Lakers, Clippers, Man City: why do so many sports owners have money on both sides of a situation?

It takes a fortune far bigger than any sports team to buy one—and that fortune rarely sits still. It’s invested in startups, private holding companies and insurers. This year, three of the richest owners in sports have come under scrutiny for deals in which they had money on both sides.

Steve Ballmer had invested in Aspiration, the financial services company that signed his star player, Kawhi Leonard, to an endorsement deal. Manchester City’s owner, through his investment vehicle, covered some of the fees the club’s sponsors were supposed to pay, an independent commission found. And insurers controlled by former Los Angeles Lakers owner Mark Walter lent billions to companies tied to his financial empire, leading to lawsuits and an SEC investigation.

The consequences are piling up. The NBA fined the Clippers $30 million, a ruling the team is contesting, while ordering Ballmer to have zero contact with the team for a year. An independent Premier League commission found City guilty of financial charges, findings the club is appealing, with the much-rumored sanctions still to come. Walter sold the Lakers after owning them barely more than a year, and federal prosecutors are examining Walter’s companies; he denies any wrongdoing.

Related-party transactions, or business arrangements between entities that are connected through common ownership, are at the center of the biggest sports scandals this year. These transactions aren’t inherently illegal—companies routinely do business with affiliates, and sports owners can legitimately hold investments across multiple industries. After all, how else would they afford a team in the first place?

But the risk surfaces when those same relationships create conflicts of interest that obscure the true flow of money or help owners get around rules designed to protect investors, policyholders and the integrity of the sport.

“Certainly the possibility is inevitable,” Rachael Jones, a principal at law firm McKool Smith and former state and federal prosecutor, told Fortune. Whether those conflicts will result in a violation, she said, depends on the rules governing the transaction. Part of why more of these cases may be surfacing now, she suggested, is that they’re easier to find: Filings that once required a trip to the library are increasingly online.

Sports are not unique in attracting potentially abusive arrangements, according to Jones. But as the industry grows more lucrative and the owners expand into additional businesses, the opportunities for exploitation grow.

“Sports is a big business,” Jones said. “It’s profit, so it just can attract misuse.”

Who stands to lose depends on which rules are at stake. In the NBA, it’s rival teams that play under the same salary cap. In the Premier League, it’s rival clubs held........

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