Championship Auto Racing Teams had operated as the dominant sanctioning body for American open-wheel racing since 1979, when team owners broke away from the United States Auto Club over disputes about series direction and revenue sharing. Through the 1980s and into the early 1990s, CART's Indy Car World Series became the pre-eminent open-wheel championship in North America, featuring a diverse schedule of superspeedways, short ovals, road courses, and street circuits. The Indianapolis 500 itself remained under USAC sanctioning but effectively served as a CART-points-scoring race from 1983 onward under a cooperative agreement.
Tony George became president of the Indianapolis Motor Speedway in 1989. He grew increasingly critical of CART's direction, arguing that the series had become dominated by wealthy multi-car teams, was too reliant on expensive technology, featured too many road and street circuits at the expense of traditional ovals, and had drifted away from promoting American drivers who came up through USAC sprint car and midget programs. CART team owners, for their part, resented what they saw as George's outsized influence over the sport through his control of its most prestigious race, and objected to his close relationship with USAC.
Attempts at a compromise governance structure collapsed repeatedly through the early 1990s. George announced the creation of the Indy Racing League in July 1994, with the new series designed to race exclusively on oval tracks, use lower-cost production-based engines purchased rather than leased, and provide a pathway for American short-track drivers to reach Indianapolis.
The decisive confrontation came ahead of the 1996 season. George announced that 25 of the 33 starting positions at the 1996 Indianapolis 500 would be reserved for the top 25 cars in IRL points standings, leaving only eight spots for any other competitors. This "25/8 Rule" was unprecedented: for the first time in the race's history, not every grid position was open for qualification on merit.
CART declared that it could not participate under these terms and would not send its teams to Indianapolis. George characterized CART's response as a boycott; CART maintained it had been locked out. To give its major sponsors an alternative showcase event on Memorial Day weekend, CART organized the U.S. 500 at Michigan International Speedway, scheduled to start partway through the Indy 500 on the same day.
The Memorial Day weekend of 1996 was a public relations disaster for both series. The Indianapolis 500, without most of its established stars, was crash-filled, with a quarter of the race running under caution before Buddy Lazier won. The U.S. 500 opened with a twelve-car crash on the pace laps, forcing a lengthy delay. Jimmy Vasser won by eleven seconds, quipping at the podium, "Who needs milk?" in a jab at the traditional victory-lane ceremony at Indianapolis. Both events were widely seen as damaging to the sport's credibility.
For 1997, the IRL introduced technical regulations specifically incompatible with CART specifications, requiring different chassis and production-based engines. This made it impossible for CART teams to run at Indianapolis without dedicating equipment solely to that event. Most CART teams stayed away from the 500 for the next three years.
In the immediate aftermath of the split, CART held most of the competitive advantages: the established stars, the manufacturer support from Honda, Toyota, and Mercedes-Benz, the major sponsorship money, and the most prestigious non-Indianapolis races. The IRL's primary asset was the Indianapolis 500 itself. The IRL's early seasons were characterized by sparse schedules, inexperienced teams, and a noticeable gap in quality between the two series.
However, the structural dynamics began to shift in the early 2000s. The 500's attendance and prestige, though diminished, remained substantial. Television deals with ESPN and ABC were renegotiated to favor the IRL, stripping CART of its primary broadcast platform. Honda announced it would move to the IRL for 2003, followed by Toyota. Major teams including Chip Ganassi Racing, Team Penske, and Andretti Green Racing defected permanently to the IRL.
Stripped of manufacturers, key teams, and television coverage, CART's financial position became untenable. The series declared bankruptcy after the 2003 season. A trio of former CART team owners — Gerald Forsythe, Paul Gentilozzi, and Kevin Kalkhoven — purchased CART's assets through a group called Open Wheel Racing Series and reorganized the series as the Champ Car World Series for 2004. The two series continued to run separately for four more seasons, with Champ Car gradually losing ground in sponsorship, attendance, and visibility.
The damage inflicted by the split on the sport as a whole proved lasting. Open-wheel racing's decline in the United States coincided with a dramatic rise in NASCAR's national profile, and many observers attributed both trends at least partly to the CART-IRL conflict. Attendance and television ratings for the Indianapolis 500 fell significantly through the late 1990s and 2000s; the race did not sell out again until 2016. IndyCar's once-commanding position in American motorsport, which had been at its peak in the early 1990s with major manufacturer involvement, international star drivers, and large television audiences, had been permanently reduced by the time the series were reunified in 2008.
Gordon Kirby and other prominent motorsport commentators have argued that Tony George's decisions at Indianapolis Motor Speedway, intended to return the sport to American roots and lower costs, produced the opposite of their stated goals: a fragmented series, weakened sponsorship, and a NASCAR-dominated landscape that had no interest in waiting for open-wheel racing to resolve its governance crisis.