The European Court of Justice delivered a ruling on Friday that could dramatically reshape the soccer transfer market and private equity investment in the sport.

The judgement was related to a compensation dispute involving former French international player Lassana Diarra, who challenged FIFA rules that restricted his ability to sign with a new club following an altercation with Russian team Lokomotiv Moscow in 2014.

After a falling out with the club’s manager, Lokomotiv alleged Diarra refused to appear at training or accept a lower salary, and subsequently dismissed him three years before his scheduled contract expiration. Diarra then agreed to a new deal with a Belgian club, but the move collapsed after FIFA declined to clear the transfer and prevented Diarra’s would-be team from registering him as a player.

Subsequent FIFA proceedings found Diarra liable for breach of contract, ordered him to pay €10 million to Lokomotiv, and banned him from competition for 15 months.

Last week’s ECJ decision ruled that FIFA’s financial penalties levied against players who break contracts without “just cause” and its practice of making new clubs jointly liable in disputes are “contrary to EU law.” The court’s position is that these rules “impede the free movement of professional footballers” and prevent “cross-border competition” between clubs in EU member states.

It’s still early days, but the expected outcome is a reshaping of the transfer fee system that backs soccer’s global player market. The ruling appears likely to hand players more leverage and could hamper clubs’ ability to profit from player sales.

“It’s entirely possible this means players will feel they can now break contracts and sign on with new clubs, without the selling club being able to hold them or demand significant transfer fees,” said Ian Giles, head of antitrust for EMEA at law firm Norton Rose Fulbright.

Transfer fees, often reaching into the tens or hundreds of millions of euros for top players, can be a critical driver of club economics.

Smaller outfits across Europe’s second and third-tier leagues frequently source, develop, and then sell players to wealthier teams in the most popular competitions (with lucrative media deals) like the U.K.’s Premier League. This dynamic is, in some ways, not much different from pharma’s effective R&D outsourcing to specialized biotechs, from which it can then acquire or license promising assets to plug into its existing distribution.

Dutch club Ajax, for example, brought in €95 million for its sale of Brazilian winger Antony to Manchester United in 2022, part of a €225 million total haul for the club in a single transfer window. Another abundant source of talent is Portuguese side Benfica, which has booked average annual net transfer earnings of €66 million over the past decade.

Behind these numbers are extensive global scouting networks and world-class player development academies—perfected over time to turn a somewhat unpredictable model into a systematized source of revenue.

Disruption could be problematic for financial backers. Data from Chronograph show around 35 percent of European soccer clubs are owned or financed by private equity, venture capital, or other private consortiums.

Consider RedBird Capital Partners’ $1.2 billion acquisition of AC Milan in 2022 from Elliott Management. Italian outlet La Gazzetta dello Sport has previously reported that the investment was underwritten in part by assumptions around transfer market profitability, including plans to optimize the timing of player sales to maximize the club’s returns on its human capital efforts.

The impact may not be limited to smaller, player development-focused clubs. An erosion in player contract protections could mean that some of the value baked into recent transfer spending has now evaporated.

Since Todd Boehly and Clearlake Capital purchased London club Chelsea in 2022, the team has already shelled out €1.32 billion on new player signings, according to data from Transfermrkt.

Including departures, the club’s net spend over the two years is around €870 million. It’s possible the ECJ’s ruling could hit Chelsea from two sides: newly-signed players are less secure, and any follow-on sales may be made into a transfer market where player valuations have broadly reset.