The Baseball Exception

Introduction American antitrust law typically seeks to promote competition by forbidding anti-competitive collusion. But there is one giant exception to this rule: one of America's largest professions has an exemption from antitrust laws that has lasted for almost a century.

Baseball enjoys a privileged position in federal antitrust law. Specifically, the Supreme Court has ruled that professional baseball is not commerce, for the purposes of the Sherman Antitrust Act. One hundred years later, that same court ruled that while the rest of professional sports were subject to antitrust laws, this exemption still stood, due to long-standing precedent and inertia in Congress. This led to one the most bizarre exceptions in American law: the peculiar status of Major League Baseball's relationship to antitrust laws.

But how far does this exemption extend? And more importantly, where does it end?

The Decision That Created the Antitrust Exception

The creation of this exemption began with the case of Federal Baseball Club of Baltimore, Inc. v.

National League of Professional Baseball Clubs¹. The Baltimore Federal League sued the National League, alleging that the way baseball operated was anti-competitive. The Supreme Court ruled against them, in a unanimous decision. Justice Oliver Wendell Holmes, Jr., writing for the Court, stated that "baseball exhibitions" were really "but local events," and that travel between states was only incident to the game.³

The Court's economic understanding of the game was different than it would be a century later. While professional baseball most definitely did involve traveling between states, the Court did not consider this travel an important part of the game itself. That decision would have lasting effects on the game; and it was not immediately popular.

Baseball Changed, the Doctrine Stayed the Same

Professional baseball changed drastically in the years following the decision. It became much more of an industry, involving broadcasting deals, licensing, merchandising, franchising, national distribution of tickets, and of course, huge sums of money. At the same time, the Commerce Clause jurisprudence underwent a major change. However, when the exemption was challenged again, in Toolson v. New York Yankees, Inc.⁴, the Court ruled that it would continue to stand. The Yankees were accused of colluding with other teams to prevent free agency, but the Court ruled that Congress had been made aware of the Federal Baseball decision and had done nothing to act upon it

Almost twenty years later, the Court returned to the issue in Flood v. Kuhn.⁵ The Court in Flood

ruled that the exemption was anomalous; it was the only sport not subject to antitrust laws, and thus, anomalous⁶

However, the decision to uphold the exemption was unanimous, if not entirely popular; the Court reasoned that changing it would require congressional action. The Court was beginning to entrench the exemption into law, despite it being completely out of date.

Congress Takes Action

Congress acted upon the exemption in 1998, when it passed the Curt Flood Act, which amended the antitrust laws⁷. After years of litigation, the exemption no longer applied to contracts of major league players. However, it did not apply entirely to the game of baseball itself. The new law ruled that the exemption was not a complete exemption, and noted several areas in which the antitrust laws did apply to the sport. It also noted that while it had changed several areas of the law, it did not apply to certain areas, such as the minor leagues, franchising, broadcasting, and other related industries⁸.

A complicated compromise was reached; the exemption continued, but was limited in scope. Major league players no longer had to suffer under the reserve system, but the game as a whole retained most of its antitrust advantages.

The Problem in Puerto Rico

That brings us to Cangrejeros de Santurce Baseball Club, LLC v. Liga de Béisbol Profesional de Puerto Rico, Inc.⁹ The problem in Puerto Rico began when the owner of a baseball club filed a lawsuit against the league he was a part of. The owner of one of the teams, Thomas Axon, was upset with the conditions of the park in which his team played, and attempted to reach a lease agreement with the city of San Juan. However, both he and a representative of the city were unhappy with the terms of the deal, and the league eventually decided to suspend Axon after he criticized them publicly. They then proceeded to acquire the controlling interest in his team. Axon then sued them, claiming that the league had violated antitrust laws.

The problem with the lawsuit was simple: while antitrust laws typically applied to sports leagues, they didn't exactly apply to an independent league in Puerto Rico

The First Circuit ruled that they did apply, nevertheless.¹⁰

This created a difficult dilemma. The entire point of the exemption was to make it so that the National League did not have to answer to the Sherman Antitrust Act. However, the First Circuit ruling meant that the same rules would apply to an independent league in Puerto Rico as well.

The Problem With an Exception

The fundamental problem with this ruling is simple: the exception was never meant to apply to anything aside from the National League. The decision in Federal Baseball was made with the understanding of the game that was common with at the time. ¹¹

Further, subsequent decisions by the Supreme Court indicated that the exemption was only meant to apply to the National League.

If a professional league in Puerto Rico was truly meant to be covered by the exemption, then why wasn't it specified? Perhaps more importantly, where does the exemption end?

If the antitrust exemption applies to any league that presents itself as professional baseball, it would apply to far more leagues than the ones the Supreme Court originally ruled on. It would apply to minor league teams, independent leagues, other sports leagues, college sports, and even non-professional leagues that were only presenting themselves as professional.

The problem with the exception is that it is an exception. It carves out an anomalous position for professional baseball in American law, where it is no longer entirely sure where the exemption ends and begins.

Why Antitrust Laws Were Made in the First Place

Antitrust laws exist because they promote competition by forbidding anti-competitive practices. The Sherman Act is the main antitrust law, and it forbids "(1) every contract, combination in the form of trust or otherwise, or conspiracy, agreement, or understanding among persons that unreasonably restrains trade...and (2) every attempt to monopolize, or combination or conspiracy to monopolize, any part of trade or commerce."¹²

This does not mean that all agreements between businesses are forbidden, of course, as many would benefit competition. However, league-style sports present a tricky situation for antitrust laws, as a league must allow its teams to compete against one another in order to have a sport. Teams need to cooperate on scheduling, rules, and other restrictions in order to present a sporting competition to the public.

The problem with antitrust laws and sports is that they are meant to forbid anti competitive practices, but at the same time, sports leagues would not be able to exist without practicing some of them. The exemption makes that issue go away for professional baseball.

The Competitive Balance Argument for the Exemption

The exemption was originally justified on the grounds of competitive balance. In the early 20th century, the reserve system severely limited the free movement of players between teams.

The exemption was originally applied to the league in order to circumvent antitrust laws. Later rulings by the Supreme Court, such as United States v. Shubert and Flood, stated that baseball's exemption from antitrust laws was anomalous, and that in other leagues, trades were conducted in a much more player-friendly manner.¹³

Further, the competitive balance argument does not entirely account for how much power the reserve system gave to owners. While it did prevent individual teams from buying up every available player, it ensured that the teams with the deepest pockets retained their dominance in the sport. While the teams that did not spend as much on players could still field competitive rosters, they would not be able to contend for championships as often as the richer teams.

As time went on, the reserve system ended, collective bargaining agreements replaced reserve clauses, and other economic aspects changed in order to promote competition in the sport

However, the exemption remained.

A New Problem Arises in Puerto Rico

There is one particularly interesting question that arises from the First Circuit decision. If professional baseball leagues in Puerto Rico are subject to antitrust laws, where does the antitrust exemption end? According to the First Circuit, it apparently ends wherever it was originally supposed to end, according to the Supreme Court's decision in Federal Baseball.

However, that was a long time ago, and the rules regarding antitrust laws have since changed.

The Supreme Court recognized that the exemption did not apply to other professional sports leagues, so if the First Circuit's decision was supposed to apply to any independent league, how did those other leagues manage to avoid it?

In other words, why wasn't the antitrust exemption applied to other sports leagues as well?

This is a pertinent question, as it highlights the difficulties of applying an antitrust exemption that has unclear limits. There are a number of ways to interpret what the exemption covers. Does it apply to any league that conducts a professional baseball game? Does it apply to minor league games as well? Does it apply to an independent league that is not affiliated with the Major League? Does it apply to college baseball, if the athletes are considered employees? Does it apply to a professional baseball league operating inside a single state?

If the answer to any of these questions is "yes," the exemption covers far more ground than the original decision intended.

The Supreme Court Says Nothing

The antitrust exemption has always been a precarious position in American law, but the Supreme Court left it to the lower courts to decide whether it should continue to be an exemption.

The owners of the Cangrejeros de Santurce petitioned for a writ of certiorari to the Supreme Court, which was granted in 2025, where they asked the Court to either repeal the exemption or limit it to the original ruling.¹⁵ On March 2, 2026, the Supreme Court denied the writ.¹⁶

The uncertainty of the antitrust exemption remains with us, as the Court has left the issue to the lower courts to decide.

Why It Matters

Few areas of American law showcase the complexities and nuances of precedent quite like baseball's antitrust exemption does. The exemption in many ways showcases how precedent can have much longer lasting effects than many people expect; while the exemption in many ways does not reflect modern understandings of antitrust laws and the Commerce Clause, the Supreme Court has repeatedly ruled to uphold it due to a combination of precedent and political considerations.¹⁷

This leaves such antitrust exemptions in a precarious position, where they are difficult to repeal due to political considerations while still having little practical effect due to being out of date.

Conclusion While the baseball antitrust exemption is not an entirely relevant issue for the average American, it touches on matters of great importance to many people. It showcases how complicated the issues of antitrust laws, economic regulations, and the Commerce Clause can be. Most importantly, it shows how difficult it can be for courts to overturn long standing precedents, particularly if they have acquired a certain degree of sanctity among policymakers and members of the public.

The Cangrejeros de Santurce case shows that while the issue of the antitrust exemption was firmly in the hands of the lower courts, the very existence of the exemption itself is a contentious issue itself. Not only does it affect Major League Baseball, but it also has implications for other professional baseball leagues and industries that operate alongside it.