Problems and solutions for the college athlete transfer portal

Many science fiction stories delve into the myriad consequences of “opening a portal.” This seems like a case of life imitating art, as evidenced by the results of the National Collegiate Athletics Association (NCAA) transfer portal.

The NCAA transfer portal was introduced in 2018, and though its intention was to be a transparency and compliance tool, it has presented more challenges than solutions. Civil lawsuits have been piling up against the NCAA for years, and 2024 kicked off with another high-profile suit filed by the Department of Justice (DOJ).

Let’s discuss how the litigation highway and high-profile violations actually increase contractual and insurance risks for the players; evaluate players’ ties to name, image and likeness rights (NIL); and also present potential solutions to transfer portal problems.

Step very carefully into the portal

Players enter the transfer portal with the intention to leave their school and secure a better fit for their athletic and academic needs. The criteria can vary from player to player, and up until December 2023, those who entered the portal forfeited certain scholarships and conditions afforded by their former college.

Critics have strongly argued that the transfer portal lacks consistency in decision-making. While some athletes receive immediate eligibility waivers, others are subjected to a waiting period of one year, which can equal 20% of the total time allotted by NCAA regulations. This lack of uniformity raises concerns about fairness and transparency and has even suggested incidents of favoritism.

This inconsistency was on full display on Dec. 18, 2023, when the NCAA sent a memo to schools stating it would allow multi-time transfers who enter the transfer portal in the fall or winter of 2023, would be eligible to play at a new school in the 2024-25 academic year without securing a waiver.

The temporary change in policy was an attempt to get ahead of what courts have already signaled they believe is in the players’ best interest. Some might have even called it virtue-signaling. It may also have been a countermove to another civil antitrust lawsuit already filed by 10 states and the District of Columbia, which challenges the NCAA Transfer Eligibility Rule.

On Jan. 18, 2024, the DOJ joined those plaintiffs in the action, alleging the NCAA unreasonably restricted college athletes’ freedom to transfer between academic institutions by limiting their eligibility to participate in intercollegiate contests if they transferred more than once during their college careers. Deferring transfers, the plaintiffs claim, violates Section 1 of the Sherman Act and the rule itself also denies our college athletes enhanced educational opportunities.

With the DOJ having signed on to the action, the argument that many of us have been making for years should have a little more momentum and the transfer rule might see a permanent change for the better.

NIL’s influence on the transfer portal

The DOJ also notably mentioned that the NCAA rule on transfers is “an illegal restraint on college athletes’ ability to sell their image and likeness and control their education,” which succinctly connects these rights in the federal district court cases.

Though NCAA rules forbid schools from using NIL as a recruiting inducement, players securing compensation for their NIL is undoubtedly driving much of the activity in the transfer portal. All any student-athlete needs to do is follow the money. This is especially so among players in the Division I arena. In a 2020 report, NCAA Research suggested that Division I schools generated 96% of the $18.9 billion in revenues in 2019. The activity in the portal can be as riveting as on-field play, as there are social media accounts with thousands of followers devoted to tracking its momentum. Who is going where is a full-time job.

This in itself should indicate the portal’s significance in college athletics, particularly when it comes to high-profile players. Unfortunately, it can also open the door to exploitation.

The transfer portal can be exploited via coaching staff and promises of NIL endorsements. For example, on Jan. 11, 2024, the NCAA announced it had penalized an assistant coach at Florida State University for facilitating “an impermissible recruiting contact between a transfer prospect and a booster, according to an agreement released by the Division I Committee on Infractions.”

During that contact, the booster encouraged the prospect to enroll at Florida State and offered an NIL deal as a recruiting inducement. The assistant coach then violated ethical conduct rules when he provided false or misleading information about his involvement in the arranged meeting.

The NCAA’s penalties imposed on the coach and FSU included a reduction in communications and visits, in-person recruiting days and:

• Two years of probation.

• A two-year show cause order for the assistant coach, including a suspension from the next three regular-season games, a two-week restriction on recruiting communication, and required attendance at an NCAA Regional Rules Seminar.

• A restriction from off-campus recruiting during fall 2023 for the assistant coach.

• A three-year disassociation from the booster.

• A one-year disassociation from the collective.

• A $5,000 fine plus 1% of the football budget.

• A 5% reduction in football scholarships over the two-year probationary period, amounting to a total reduction of five scholarships.

This may seem like the NCAA finally exerting its muscle. For those of us who have followed and championed NIL developments recognize this as the association making an example of one school while losing control over its members. The NCAA also targeted the University of Tennessee with similar allegations that promptly resulted in the Attorney General suing the NCAA in Federal Court for antitrust allegations.

Ever since the Supreme Court’s unanimous 2021 ruling in NCAA v. Alston against the NCAA, the association established a new legal precedent in which players can earn from their NIL. This has instilled a sense of caution within the NCAA regarding the enforcement of compensation restrictions or penalties, as there is a fear of potential violations of federal antitrust law, which also harkens back to the aforementioned complaint filed by several states and the DOJ.

In reaction to Alston, the NCAA created a method known as a “negotiated resolution” in the case involving FSU and others like it. Under this process, FSU collaborated with the NCAA and accepted all prescribed penalties. The system serves as a preventive measure against antitrust lawsuits. Had FSU not cooperated, it could have pursued legal action against the NCAA for antitrust violations. Consequently, the method by which the NCAA would enforce its disassociation requirement remains uncertain.

A playbook for the future

The most viable solution to this complex combination of litigation, antitrust allegations, booster involvement, transfer issues, and athletes as employees, is for a federal framework that the NCAA, colleges and universities, players, coaches and lawyers follow. It could provide a chance to govern NIL responsibly and would have a ripple effect on other mechanisms of collegiate play. Though the right federal bill has not yet emerged, the cause has momentum on Capitol Hill.

On Jan. 18, 2024, the House Energy and Commerce Committee met with players and NCAA President Charlie Baker at the Innovation, Data, and Commerce Subcommittee. While it was the latest in a long line of Capitol Hill hearings, Chair Cathy McMorris Rodgers (R-WA) noted it is “unreasonable to expect student-athletes to balance their studies while navigating a maze of complex and conflicting laws.”

“I recently heard about a draft NIL agreement with a collective which agreed to pay an athlete $1.5 million over two years,” Rodgers said. “Hidden in the fine print was a provision which allowed the collective ‘from time to time’ to ask for repayment of that money plus a 10 percent interest for commission and expenses. These provisions applied even if that agreement were to be terminated. This behavior is abhorrent, predatory and is exactly what we are trying to prevent with [a proposed federal] legislation.”

Forward motion

The Federal Court just last week imposed an earth-shattering injunction in the University of Tennessee lawsuit that just may cripple the NCAA. The effect of changing the parameters of the transfer portal is very real and is playing out daily in federal courts across the country. The civil actions filed against the NCAA by the DOJ and several states exemplify the importance of fixing the transfer portal and all the other issues the NCAA brought on itself. Revamping the transfer portal rules and pulling back the transparency curtain on what is really being offered quietly to convince a college athlete to relocate honestly is crucial.

In the absence of federal legislation and even following its eventual passage, lawyers should be consulted early and often to help students navigate these rules to avoid a myriad of pitfalls – such as jeopardizing their scholarships through the transfer portal, signing away lifetime monetary rights or accepting unfavorable and onerous contract terms and abhorrent commission percentages.