Symposium Feature Story: Balling on a Budget and Assessing the Federal Government’s Potential Role in Regulating College Athletics’ Compensation

By: Nathaniel Reiff

NCAA

The “eternal conflict” of athletic departments fostering a for-profit business model while adhering to the nonprofit educational mission of the NCAA and its umbrella of public universities has captured the interest of both federal and state lawmakers.

Up to 30 states are considering proposals that would lay the foundation for student-athlete compensation. This initiative comes after California passed a law in 2019 that would allow NCAA players in the state to make endorsements or bid merchandise without jeopardizing their scholarships or eligibility.

Aware of the states’ fervency to get the compensation ball rolling, the NCAA is in the process of enacting its own rules for student-athletes to benefit from their names, images, and likenesses in a “manner consistent with the collegiate model.” While the NCAA already has compensation boundaries in place, the new rules are projected to parrot these existent impediments, specifically: no game checks; no university-procured inducements to entice recruits; and no institutional designation of athletes as university employees.

However, the NCAA Board of Governors is unlikely to vote on any proposed measure until its annual convention next January. Accordingly, this presents a major issue for the NCAA because states will likely implement its own athlete compensation laws before the nonprofit organization can amend its own rules, potentially creating a disarray of competing state laws and policies.

For instance, one New York legislative proposal on the table requires colleges to split 15 percent of athletics ticket revenue among athletes, whereas Nebraska’s proposed scheme does not.  Additionally, some state initiatives prioritize health and safety for athletes over the mere dispersal of revenue.  Furthermore, NCAA officials fear that “uneven regulations could challenge scholarships’ status as non-taxable income or even threaten low-income athletes’ access to Pell Grants” and are concerned that some state proposals lack restrictions, guidelines or any sort of monitoring apparatus.

“[A]s you make modifications, you don’t undermine the system that we have that allows for college athletics to be something that’s fair, appropriate, and equitable across the United States. And one of the challenges to that are some of these state laws because it puts us in a position where you can’t have parity and equity,” maintains Donald Remy, the NCAA’s chief operating officer.

With these concerns in mind, the NCAA has suggested it might pursue litigation under the premise that conflicting state laws will illegally interfere with Congress’s exclusive authority to regulate interstate commerce. Accordingly, House Representative Mark Walker (R-N.C.) recently introduced a bill that would force the NCAA to allow its athletes to be “reasonably compensated for the third-party use of the name, image, or likeness (NIL).” Furthermore, Representative Donna Shalala (D-FL.), has sponsored legislation to create a 17-member commission to investigate the “anxious relationship” between college sports and higher education.

However, in order to cultivate this federal standard, “lawmakers will have to navigate a thicket of complex implications for tax, antitrust and gender equity laws” and the vast opposition by college athletic directors to supporting NIL measures. In 2018, only 26% of college athletic directors supported NIL use related to athletic performance, but this number may not reflect its current reception as society views have changed.

In the realm of college sports, the federal government has also taken an interest in combatting spiraling salaries for college coaches that spur the “dichotomy between millionaire coaches and athletes whose earning ability is limited by NCAA rules.” One proposed bill seeks to establish the Congressional Advisory Commission on Intercollegiate Athletics (CACIA) to “investigate the relationship between institutions of higher education and intercollegiate athletic programs” to reform college athletics in culmination with an antitrust exemption that would allow schools to limit or cap their coaches’ salaries.

In light of these matters, on February 28, 2020, the Wake Forest Journal of  Business & Intellectual Property will have the privilege of hosting numerous attorneys and experts at its Spring Symposium: “Amateur Hour is Over: Analyzing the Impact Changes in ‘Amateurism’ May Have on the Business of Collegiate Sports” to discuss the implications of these reforms and what the legal ramifications are for all those involved. Speakers include Dr. Todd Hairston, Senior Associate Athletic Director, Compliance & Administration at Wake Forest University and high profile sports law attorney Jason Setchen, among others. If you are interested in attending and for more information about the event itself, please check out the Journal of Business & Intellectual Property Law website!

Nathaniel Reiff is a third-year law student at Wake Forest University School of Law. He holds a Bachelor of Arts in Business Administration and a Master of International Business from the University of Florida. Upon graduation, he intends to practice corporate and other aspects of contract law.