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States Move Forward on Compensation for Student Athletes

Colleges make billions from the feats of student athletes. Recent bills could open the door for athletes to receive compensation beyond their scholarships.

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NCAA members raised $18.9 billion in 2019. Compare that with the National Basketball Association (NBA), which generated $8.5 billion in the 2019-2020 season. The NCAA has shifted focus from integrating athletics in the college educational experience to “generating profits for itself and its members,” claim former NCAA executives in an amicus brief for a student compensation case now before the Supreme Court.  

Although the scale of college sport revenues has increased by orders of magnitude, the share that goes to athletes has decreased. A recent survey of college athletes by the Hope Center for College, Community and Justice found that almost one in four had experienced food insecurity in the past month and nearly 14 percent had been homeless in the past year. 
According to NCAA surveys, student athletes devote anywhere from 28 to 40 hours a week to athletic activities during sport seasons. This amounts to a full-time job in addition to the demands of full-time study; football players report an average of less than 6 hours of sleep per night in-season.

The NCAA estimates that 2 percent of college football players will play professional sports, and only 1 percent of basketball players. For the vast majority, there is no long-term reward for the personal sacrifices they make for their teams while in college, including the risk of chronic injury.  

It may not work for schools to pay student athletes, but resistance to compensation is breaking down. Several states have already passed laws to make this possible, and many more have been put forward.

Name, Image and Likeness

The path forward that state lawmakers are pursuing at present is allowing student athletes to be compensated for use of their name, image or likeness (NIL). This can include sponsorships and endorsements as well as other business opportunities.

California’s Fair Pay to Play Act, passed in 2019, was the first state-level law to create opportunities for student athletes to be compensated, enabling them to work with state-licensed agents to pursue endorsements and negotiate business ventures. They can’t be paid directly by schools, or have sponsorships that compete with those of their college — a competing shoe brand, for example. The law won’t go into effect until January 2023. 

However, Florida SB 646, with similar provisions, will go into effect on July 1, 2021. New Jersey’s NIL legislation, S 971, goes into effect in 2025. Nebraska, New Mexico, Arizona, Michigan and Colorado have passed their own bills and dozens more are moving through legislatures (see map). 

Freedom to profit from name, image and likeness isn’t limited to shoe sponsorships. New technologies have given student athletes new tools to promote themselves and to profit, says Los Angeles attorney Jeremy M. Evans, who represents entertainment, media and sports clients in matters regarding contracts, intellectual property and deal-making. 

“They literally have their own television channel when it comes to their social media channels,” he says. A star player in a sport that isn’t necessarily a big money maker for the school can have a large social media following and profit accordingly. 

In the modern media ecosystem, social media popularity can open the door to other possibilities in broadcasting, entertainment and even production. As more professional athletes have expanded their careers into these areas, Evans has seen major talent agencies such as CAA and UTA become more interested in sports agency. 

College athletes could also enter into the world of nonfungible tokens (NFTs), digital works of art authenticated as originals through blockchain technology and sold through cryptocurrency applications, says Evans. NFTs based on clips of basketball plays generate hundreds of thousands of dollars. (The artist Beeple earned $69 million for an NFT collage sold through a Christie’s auction.)

What might really happen once the door is opened remains to be seen, but the sums could be large. One idea that has been discussed, says Evans, is the creation of trust accounts and limits to withdrawals by student athletes. 

Level Playing Field

The NCAA board approved rules that would allow an athlete to be compensated for endorsements, social media, new businesses and other opportunities, but these won’t go into effect unless approved by the councils for each of its three divisions.  

In January, its Division 1 Council — overseeing schools with the biggest student bodies, the largest athletic department budgets and the most scholarships — postponed a vote on new rules. There has been no vote regarding changes to Division 2 and 3 rules. The reasons for the delay include “legal issues,” and in a case before the Supreme Court, the NCAA is arguing that it should have the right to set limits on athlete compensation. 

The NCAA opposes state-level legislation, seeing a federal standard as the only way to ensure a level playing field for athletes throughout the nation. It even urges states to “respond” to laws passed elsewhere that “would be harmful to a national, uniform college athletics model.”

Battles for championships are regional and national. It’s not hard to imagine ways that differing standards could cause friction between states. Conflicts could arise from what a state law doesn’t cover as well what it does; one state could sue another if it believed that any rule more vague or permissive than its own created a recruiting advantage.  

A Difficult Path Ahead 

If there is no federal law when the first state laws go into effect, some expect the NCAA to file lawsuits against these states on the basis that their new rules interfere with interstate commerce. If rules for certification or approval of agents who represent students don’t cross state lines, high school recruits and their families might have to deal with an explosion of branches on their decision trees.

Passage of the College Athletes Bill of Rights, whose sponsors include Sen. Cory Booker (who played football at Stanford), would be one way out of the maze. In addition to giving NIL rights to athletes, it requires colleges to share sports revenue with athletes, expands scholarships to cover as many years as athletes need to complete a degree and establishes a medical trust fund for players. 

“NCAA sports systematically strips generational wealth from predominantly Black athletes from lower income households to pay lavish salaries of predominantly white coaches, athletic directors, commissioners and NCAA administrators,” said Ramogi Huma, president of the National College Players Association in endorsing the bill. “This legislation is an important avenue to fix all that is so broken in college sports.”
 

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Carl Smith is a senior staff writer for Governing and covers a broad range of issues affecting states and localities. He can be reached at carl.smith@governing.com or on Twitter at @governingwriter.
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