Game-Changing Lawsuit: Exploring the Current NIL Litigation Against the NCAA
In a time when the spotlight on college sports has never been brighter, the debate over whether universities should directly pay college athletes has reached a new high. Ongoing litigation against the National Collegiate Athletics Association (“NCAA”) has the potential to reshape the landscape of college sports. Three former Division One athletes are suing the NCAA for damages related to the money they could have earned had there been no restrictions on student-athletes receiving compensation. [1] They are also seeking an injunction to prevent the NCAA from enforcing its ban on student-athletes receiving compensation directly from universities.[2]
How We Got Here
The NCAA serves as the central authority overseeing college athletics, where colleges and universities come together to make decisions regarding national-level sports matters.[3] The NCAA has consistently maintained a crucial distinction between itself and professional sports leagues – the amateur status of the student-athletes.[4] Thus, the NCAA seeks to have players who play college sports “for the love of the game” and not for money.[5] This commitment to the amateur model can be seen by how seriously the NCAA took any violation of student-athletes accepting gifts or money.[6]
Take for example a violation by three student-athletes in 2014 who voluntarily donated the value of the pasta they ate at a banquet – $3.83 – to avoid any punishment from the NCAA for accepting more than the “reasonable refreshments” allowed for student-athletes at celebratory events.[7] However, this emphasis on maintaining amateur status for student-athletes has not stopped the NCAA from reaping the financial benefits of the performance of these student-athletes. In 2003, college sports programs generated $3 billion in revenue, and by 2018 that revenue had surged to $14 billion.[8]
In 2019, California initiated a transformative change by passing the Fair Pay to Play Act, which allows college athletes to profit from their name, image, or likeness (“NIL”) while still maintaining eligibility in NCAA sports.[9] With this landmark legislation, college athletes can now sign brand and endorsement deals with other companies without jeopardizing their scholarships.[10] Soon after, many other states began to propose legislation that would prevent the NCAA from blocking student-athletes from receiving compensation.[11] In response, the NCAA enacted interim policies to ease the restriction on athletes’ ability to profit from their NIL, while maintaining that college sports are not pay-for-play.[12] Following this change in NIL rules, athletes can profit off of their own personal brand and many are reaping much larger benefits than their predecessors of a few years ago.[13] All of these athletes landing big NIL deals are Division One athletes, most of whom are football and men's basketball players.[14]
Where Are We Now?
This temporary relaxation of NIL restrictions in states that have not passed NIL legislation for student-athletes may not be the end of the NCAA’s concern regarding student-athletes profiting from their stardom. Currently, there is an ongoing lawsuit brought by three former NCAA athletes on behalf of themselves and others similarly situated for their inability to profit off of their name, image, or likeness while playing college sports.[15] The damages the plaintiffs seek could be just the tip of the iceberg.
As a part of the lawsuit, the former athletes allege that the NCAA and major college conferences have violated antitrust laws by colluding and preventing student-athletes from directly being paid by the universities for their NILs.[16] This collusion, according to the former athletes, is a concerted effort to keep student-athletes from the revenue that they have generated, so that the NCAA and others can keep it for themselves in the name of amateurism.[17] Even more, the lawsuit seeks to compel the NCAA to allow universities to pay their student-athletes directly for their participation in broadcasted games by enjoining the NCAA from enforcing its rule against universities paying student-athletes.[18] Under current NCAA rules, universities are prohibited from directly compensating athletes for their NIL.[19] Under current NIL rules, student-athletes are allowed to seek their own NIL deals from companies not associated with the universities but are not allowed to be paid directly by the university.[20] With college athletes unable to receive compensation directly, the NCAA, college conferences, and universities split the revenue by the broadcast deals.[21] Recently, a Northern California District Court judge granted class certification to the plaintiffs regarding an injunction.[22] This allows student-athletes who competed from the time the lawsuit was filed in June 2020 until its projected end in 2025 to request class certification for their injunctive relief claim against the NCAA.[23]
To illustrate the magnitude of the revenue student-athletes are eager to share, consider the 2022 agreement in which Amazon Prime Video agreed to pay $1 billion per year for 11 years for the exclusive broadcasting rights to air the NFL’s weekly “Thursday Night Football.”[24] That same year, the Big Ten – one of the NCAA’s most prominent conferences – signed a seven-year deal with CBS, Fox, and NBC, that will pay the conference $1.2 billion for exclusive broadcasting rights.[25] Though the universities are signing deals in the same ballpark as their professional counterparts, there is not the same revenue split.[26] As mentioned earlier, the NCAA prohibits universities from sharing this revenue with student-athletes.[27] In contrast, professional leagues follow a different model. For instance, in 2020 the NFL Players Association negotiated for players to receive a minimum of 48% of all revenue – including broadcasting deals – generated by the league.[28] If successful, the current litigation would require the NCAA to share this revenue with the student-athletes.[29]
Where Do We Go From Here?
If the former athletes are successful in this ongoing NIL litigation, it will surely change the dynamics of college sports. A win in court could mean these athletes get a share of the ever-growing broadcast deals that college sports are generating. While the “need to maintain amateurism”[30] is no longer compelling due to the legislation allowing players to receive compensation, opponents to this change bring up interesting arguments that lead one to question whether the solution is so simple.[31]
On the flip side of the pay-for-play model athletes are fighting for is the fact that a large portion of the revenue generated by the NCAA from these broadcasting deals goes back to the schools.[32] This funding redirects money to smaller athletic programs that do not generate as much money, such as gymnastics or lacrosse.[33] Most of the revenue generated comes directly from football and men’s basketball.[34] If schools were forced to pay the athletes who play these sports, then colleges would be faced with the situation of further investing in these programs and canceling the sports that do not generate revenue.[35]
Another implication that will be triggered by colleges directly paying their athletes is related to Title IX. Title IX prohibits discrimination in colleges that receive federal funding, among other things, based on gender.[36] If schools were to pay students in accordance with the revenue their sport generates, then schools would likely have to pay men’s basketball players more than their female counterparts.[37] This, in itself, would likely open schools up to the possibility of Title IX litigation due to the unequal payment between the two sports.[38] Given the NCAA’s stance that college athletics is merely a part of the education program, Title IX would surely be invoked if students on the men’s basketball team were being paid more than those on the women’s basketball team.[39]
As this case awaits the judge's ruling on class certification for the remainder of the plaintiffs' claims, there is a lot at stake. If the plaintiffs succeed in obtaining class certification, the potential damages for the remaining claims could exceed $4 billion.[40] This, in turn, could result in athletes covered by the lawsuit receiving up to $400,000 each in compensation for the broadcast revenue they could have earned while competing.[41]
While the path forward is not clear, one thing is evident: the NCAA could be on the verge of a transformation that will permanently redefine how college athletes are paid. In terms of equity, it seems reasonable for universities to compensate their players for the revenue being generated because it would follow the same model that is applied in professional sports. Nevertheless, simply paying the players directly is not necessarily the most straightforward solution. This will be an interesting situation to monitor and see how it unfolds.
[1] Consolidated Amended Complaint, at 16-17, In re Coll. Athlete Name, Image, Likeness Litig., No. 4:20-cv-03919 (N.D. Cal. July 26, 2021), ECF No. 164.
[2] Id.
[3] Douglas Bryant, A Level Playing Field? The NCAA’S Freshman Eligibility Standards Violate Title VI, But The Problem Can Be Solved, 32 Tex. Tech L. Rev. 305, 307 (2001).
[4] Ray Yasser & Carter Fox, Third-Party Payments: A Reasonable Solution to the Legal Quandary Surrounding Paying College Athletes, 12 Harv. J. Sports & Ent. L. 178, 184 (2021).
[5] Id. at 185.
[6] See Jake Trotter, Sooners self-report excessive pasta, ESPN (Feb. 19, 2014, 4:37 PM), https://www.espn.com/college-football/story/_/id/10484741/oklahoma-sooners-penalized-three-student-athletes-eating-too-much-pasta.
[7] Id.
[8] Chris Murphy, How Everyone Is Getting Rich Off College Sports – Except the Players, Madness Inc., https://www.murphy.senate.gov/imo/media/doc/NCAA%20Report_FINAL.pdf (last visited Oct. 10, 2023).
[9] Cal. Educ. Code § 67456(a)(3).
[10] Dan Whateley & Margaret Fleming, How NIL Deals and Brand Sponsorships are Helping College Athletes Make Money, Business Insider (Sept. 19, 2023, 12:25 PM), https://www.businessinsider.com/how-college-athletes-are-getting-paid-from-nil-endorsement-deals.
[11] Charlotte Carroll, Tracking NCAA Fair Play Legislation Across the Country, Sports Illustrated (Oct. 2, 2019), https://www.si.com/college/2019/10/02/tracking-ncaa-fair-play-image-likeness-laws.
[12] Michelle Brutlag Hosick, NCAA Adopts Interim Name, Image, and Likeness Policy, NCAA (June 30, 2021), https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx.
[13] University of Alabama starting quarterback Bryce Young—the first overall pick in the 2023 NFL draft—had NIL deals worth about $3.5 million. Michelle Newblom, Bryce Young Had ‘Ungodly’ NIL Numbers During His Time With Alabama, The NIL Deal, (Feb. 17, 2023), https://www.nildealnow.com/bryce-young-ungodly-nil-numbers-alabama/#:~:text=Look%20at%20Alabama%20quarterback%20Bryce,NIL%20worth%20around%20%243.5%20million. In 2016, the stipend for any student athlete on a full ride scholarship at the University of Alabama was about $550 per month. Bob Baum, College Football Stipends Help Pay for the Basics, Daily Hampshire Gazette (last modified Jan. 13, 2016), https://www.gazettenet.com/Archives/2016/01/Spending-hg-011116.
[14] Barry Werner, Top NIL Earners in NCAA, Yahoo, (Sept. 14, 2023), https://sports.yahoo.com/top-nil-earners-ncaa-153252893.html.
[15] Consolidated Amended Complaint, supra note 1, at 108.
[16] Id. at 5.
[17] Id. at 108.
[18] See id. at 111.
[19] See id. at 38.
[20] Bryan Finck, What Athletes Can and Can't do Under NIL, Dreamfield, (Oct. 6, 2021), https://www.dreamfield.co/resources/what-athletes-can-and-cant-do-under-nil.
[21] See id.
[22] Michael McCann, Athletes in NCAA NIL Case Gain Class Certification For Part Of Lawsuit, Sportico (Sept. 22, 2023, 8:51 PM), https://www.sportico.com/law/analysis/2023/judge-certifies-ncaa-nil-broadcast-class-action-1234739488/.
[23] Id.
[24] Alex Sherman, Amazon’s Exclusive ‘Thursday Night Football’ Package Will Begin in 2022 Instead of 2023, CNBC (May 3, 2021, 1:00 PM), https://www.cnbc.com/2021/05/03/amazons-thursday-night-football-package-will-begin-in-2022-instead-of-2023.html.
[25] Dennis Dodd, Big Ten Reaches Seven-year Media Rights Deal With CBS, Fox and NBC for Football, Basketball Through 2029-30, CBS (Aug. 18, 2022, 9:30 AM), https://www.cbssports.com/college-football/news/big-ten-reaches-seven-year-media-rights-deal-with-cbs-fox-and-nbc-for-football-basketball-through-2029-30/.
[26] See Consolidated Amended Complaint, supra note 1, at 38; see also JC Tretter, NFL Economics 101, NFLPA (Oct. 27, 2021), https://nflpa.com/posts/nfl-economics-101.
[27] Consolidated Amended Complaint, supra note 1, at 38.
[28] JC Tretter, NFL Economics 101, NFLPA (Oct. 27, 2021), https://nflpa.com/posts/nfl-economics-101. In this revenue splitting model, the NFL retains all the current year's revenue, reserves 48% of the projected revenue, subtracts player benefits (such as medical insurance and pensions), and then distributes the remainder among the 32 teams. Id. Teams use this money to pay player salaries. Id. Under this model, the NFL's increased revenue directly correlates with higher player salaries. See id.
[29] Consolidated Amended Complaint, supra note 1, at 111.
[30] Ken Tysiac, Getting a Little Too Chummy, The Post and Courier (updated Mar. 5, 2018), https://www.postandcourier.com/sports/getting-a-little-too-chummy/article_77a3c681-c530-567d-a4e6-80b3585fd2cd.html.
[31] Yasser & Fox, supra note 4, at 192-97.
[32] Id. at 195.
[33] Id.
[34] Id.
[35] Id.
[36] 20 U.S.C. §§ 1681-1688.
[37] Christian Jope, NCAA Men’s vs. Women’s Basketball: Revenue, Scholarship, Viewership, & Attendance, WSN (Apr. 13, 2023), https://www.wsn.com/ncaam-basketball/ncaa-men-vs-women-basketball/.
[38] Yasser & Fox, supra note 4, at 192.
[39] Id.
[40] Eric Prisbell, Major NIL changes now in play in House v. NCAA antitrust case, On3, (Sept. 25, 2023), https://www.on3.com/nil/news/major-nil-changes-now-in-play-in-house-v-ncaa-antitrust-case-judge-claudia-wilken/.
[41] Id.