Preventing NIL rules from creating a minor league within college sports

Many sports lawyers and fans lauded the unanimous decision handed down by the Supreme Court of the United States in American Athletic Conference et al. v. Alston et al.in 2021. The Court sided with former college players in a longstanding dispute with the National Collegiate Athletic Association (NCAA) about compensation. This decision cleared a path for states and schools to create their own NIL policies that adhere to interim NCAA guidelines until a federal framework is passed.

This major legal development also allows college athletes to reap long overdue financial benefits related to their name, image, and likeness (NIL), which were withheld for decades. While many support the ability for athletes to earn from NIL, the level of activity in the college transfer portal in 2022 underscores the need for stronger safeguards to reduce volatility and protect the players’ finances and futures. Furthermore, firm legislative guardrails will help redirect a focus toward education for student athletes and prevent smaller schools from being the minor leagues within college sports.

College sports are emulating the business of professional sports at a very quick pace. Let’s discuss how moderate regulation can help prevent a class war at the collegiate athletic level.

The Transfer Portal As A Window

Evidence of the seismic impact of NIL on college sports is seen by looking at the NCAA’s transfer portal, which historically had modest numbers of players who were either moving away from – or along with – their coaches to a new school.

Since the Alston ruling, thousands of players have jammed the portal – many of whom are in pursuit of better NIL-based opportunities. By the close of 2022, nearly 1,400 football players alone were logged and trying to transfer.

The high level of portal activity is partially attributable to the pandemic, as the NCAA granted an extra year of eligibility to many spring, fall, and winter sport athletes (including those in Divisions 1, 2, and 3), giving them six years to play instead of the traditional five years. Many of these students were on scholarship, and capitalized on this extra time and used the NIL laws to their advantage; optimistically those who entered the collegiate system in 2020 will not be off the books until 2025, and then the backlog may ease up.

Above all, the NIL opportunities from highly-ranked schools are the main attraction. Activity at bigger colleges could be used as a case study for the allure of NIL and how many schools are being exploited as “farm clubs” for those in larger conferences. Just look at the University of Arizona, where wide receiver Dorian Singer became the third player in one month (December 2022) to transfer and commit to University of Southern California (USC), joining defensive tackle Kyon Barrs and cornerback Christian Roland-Wallace.

The shuffling and transfers don’t end there. Another wide receiver and linebacker also announced that he would transfer from Arizona to UMass, where the Minutemen are now led by their former defensive coordinator.

This highlights the latest trend in college and university football teams becoming “clubs,” wherein the splendor of student-athlete competition is being systematically chipped away.

The University of Arizona has historically been prestigious enough to build a competitive football team. But the dynamic in college sports has changed so rapidly that once-formidable schools are unwittingly becoming feeder teams for behemoths like USC. The Wildcats will need to regain momentum to win games somehow; without the aforementioned marquee starters its remaining players may not be seen as valuable through the NIL lens.

Unionization Possibilities

The progress made with NIL occurred during a tumultuous period in American history and the NCAA has seemingly thrown up its hands in response. This analysis paralysis scenario will not last forever. Several lawmakers have proposed frameworks that could govern or regulate this new era of NIL. Federal legislation may regain traction after the 118th congress is sworn in.

Advocacy groups like the National College Players Association (NCPA), which led efforts toward unionizing in 2013 at Northwestern University, have reemerged. Perhaps it needed the fresh perspective of the National Labor Relations Board (NLRB), which issued a memo in 2021 indicating it would recognize athletes on college teams as employees. The NLRB needed a valid complaint to rule on such matters, and in December 2022 found merit in an unfair labor practice complaint filed on behalf of USC football and basketball players that could open the door toward unionization. A players union might provide equitable distribution to all players, so that those who do not attract high-value NIL deals still receive compensation for the physical risks they assume.

Coincidentally, or perhaps strategically, the NCPA had already announced the #FairRevShare campaign, which called for six goals, with the first two being: (1) share revenue with athletes; and (2) protect freedoms connected to name, image, and likeness deals in light of potential Congressional involvement.

The Path Forward

Decades of the NCAA’s prohibitive measures regarding NIL are being purged right now by college athletes, schools, and well-funded corporations and advertisers. While this has short-term benefits, they are not substantive enough to prevent the risk of unlawfulness or exploitation of the NCAA’s interim guidelines or the players.

College athletics is in a transitional phase that could easily double for a “cash grab” – prestigious athletes will be attracted to well-funded schools, and possibly leave their initial school and educational aspirations for greener financial pastures. If left unchecked for too much longer, this scenario may harm a university’s compliance status as well as the enforceability of NIL agreements.

Some say the best way to course-correct is through a federal framework that falls close to the middle, featuring a practical uniform code, bill, or act that also levels the recruiting playing field. This will benefit schools, as it could help stop the trend of “feeder schools” and limit incentives for athletes to enter the transfer portal so readily. Further, it would provide much needed guidance for lawyers who represent players and can help them make informed, lawful decisions that can secure their financial futures.