At the end of March 2026, the National Basketball Association’s Board of Governors agreed to explore expanding the NBA by two more teams. The two potential expansion cities are Las Vegas, the USA’s gambling capital, and Seattle, a high-tech center, which lost its NBA franchise in 2008. Expanding the NBA would result in 32 teams. This follows closely on the heels of expanding the WNBA, which just added three more teams to bring its total to 18.
I am a native Bostonian who proudly looks up at the raft of championship banners hanging in the Boston Garden. Many of those banners were won in the glory days of the 1960s when Red Auerbach’s Boston Celtics had epic battles against the Los Angeles Lakers. The NBA in the early 1960s was comprised of just 8 or 9 teams, which is a far cry from the potential 32 NBA teams.
The push for expansion is strange given this season nearly one-third of NBA teams are “tanking.” Tanking is when a team purposefully loses in order to boost their chances of drafting a young star player for next season. To over-simplify the NBA’s draft rules, the worse a team’s record, the more likely they are to get the first draft pick. This encourages teams to under-perform now for a chance at greatness later.
Veblen Goods
If so many teams are terrible, why does the NBA want to expand? The answer can be explained by two ideas; Veblen goods and gambling. Let’s start with Veblen goods. For the vast majority of products and services that business school students purchase the higher the price, the fewer items bought. For example, if coffee currently costs $4 a cup and the price jumps to $6 then we typically see many fewer coffee customers at the new $6 price.
Veblen goods, however, put this logic on its head. Veblen goods are unique items where the demand goes up as the price rises. This is backwards from what happens with most things. Veblen goods are named after the economist Thorstein Veblen. He looked at spending in society and wrote an influential book in 1899 called the “Theory of the Leisure Class,” which explained why people spend.
Veblen pointed out one reason people spend money is to show their status. For some goods, the more expensive they are, the more they show status. Forbes magazine tracks the number of billionaires. In 2026 it estimates there are over three thousand billionaires in the world, with roughly one-third living in the U.S. As a billionaire, one method of both showing status and flaunting your wealth is by owning a major sports team.
Given the paucity of major sports teams, some sell for eye-popping sums of money. In 2025 the Boston Celtics were sold for $6.1 billion and the Los Angeles Lakers went for $10 billion. This means the NBA’s owners and players could potentially share around $7 billion just for the rights to own a single expansion team. With so much money on the line, the NBA can look the other way even if the product suffers.
Financial information shows professional basketball teams are not valued using the same criteria as other types of investments. Typically NBA sports teams do not share their financials publicly, but when the Boston Celtics were marketed, financials were available for the 2023-24 season. That season the team had almost $500 million in revenue but only $30 million in profit.
Many investors look at a company’s price-earnings or PE ratio when evaluating whether to buy a stock or not. If conditions don’t change, the ratio shows the number of years of profits it takes to earn back the investment. For example, Apple computer and Amazon today both have a PE ratio of 33. This means if you buy shares in these companies and collect each year’s share of profits, the total earned over the next 33 years equals the amount invested. Buying the Celtics at a price of $6.1 billion and earnings of $30 million gives a PE ratio of 203. This means it would take over two hundred years to pay off the purchase, suggesting pro-sports team buyers are not doing it to capture free cash flow.
Veblen disdained conspicuous consumption designed to show others how rich you are, but the billionaires buying sports teams have no such compunction.
Gambling
Why is the NBA not worried about expanding the league when so many teams are already tanking? The answer is gambling. Years ago when games were lopsided, fans left arenas early or shut the game off at home. Today gambling has made even the most lopsided game interesting for people who have a wager on the outcome.
For example, let’s assume you are watching the Washington Wizards play. This season the Wizards are winning about 20% of their games. To make gamblers bet on the Wizards, sports books offer points. In an upcoming game if the Wizards lose by less than 20 points, the gambler wins the bet. This results in the bizarre situation where a hometown fan can win a bet on their favorite local team even when that team loses the game and breaks the fan’s heart.
Professional sports like gambling because it ensures people continue to watch games even when the outcome of who wins and who will lose is not in any doubt.
Combining Veblen goods, gambling, and a paucity of professional sports teams means the NBA, the WNBA and other professional leagues are all incentivized to expand in the short run. However, what all leagues need to worry about is that capturing that expansion gold today can lead to killing the golden goose in the future by watering down sports with mediocre teams that no one wants to support or watch.
Jay Zagorsky is part of Questrom’s Markets Public Policy and Law Department. Details on his latest book “The Power of Cash: Why using paper money is good for you and society” can be found at https://www.thepowerofcash.com/
