Just over a month ago, the Supreme Court of the United States unanimously upheld the Ninth Circuit, ruling that the National Collegiate Athletic Association (“NCAA”) cannot restrict education-related compensation benefits for student-athletes. While the decision itself is quite narrow, its ramifications have the potential to lead to litigation and new legislation which could drastically alter the relationship between the NCAA and student-athletes.
- The NCAA cannot restrict education-related compensation and benefits to student-athletes.
In National Collegiate Athletic Association v. Alston, the Supreme Court unanimously held that the NCAA may no longer restrict member institutions from offering education-related compensation and benefits to student athletes. Such compensation and benefits include cash awards for academic achievement, graduate degree and vocational school scholarships, and computers.
The Supreme Court was tasked with determining whether such restrictions were in violation of federal antitrust law. The NCAA argued that restrictions on education-related benefits were necessary to keep college sports distinct from professional sports through “amateurism” i.e. athletes who are uncompensated. But the Supreme Court disagreed, finding that relaxing restrictions on education-related benefits would not blur the distinction between college and professional sports. In fact, the Supreme Court pointed out that there was no evidence suggesting that academic awards would impair consumer interest in any way.
However, the majority emphasized that the NCAA retains the freedom to establish criteria to ensure that academic awards are legitimately related to education. The education-related benefits cannot be any lower than the current aggregate limit on parallel athletic awards (currently $5,980 per year). Additionally, the NCAA retains the authority to place limits on compensation and benefits unrelated to education.
- Justice Kavanaugh’s concurrence opens the door to potential litigation in the future.
The majority limited its opinion to the issues the Plaintiff brought before them, specifically the education-related compensation and benefits. Importantly, the majority provided the framework for analyzing the NCAA’s restrictions and regulations: the rule of reason approach. Under the rule of reason, the NCAA must supply a legally valid procompetitive justification for the compensation restrictions. In Alston, the NCAA argued that the procompetitive justification for restraining student-athlete’s compensation was the preservation of amateurism in college sports.
However, in a powerful concurrence, Justice Kavanaugh remarked that the NCAA’s remaining compensation restrictions still present serious antitrust issues—potentially foreshadowing a litany of litigation. Justice Kavanaugh expressed skepticism that the NCAA’s remaining rules would survive under rule of reason scrutiny, bluntly asserting the NCAA’s business model would be “flatly illegal in almost any other industry in America.” The concurrence called out the NCAA for price-fixing and questioned the NCAA’s position that it does not pay student athletes a fair share of the revenue simply because the defining characteristic of college sports is that the student-athletes do not get paid. If the remaining compensation rules are later found to violate antitrust laws, difficult questions will undoubtedly arise regarding student-athlete compensation. However, Justice Kavanaugh indicated that any difficult questions could be resolved in ways other than litigation, such as legislation.
- New legislation allows student-athletes to receive compensation for their name, image, and likeness.
While the majority opinion related specifically to restrictions on education-related benefits, Kavanagh’s concurrence may open the door to litigation challenging the NCAA’s other compensation restrictions. In the meantime, legislation has emerged which alters the relationship between the NCAA and student-athletes.
Many states, such as Florida, Georgia and Alabama, have passed legislation permitting student-athletes to benefit off their name, image and likeness (“NIL”). Ohio sought to be among those states to pass NIL legislation prior to July 1. However, a bipartisan bill was derailed when an amendment was added which caused the bill to lose the Democratic support needed for the changes to take effect prior to July 1. With the death of the bill in the Ohio House of Representatives, and in an effort to keep pace with other states, Governor Mike DeWine recently signed an executive order allowing student-athletes to benefit off their name, image and likeness. The executive order allows student-athletes to hire agents in order to benefit off their name, image and likeness but prohibits them from endorsing, alcohol, tobacco, adult entertainment and casinos.
Only a couple days after Governor DeWine signed the executive order, the NCAA adopted an interim policy regarding student-athletes’ ability to benefit off their NIL. The NCAA’s policy allows student-athletes to engage in NIL activities in a manner consistent with the laws of the state where their school is located. However, even if a student-athlete attends a school in a state without an NIL law, the NCAA still permits the student-athlete to engage in NIL activities without violating NCAA rules. The NCAA also allows student-athletes to use a professional service provider for NIL activities and requires the student-athletes to report NIL activities to their school.
Since Alston, the landscape of college sports has begun to change. However, it is unclear exactly how revolutionary and widespread the change will be. Will Congress adopt federal legislation regarding NIL or will it remain a state by state endeavor? Will the NCAA’s remaining compensation restrictions be challenged in court? The answers to these questions are unknown as college sports enter a historic era of change. For more background on Alston and the issues discussed during oral arguments, click here.
Crabbe, Brown and James’s managing partner, Larry James, represented several members of the Ohio State football team during the 2010 and 2011 events known as “tattoogate.” Mr. James represented Terrelle Pryor, DeVier Posey, Boom Herron, Mike Adams, and other Ohio State players in the NCAA’s investigation into allegations that the college athletes had received improper benefits, including allegations that a number of players had traded football memorabilia for tattoos. CBJ and Mr. James continue to work with Ohio State as special counsel in various matters. For example, in 2019, Mr. James was asked to speak to the football team as part of its “Real Life Wednesday” program Mr. James covered a wide array of topics—ranging from the legal systems to the political systems—that impact society and culture.