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Student athlete compensation

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In college athletics in the United States, a student-athlete who participates in a varsity sport on any and all levels is eligible to profit from their name, image, and likeness (NIL). Historically, the National Association of Intercollegiate Athletics (NAIA) was the first association to permit pro-am, as the National Collegiate Athletic Association (NCAA) resisted efforts to compensate college athletes beyond the scholarship and stipend.[1] The Supreme Court's decision in NCAA v. Alston (2021) allows for non-scholarship earned income across every division.[2]

History

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The NCAA had long maintained that student-athletes cannot be compensated in the name of "amateurism".[3] In 1953, the NCAA created the term "student-athlete" in response to the Colorado Supreme Court's ruling in University of Denver v. Nemeth that an injured football player was an "employee" of the University of Denver and therefore entitled to workers' compensation.[1] Despite further attempts by the NCAA to classify student-athlete compensation as a violation of the Commerce and Contracts Clauses of the U.S. Constitution, "amateurism" in college sports had begun to fade as the push for student-athlete compensation grew stronger.[1]

The latest movement in the college athlete compensation space focuses on payment for name, image, and likeness, a practice first adopted by the state of California in 2019.[1] In September 2019, Governor Gavin Newsom signed Senate Bill 206, which generally allowed student-athletes in California to accept compensation for the use of their name, image, and likeness.[4] The "Fair Pay to Play Act" bill was authored by California state senators Nancy Skinner and Steven Bradford and advanced with testimony from former Stanford volleyball star and 2015 national freshman of the year Hayley Hodson and Oklahoma State University football star Russell Okung.[5][6][7][8] No federal statutes used to touch on this topic, and the only federal regulation permitting college students to accept compensation was 34 CFR § 675.16, which related to work-study programs.[9]

The Supreme Court's 2021 decision in NCAA v. Alston shed light on modern federal attitudes towards student-athlete compensation.[2] In this case, the Court struck down any potential limitations on education-related benefits that student-athletes may receive.[2] Most notably, the Court – and especially Justice Brett Kavanaugh – rejected the NCAA's "amateurism" argument as an overly broad and outdated defense for failing to allow its revenue-drivers (i.e., student-athletes) to receive compensation.[2] The NCAA contended that the Court should defer to its amateurism model because it is a joint venture along with its member schools, but the Court instead reasoned that deference was inappropriate since the NCAA has a monopoly in the relevant market.[2] The Court further rejected the NCAA's appeal that it was not a "commercial enterprise," noting the "highly profitable" and "professional" nature of certain college sports.[2]

Several startups like ATHLYT have begun to connect advertisers with their student-athlete members shortly after the NCAA enacted their interim NIL policies. Grambling University signed what is believed to be one of the first NIL deals in 2022.[10] In July 2023, multiple bills were introduced by members of Congress to regulate NIL.[11][12][13]

In May 2024, NCAA settled the House v. NCAA class action lawsuit for $2.8 billion. The main plaintiffs, Grant House and Sedona Prince, sought an injunction to force the NCAA and affiliated athletic conferences to lift restrictions on revenue sharing from broadcast rights. The plaintiffs also sought damages related to their inability to use their name, image, and likeness. This lawsuit highlights changes in the legal approach to the NCAA's amateurism defense, which had been central to its stance on student-athlete compensation but was nearly eliminated by the NCAA v. Alston decision.[14]

Criticism

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One area of concern from recent NIL bills are the tax implications for student athletes. The NCAA maintains tax-exempt status by claiming its purpose in "fostering amateur athletics."[15] NCAA universities are typically exempt from federal income tax because they are classified as charitable organizations.[16] If the NCAA were to frequently enter contracts with student athletes and compensate them it could be at risk to losing this status. One impact on student athletes would be that their athletic scholarships would be subject to income tax. Additionally, student athletes would have to navigate varying state taxes. Some critics argue that because of these complications, student athlete compensation wouldn't be beneficial overall.[16]

Another protest about student athlete compensation is that the NIL landscape will take away from the amateurism in the NCAA and commercialize college sports. Top NIL earners such as Livvy Dunne, an LSU gymnast with over one million followers on Instagram and TikTok, are making several million dollars a year.[17] There are worries that this type of income will blur the line between college and professional sports and remove the unique appeal and camaraderie of college sports.[18] This has caused concerns about the implications on college recruiting due to the lack of national standardization for NIL legislation.[17] Shortly after the Court's decision in Alston, the NCAA issued an interim name, image, and likeness policy which permits student-athletes to earn this compensation.[19] States have also followed suit by enacting similar laws.[20] To date, 29 states have some sort of NIL legislation in place since the Alston interim policy was put into place.[21] For example, Illinois Public Law 102-0042 permits athletes to receive market-value compensation for the use of their name, image, and likeness.[22] An example of the differing state policies might be: if a recruit is comparing two schools with similar athletic and education opportunities but one school is in state that has a Fair Pay to Play Act and the other is not, the school in the state that allows student athlete compensation receives a significant recruiting advantage.

High school athletes

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Athletes still in high school began signing NIL deals in May 2022, beginning with Nike signing Harvard-Westlake School soccer players Alyssa Thompson and Gisele Thompson,[23] followed by NIL deals signed by basketball prospects Bronny James, Dajuan Wagner Jr., and JuJu Watkins in October 2022.[24] Some high-school athletics associations subsequently adjusted their rules to allow high-school athletes to sign NIL deals while retaining their athletic eligibility. For example, the Oregon School Activities Association approved student NIL deals on October 10, 2022,[25] leading to a local apparel company signing two Oregon Ducks basketball commits on October 21 in the state's first high-school NIL deals.[26] Other states allowed high-school NIL deals with restrictions, such as Missouri, which enacted a state law in July 2023 allowing high-school NIL deals only if athletes commit to a Missouri-based college.[27]

Life Center Academy basketball prospect Kiyomi McMiller signed Nike label Jordan Brand's first high-school NIL deal in February 2023,[28] and in July 2023 Lake Oswego High School senior Mia Brahe-Pedersen signed Nike's first high-school track-and-field NIL deal.[29]

Media involvement

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Due to the increasing popularity of college sports because of television and media coverage, some players on college sports teams are receiving compensation from sources other than the NCAA.[30] For instance, CBS paid around $800 million for broadcasting rights to a three-week 2014 men's basketball tournament.[30] Because of the revenue and positive attention players bring to their colleges, there is a high demand to be fairly compensated.[30] However, the NCAA forbids players from accepting external forms of compensation, such as payment or improved grades.[30] Instead, the NCAA traditionally compensates players through athletic scholarships that cover the cost of tuition and other academic expenses.[30]

Collectives

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The Internal Revenue Service defines collectives as organizations which are "structurally independent of a school, yet fund NIL opportunities for the school’s student-athletes". They can be tax-exempt or for profit entities which can either package business opportunities in a marketplace, or pool booster and supporter funds and deliver them to athletes.[31] Most Division I universities now have collectives which can provide funds for selected athletes or a full team;[32][33] however, there has been criticism that the use of collectives may circumvent Title IX, which require equal opportunities between men and women in college sports.[34][35]

References

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  1. ^ a b c d Tepen, Luke (January 1, 2021). "Pay to Play: Looking Beyond Direct Compensation and Towards Paying College Athletes for Themselves". Washington University Journal of Law & Policy. 65 (1): 213–246. ISSN 1533-4686. Archived from the original on October 8, 2021. Retrieved October 8, 2021.
  2. ^ a b c d e f "NCAA v. Alston" (PDF). U.S. Supreme Court. Archived (PDF) from the original on October 1, 2021. Retrieved October 8, 2021.
  3. ^ Holden, John T.; Edelman, Marc; McCann, Michael (March 11, 2022). "A Short Treatise on College-Athlete Name, Image, and Likeness Rights: How America Regulates College Sports's New Economic Frontier". Georgia Law Review. Rochester, NY. SSRN 4055530. Archived from the original on July 6, 2023. Retrieved August 1, 2022.
  4. ^ "Bill Text - SB-206 Collegiate athletics: student athlete compensation and representation". leginfo.legislature.ca.gov. Archived from the original on October 8, 2021. Retrieved October 8, 2021.
  5. ^ Chuck Culpepper (June 30, 2021). "This state senator once caused McDonald's to change. No wonder she took on the NCAA". The Washington Post. Washington, D.C. ISSN 0190-8286. OCLC 1330888409. Archived from the original on August 4, 2022. Retrieved February 28, 2022.
  6. ^ "Senators Bradford and Skinner Respond to NCAA's Announcement on Name, Image, and Likeness". April 30, 2020. Archived from the original on February 28, 2022. Retrieved February 28, 2022.
  7. ^ Mello, Felicia (July 3, 2019). "Should college athletes profit from their prowess? NCAA says no, but California may say yes". Calmatters. Archived from the original on February 28, 2022. Retrieved February 28, 2022.
  8. ^ "If college athletes could profit off their marketability, how much would they be worth? In some cases, millions". USA Today. Archived from the original on February 28, 2022. Retrieved February 28, 2022.
  9. ^ "34 CFR § 675.16 - Payments to students". LII / Legal Information Institute. Archived from the original on October 8, 2021. Retrieved October 8, 2021.
  10. ^ Bailey, Analis (January 31, 2022). "Grambling State name, image and likeness deal would provide student-athletes with annual income". USA Today. Archived from the original on November 5, 2022. Retrieved November 5, 2022.
  11. ^ "Senators offer latest bill aimed at college sports, NIL reform" ESPN. Retrieved 2023-07-26.
  12. ^ "Joe Manchin and Tommy Tuberville introduce bill on name, image and likeness rules for college sports" NBC News. Retrieved 2023-07-26.
  13. ^ "New NIL bill pushes Athlete's Rights, including group licensing" Sportico. Retrieved 2023-07-26.
  14. ^ "The NCAA has agreed to settle a major lawsuit. It still faces a number of challenges". AP News. July 26, 2024. Retrieved October 17, 2024.
  15. ^ "Legislative Services Database - LSDBi". web3.ncaa.org. Retrieved July 27, 2024.
  16. ^ a b Bunner, Brian P. (June 16, 2021). "NIL Bills—An Examination of the Implications of Compensating College Athletes Under Name, Image, and Likeness Legislation". Pittsburgh Tax Review. 18 (2). doi:10.5195/taxreview.2021.136. ISSN 1932-1996.
  17. ^ a b Palmieri, Christopher (January 1, 2021). "The Billion Dollar Industry That Has Never Paid Its Money-Makers: The NCAA's Attempt at Compensation through Names, Images and Likeness". Touro Law Review. 37 (3). ISSN 8756-7326.
  18. ^ Cole, Jens (2019). "A Critique of the NCAA – A Comparative Analysis of US Federal Law and California State Law in Criticism of NCAA Rules". SSRN Electronic Journal. doi:10.2139/ssrn.3463503. ISSN 1556-5068.
  19. ^ "Interim NIL Policy" (PDF). Archived (PDF) from the original on September 26, 2021. Retrieved October 8, 2021.
  20. ^ Tepen, Luke (January 1, 2021). "Pay to Play: Looking Beyond Direct Compensation and Towards Paying College Athletes for Themselves". Washington University Journal of Law & Policy. 65 (1): 213–246. ISSN 1533-4686. Archived from the original on October 8, 2021. Retrieved October 8, 2021.
  21. ^ Murray, Laura C. (March 18, 2023). "The New Frontier of NIL Legislation". Houston Law Review. 60 (3): 757.
  22. ^ "Illinois General Assembly - Full Text of Public Act 102-0042". www.ilga.gov. Archived from the original on September 30, 2021. Retrieved October 8, 2021.
  23. ^ VanHaaren, Tom (May 17, 2022). "Nike signs sister soccer players to company's first high school name, image and likeness deal". ESPN. Retrieved August 9, 2023.
  24. ^ "Bronny James, four others sign NIL deals with Nike". Fox Sports. October 10, 2022. Retrieved August 9, 2023.
  25. ^ Dieckhoff, Andy (October 10, 2022). "OSAA approves changes to NIL rules for high school student-athletes". Portland Tribune. Retrieved August 9, 2023.
  26. ^ Streng, Nik (October 21, 2022). "West Linn's Jackson Shelstad, Jesuit's Sofia Bell sign first Oregon high school NIL deal". The Oregonian. Retrieved August 9, 2023.
  27. ^ Bayless, Kacen (July 17, 2023). "New MO law allows high school athletes to cash in on image if they sign to in-state college". The Kansas City Star. Retrieved August 9, 2023.
  28. ^ "Top hoops prospect Kiyomi McMiller signs NIL deal with Jordan Brand". ESPN. February 22, 2023. Retrieved August 9, 2023.
  29. ^ Streng, Nik (July 3, 2023). "Lake Oswego's Mia Brahe-Pedersen makes history as first high school track and field athlete to sign NIL deal with Nike". The Oregonian. Retrieved August 9, 2023.
  30. ^ a b c d e Sanderson, Allen R.; Siegfried, John J. (February 1, 2015). "The Case for Paying College Athletes". Journal of Economic Perspectives. 29 (1): 115–138. doi:10.1257/jep.29.1.115. ISSN 0895-3309.
  31. ^ "Name, Image, and Likeness (NIL) Collectives". Internal Revenue Service.
  32. ^ "Inside the world of 'collectives' using name, image and likeness to pay college athletes, influence programs". CBSSports.com. January 26, 2022. Retrieved January 1, 2024.
  33. ^ Furlong, Josh. "Utes NIL collective expands leased vehicles offer to basketball, gymnastics athletes". www.ksl.com. KSL. Retrieved January 1, 2024.
  34. ^ "Colleges getting cozy with NIL collectives worries Title IX activists". Dallas News. September 18, 2023. Retrieved January 1, 2024.
  35. ^ Samaha, Albert; Giambalvo, Emily; Dougherty, Jesse; Galocha, Artur (October 21, 2024). "The Hidden NIL Economy of College Sports". The Washington Post. Retrieved November 2, 2024.{{cite web}}: CS1 maint: url-status (link)

Further reading

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