-level explanation is obvious: the WNBA is growing. The arrival of Caitlin Clark has driven spikes in attendance, television ratings, merchandise sales, and sponsorship income. The league also recently secured a $2.2 billion, 11-year media rights deal.
But this growth story only explains part of the valuation boom. The real driver is a financial mechanism that extends far beyond basketball: U.S. sports franchises remain one of the most lucrative tax advantages available to billionaires.
The Tax Shield That Fuels Sports Valuations
Under current U.S. tax law, sports team owners can treat almost the entire purchase price of a franchise as a depreciating intangible asset — covering elements like player contracts, broadcast rights, franchise rights, goodwill, and league membership. This amortization period runs for 15 years under Section 197 of the tax code.
Here’s the simplified sequence:
- Buy a team — often for billions.
- Allocate 90% or more of the purchase price to intangible assets.
- Amortize these assets over 15 years.
- Offset those deductions not just against team profits, but also against personal income.
- Save hundreds of millions in taxes over the period.
For example, if a billionaire acquires a franchise for $2 billion and allocates $1.8 billion to depreciating assets, they can claim $120 million annually in deductions. Even if the team makes $20 million in operating profit, the paper accounting shows a $100 million loss — reducing taxable income dramatically.
Because most sports teams are held through pass-through entities like LLCs or partnerships, these “losses” directly reduce the owner’s personal tax bill.
A Longstanding Loophole with Deep Roots
This mechanism has been part of U.S. sports finance for decades. Baseball teams began depreciating player contracts in the 1940s. The NBA followed in the 1970s, assigning nearly all team value to depreciable contracts. While sports franchises were initially excluded from intangible asset amortization in the 1990s, lobbying — particularly by Major League Baseball — brought them back into the fold in the early 2000s.
Unlike traditional businesses, sports franchises continually regenerate their “depreciating” assets:
- Player contracts roll over but are replaced with new contracts.
- Media rights expire but are typically renewed at higher rates.
- Franchise rights never expire yet can still be amortized.
Why the NFL Model Is Even More Lucrative
The NFL is the most tax-efficient league for owners:
- Equal national TV revenue distribution guarantees massive, stable income.
- A hard salary cap keeps costs predictable.
- After 15 years, the team is usually worth far more — and when sold, the amortization clock resets for the new buyer.
This structure creates a self-reinforcing cycle of rising valuations.
Political Pressure and Preservation
This summer, the tax benefit came close to being curtailed. A proposal in Congress sought to limit amortization to 50% of the purchase price for future acquisitions — potentially raising $1 billion in federal revenue over a decade.
The pushback was immediate. NFL owners and other sports magnates lobbied heavily, arguing that changes could hurt fans and complicate the tax code. Critics point to the political influence of owners, many of whom are major donors, as a decisive factor in the proposal’s removal from the final legislation.
The Bigger Picture — and the Cost to Taxpayers
Amortization is just one benefit in a broader landscape of public support for professional sports:
- Stadium subsidies from local governments.
- Publicly funded infrastructure upgrades around venues.
- Property tax abatements and other municipal incentives.
While these incentives can boost local economies in the short term, they also represent billions in foregone federal and state tax revenue. Effectively, taxpayers help underwrite the ever-climbing valuations of U.S. sports teams.
What Would Happen Without the Loophole?
If the amortization benefit were ever removed, it could have an immediate cooling effect on valuations. The pool of potential buyers would shrink, prices would soften, and the investment case for some franchises could change fundamentally.
For now, though, the tax code remains in place — and as long as it does, WNBA valuations (and those across U.S. professional sports) are likely to keep rising, even in the face of operating losses.
Strategic Takeaway: The WNBA’s valuation boom is a case study in how sports growth narratives and structural financial incentives intersect. The on-court product is improving, audiences are expanding, and commercial deals are increasing — but the true engine behind billion-dollar bids is the sophisticated tax environment that makes U.S. sports ownership one of the most financially efficient asset classes in the world.
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IMAGE: WNBA
