Charter System

The Charter System is a franchise-like framework in NASCAR that guarantees participating race teams a starting position in every Cup Series race and provides them with a share of the sport's revenue.

Before the Charter System was introduced in 2016, NASCAR teams had to qualify for every single race. This meant that even well-funded teams could miss a race if they didn't perform well enough during qualifying sessions. Missing races meant losing sponsorship money, which created significant financial uncertainty for team owners.

Under the Charter System, 36 of the 40 available spots in each NASCAR Cup Series race are reserved for charter-holding teams. These teams automatically start every race without needing to qualify, similar to how franchises in the NFL or NBA are guaranteed to play every season. The remaining four spots are open to non-charter teams, who must compete in qualifying to earn their place on the starting grid.

Charters function as valuable business assets that team owners can buy, sell, or lease to other teams. When new teams enter NASCAR, like 23XI Racing co-owned by basketball legend Michael Jordan, they typically purchase an existing charter to guarantee their participation. The buying and selling of charters has created a marketplace where these assets can be worth millions of dollars.

One major benefit of owning a charter is receiving a portion of NASCAR's revenue. The sport distributes money to charter teams based on their performance throughout the season, providing a more predictable income stream. This financial stability makes teams more attractive to sponsors, who want assurance that their brand will appear at every race.

The system does include accountability measures. If a charter team finishes in the bottom three positions in owner points for three consecutive years, NASCAR can revoke that charter. This performance standard ensures that charter-holding teams maintain a minimum level of competitiveness.

There are also rules limiting how many charters one organization can own. No single team can hold more than four charters, preventing any one owner from dominating the sport's guaranteed entry positions.

While the Charter System has brought stability to NASCAR team ownership, it has faced criticism. Some argue that the revenue distribution favors larger teams and that the system creates barriers for new teams trying to enter the sport. Ongoing negotiations between NASCAR and team owners continue to shape how the charter agreement evolves, with debates about whether charters should become permanent fixtures or remain subject to periodic renewal.