Before the charter system, NASCAR Cup Series teams had no guaranteed entry to races. Teams competed for starting positions on the basis of qualifying speed and past performance, with no contractual security and no claim on the sport's growing television revenues. When a team ceased operations, its equipment could not be liquidated for anything close to its value because the team's "position" in the sport had no recognized market value — there was nothing to sell.
This dynamic came to a head as NASCAR's television revenues grew substantially under a series of rights deals. The $8.2 billion, 10-year media rights deal signed in 2015 distributed 65 percent of revenue to tracks, 25 percent to teams, and 10 percent to NASCAR itself. Team owners, particularly those at major multi-car operations, argued the split left teams with insufficient operating revenue and no appreciable asset to underpin investment.
The Race Team Alliance, a 501(c)(6) organization founded by businessman Rob Kauffman in 2014, emerged to negotiate with NASCAR on teams' collective behalf. Rick Hendrick of Hendrick Motorsports stated in 2015 that negotiations were underway to "create some sort of permanent value for the teams" — the language that would eventually define the charter concept.
On February 9, 2016 — one week before the 2016 Daytona 500 — NASCAR and the RTA announced the charter system. Thirty-six charters were issued to teams, with each charter guaranteeing its holder a starting spot in every Cup Series race and access to increased purse money above what open (non-chartered) teams could earn. The Cup Series field was simultaneously limited to 40 cars. Teams were permitted to sell or lease their charters, creating a genuine secondary market for team assets.
A NASCAR team owner's council was formed as part of the arrangement. NASCAR also reserved the right to repossess charters from teams finishing in the bottom three of owner points for three consecutive seasons, though as of the system's first decade of operation no team lost a charter by that mechanism.
The charter limit per team was initially set at four, matching NASCAR's four-car limit per organization. In 2025, the limit was reduced to three, with Hendrick Motorsports and Joe Gibbs Racing grandfathered under the old four-charter arrangement. Chartered teams were permitted to field an additional open fourth car.
The charter system rapidly inflated the value of NASCAR Cup Series franchises. Charters that were issued in 2016 subsequently traded in the tens of millions of dollars. Advocates argued this was the intended outcome — creating a financial foundation that could attract outside investors and sustain teams between strong on-track results.
Critics emerged quickly. Wood Brothers Racing, one of NASCAR's oldest and most storied teams, did not receive a charter on implementation and left the Race Team Alliance in response. Smaller single-car and part-time teams argued the system effectively shut them out of races by guaranteeing all 36 charter holders their starting positions, leaving only four open spots contested among non-chartered competitors. Ty Dillon, driving for the shuttered Germain Racing, stated the charter system made it particularly difficult for teams without substantial financial backing to sustain themselves. Leavine Family Racing's Bob Leavine cited the system alongside the pandemic as reasons for his team's closure in 2020.
Rob Kauffman defended the system against these criticisms, arguing that open, part-time teams devalued the worth of a NASCAR franchise and that chartered teams should be the only regular entrants.
By October 2022, the RTA publicly declared that NASCAR's revenue distribution model had "little to no chance of long-term stability" and demanded a larger share in the next media rights deal. Teams considered holding exhibition events outside NASCAR's sanction — raising fears of a split analogous to the CART–IRL schism that fractured American open-wheel racing in the late 1990s.
In October 2024, 23XI Racing (co-owned by Denny Hamlin and Michael Jordan) and Front Row Motorsports filed an antitrust lawsuit against NASCAR after declining to sign the 2025 charter agreement. A federal judge granted a preliminary injunction in December 2024, ensuring both teams competed as chartered teams in 2025 despite not having signed the agreement. The injunction was subsequently overturned in June 2025, meaning the teams lost their chartered status for the duration of the litigation.
The lawsuit settled on December 11, 2025. Under the settlement terms, charters became permanent — eliminating the requirement for periodic renewal that had been a central grievance — and the "three-strike rule" allowing NASCAR to reclaim charters from consistently bottom-finishing teams was reinserted and expanded to a five-strike threshold.
The charter system represents the most significant structural change to NASCAR's franchise model since the sport's professional organization in the 1940s. By attaching transferable financial value to team participation rights, it aligned NASCAR's economic structure more closely with those of North American professional sports leagues — where franchise rights are the fundamental unit of team value — than with the open-entry tradition of motorsport. The system's legal contestation and eventual settlement over permanence established a new baseline for how team rights and revenue sharing are understood within the sport.