Alert 11.01.23
Alert
12.14.23
Last week, NCAA President Charlie Baker, without advance notice, released a framework that, if adopted, would allow schools, for the first time, to directly pay student-athletes, fundamentally altering the NCAA’s current Name, Image and Likeness (NIL) rules and governance structure.
Baker’s proposal, outlined in a letter sent to more than 350 Division I member schools, calls for allowing all Division I institutions to, “at their choice,” enter directly into NIL “licensing opportunities” directly with their respective student-athletes. Baker’s framework would also create a new subdivision within Division I that would require schools, should they opt in, to invest at least $30,000 per year—per student-athlete and for at least half of the institution’s eligible student-athletes—into an “enhanced educational trust fund.” Those schools that opt into the subdivision would also be able to set their own rules for scholarship commitment, transfers, recruitment, roster size and a wide range of other policies.
The NCAA’s Current Legal Challenges
Baker’s proposal, which caught athletics conference commissioners (and many others) off guard, aims to preserve the existing NCAA system while addressing resource disparities among Division I member institutions and acknowledging the need for greater self-governance by a subset of schools. The outline comes amidst mounting legal challenges threatening the existing NCAA governance structure, including:
The proposal also comes against the backdrop of the NCAA repeatedly, but unsuccessfully, lobbying Congress to provide a national standard for NIL to replace the existing patchwork of inconsistent state legislation, as well as seeking an antitrust exemption and legislation establishing that student-athletes are not “employees” of their respective universities.
Two bipartisan NIL bills have been introduced by Congress: (1) Senators Corey Booker (D-N.J.), Richard Blumenthal (D-CT) and Jerry Moran (R-KS) have released a draft NIL bill entitled the College Athletes Protection and Compensation Act, or CAPCA; (2) Senators Joe Manchin, (D-WV) and Tommy Tuberville, (R-AL) have introduced the Protecting Athletes, Schools, and Sports Act of 2023. As of now, neither proposal seems likely to pass both houses of Congress, but Pillsbury continually monitors the situation.
Baker’s NIL/Governance Plan Specifics
Baker’s proposed framework would significantly reorient the NIL landscape, which currently operates largely through third-party “collectives,” many of which have no affiliation with the school and, as a practical matter, operate beyond the NCAA’s ability to enforce its bylaws. Under the recently unveiled proposal, member institutions would be permitted to:
Perhaps more significant is the blueprint’s express contemplation of a new athletics subdivision and direct student-athlete compensation, which states:
Guidance for Clients
Baker’s letter, as he acknowledged, is intended to be the opening remarks in a long conversation among the membership to engender substantial reform while avoiding a “doomsday” scenario, such as where several dozen schools “break away” from the NCAA and form a separate voluntary membership organization. “This is a conversation we need to have. It’s a conversation the folks in Division I and the NCAA want to have,” Baker said last Wednesday while speaking at the Sports Business Journal’s annual summit in Las Vagas.
Nevertheless, as likely the most proactive governance and compensation proposal by a sitting NCAA president, it is a watershed moment. While the plan is unlikely to pass in its current form and raises many questions (e.g., what benefits, if any, can count towards the per-athlete donation? Are those amounts taxable income for the student-athletes? Will this lead to draconian cuts among Olympic sports to preserve football and men’s basketball?), it represents concrete recognition by the NCAA’s leadership that direct compensation for student-athletes is a looming reality. And it acknowledges and attempts to mitigate the desire of a subset of Division I athletics departments to no longer be confined by the same set of rules that apply to member institutions with fewer resources and different missions.
While collegiate athletics is entering a period of substantial uncertainty, member institutions should begin preparing in earnest for the future, including:
Pillsbury’s higher education and sports legal teams are keeping apprised of all current developments in NIL, NCAA governance, compliance and enforcement actions. Pillsbury regularly counsels sports teams, investors, sponsors, leagues and sports figures. Most recently, Pillsbury’s William M. Sullivan, Jr. and Alex G. Anderson achieved a significant victory on behalf of the University of Kansas and head men’s basketball coach Bill E. Self in the long-running enforcement action arising out the Southern District of New York criminal prosecutions of rogue adidas representatives and sports agency affiliates.
Pillsbury is closely monitoring NCAA-related legislative and regulatory developments. Our nationally ranked White-Collar team helps institutions and individuals navigate the ever-changing NCAA regulatory landscape. For insights on these rapidly evolving topics, please visit our Corporate Investigations & White Collar Defense practice page.
In addition, Pillsbury’s multidisciplinary Education team represents a wide variety of public and private colleges, universities and academic medical centers. For more information, please visit our Education practice page.