Tyler Lockett broke an NFL barrier when he announced that his company, LivNServe Real Estate, entered into a partnership with the Seattle Seahawks, becoming perhaps the first instance where a company owned by a player became a major sponsor of an NFL team.
Is There Any Precedent for the Tyler Lockett Sponsorship Deal with the Seattle Seahawks?
Many players concerned about their post-NFL life have taken on business ventures like this, especially in real estate — Lockett has put in place the foundation for a potentially successful career in real estate after his NFL career is over, using the capital from his first venture to fund his second.
That’s why Lockett has received so much praise for the announcement. NFL fans often think of that kind of planning as a method for preventing the stories of financial ruin that we’ve become familiar with for former players.
While that could all be the case, there are nevertheless reasons to at least look into the arrangement because this could set — or re-establish — a precedent that teams could use to circumvent the salary cap.
While a sponsorship may be a first, this isn’t the first time a player has produced a product or owned a company contracted with an NFL team. Tom Brady’s TB12 had been contracted to the New England Patriots, providing treatment to Patriots players.
It was one of the few arrangements where an NFL team would pay money for an external treatment facility instead of an arrangement for discounted or compensated treatment for sponsorship — or, even more likely, money flowing the other way from the treatment facility to the team.
The NFL had been made aware of the arrangement and was monitoring the situation but found no violation.
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In the case of the Patriots and Brady, the concern was deeper because of the direct vendor relationship instead of a sponsorship. At first glance, this looks like the opposite — Lockett’s company is, in theory, paying the Seahawks instead of the other way around.
Still, a number of questions need to be answered by the Seahawks. If the Seahawks are offering Lockett a discount, that could be a form of under-the-table compensation. If, for example, a sponsorship from the Seahawks provided $10 million in value in the form of brand recognition and direct business and Lockett paid only $1 million for the sponsorship, then his company would have received $9 million in extra compensation.
In that way, the Seahawks could be circumventing the salary cap if handled poorly. The NFL told Sportico business reporter Eben Novy-Williams that they’re aware of the possibility of a cap violation, saying “as a practice, the league would look at the partnership to ensure that is fair market value.”
How the NFL will determine that is difficult, but they are not new to the concept of finding market value for a sponsorship. If the contract contains language insulating the sponsorship from Lockett’s performance on the field, that would be a nice step, but that is pretty similar to a contract with guarantees and could be no different than a signing bonus.
Given that the NFL didn’t seem to heavily investigate the relationship TB12 had with the Patriots after their initial assessment, it would seem unlikely that the NFL would pursue this line of inquiry too deeply. If they did, it would probably mean pulling all of the communication the Seahawks would have with Lockett and his company, including text messages and emails.
There is a good chance that in the spirit of compliance and the appearance of propriety, the Seahawks and Lockett cleared this with the NFL beforehand. Even if they didn’t, the contract would be produced in a manner readily available for NFL investigators to pore over in conjunction with other contracts the Seahawks have signed with non-vendor sponsors.
The Seahawks had a previous real estate sponsorship partner, so it should be easy for the NFL to compare the deals LivNServe signed with Seattle to the deal Windermere signed with the Seahawks over the previous six years.
The Worry About the Seattle Seahawks Salary Cap Loophole Is Independent of Player Empowerment
The issue at hand isn’t whether or not there should or shouldn’t be a salary cap. The cap, in theory, provides some degree of competitive parity between teams, disallowing one team to “buy” a championship by outspending other teams. It also suppresses wages and allows owners to control labor costs below market value.
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Cap circumvention of this type would not really resolve either issue — it would diminish parity and provide advantages to teams best positioned to offer lucrative uncapped sponsorships while still restricting the majority of the players from uncapped wages.
It’s unlikely, though worth considering, that we could see collectives emerge to support specific teams, with players buying ownership in a company that has a relationship with the team in some capacity — somewhat similar to the emerging marketing collective arrangements designed to maximize the benefits of NIL for college athletes.
A Salary Cap Loophole Is Unlikely for Lockett and the Seahawks
The primary reason this likely wouldn’t be an enormous issue is that any relationship a player-owned company strikes with an NFL team will likely see significant scrutiny, particularly if it becomes a pattern. The NFL would be able to determine with some ease whether or not the company in question is a legitimate one or a placeholder to funnel player salary, especially if there aren’t many other partners or owners in the organization.
It helps that Lockett has already sold real estate and has been a licensed real estate professional in the state of Washington since 2021. The business has been registered since March of 2022, and he’s named as the sole proprietor. He’s also been pursuing a license in the state of Texas. Though his real estate agency doesn’t have listings currently active, it has partnered with Keller Williams Realty in Washington and can broker homes through that partnership.
For tax purposes, he’ll have needed to have invested 750 hours of service in real property trades or businesses and “materially participate” in business activity. If he fulfills the requirements to be a part of that tax category, then there’s no question that this is a legitimate business.
That’s why a “Mahomes Real Estate” probably would have to begin brokering more real estate deals before signing a sponsorship deal with the Kansas City Chiefs.
The NFL has demonstrated time and again that they don’t hold themselves to restrictive criminal liability standards when investigating team or player wrongdoing, often relying on the more common civil standard of “preponderance of evidence,” which is essentially a determination of whether or not there was a 51 percent chance of a violation.
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The fact that Lockett’s real estate business appears to be legitimate is good news, but that doesn’t prevent the Seahawks from using it to circumvent the cap — it just makes it a bit less likely because there is a legitimate business interest for Lockett to contract with the organization to become a sponsor.
If nothing else, other teams are going to demand some investigation.
The NFL does harshly penalize teams for salary cap violations, even in years without a salary cap. In the uncapped year of 2010, Washington and Dallas were both penalized millions in cap space dollars for cap manipulation, even though it wasn’t technically against the rules.
Recently, Houston was penalized a fifth-round pick for providing compensation for Deshaun Watson as “player benefits” when he used an alternate athletic facility. Instead of being part of the player benefits package, it should have been charged from the player’s salary, according to the NFL. The total amount of money involved was only $26,777.
The NFL never took championships away from the Denver Broncos for their salary cap violations in the 1990s, so if the Seahawks view this as worth the risk of a few draft picks and a few million dollars, knowing that they don’t have to give any rings back, the deterrent effect of punishment may not mean anything. But the risk/reward proposition, in general, doesn’t seem worth it.
