University administrators, coaches, athletes and sports management agencies should all be aware of the emerging debate in the halls of Congress concerning the status of the name, image, likeness rule (NIL) and how this discussion may impact college athletics. On October 17, 2023, the U.S. Senate Committee on the Judiciary held the latest in a series of hearings on the regulatory efforts with respect to NIL and collegiate athletics. The Judiciary Committee heard testimony from a range of interested stakeholders, including NCAA President Charlie Baker, Big Ten Commissioner Tony Petitti, University of Notre Dame Athletic Director Jack Swarbrick, Executive Director of the Grove Collective Walker Jones, University of Florida student-athlete Trinity Thomas, and others. The testimony presented two starkly different visions for the future of NIL and college athletics: one centered on top-down federal legislation and the other on promoting bottom-up state-based regulation. In the coming months, we may learn which vision will prevail.
The Judiciary Committee’s hearings are the latest attempt to grapple with the fallout from the U.S. Supreme Court’s seminal 2021 decision in NCAA v. Alston. Contrary to popular belief, the Alston ruling did not itself legalize NIL. Itdid, however, make clear that the antitrust laws applied to the NCAA with full force and expressed a deep skepticism of the NCAA’s status in the landscape of college athletics. Reading the writing on the wall, the NCAA quickly issued regulations authorizing athletes to begin benefiting from NIL. Since the NCAA’s interim authorization of NIL, a fog of uncertainty and confusion has prevailed across college athletics with respect to the exact boundaries of permissible and impermissible NIL conduct. State legislatures have stepped into the void and constructed a patchwork quilt of NIL laws that vary greatly in scope and created further ambiguity around how the NIL laws and regulations may be implemented across the country. The Judiciary Committee’s October 17 hearing is both a clear response to the reigning confusion in college athletics and an indicator of potentially imminent congressional action.
The testimony broadly fell into two camps: in one camp are the institutional players, the NCAA, the conferences, and the universities, and in the other are the student-athletes, the advocacy organizations, and the individuals affiliated with NIL collectives. While there was some diversity of opinion within these two broad camps, based on the testimony, these are the current views of industry stakeholders with respect to several critical issues:
- Preemption: The NCAA, the conferences, and the universities universally testified that an overarching federal NIL law is necessary. They argued this law must preempt state NIL laws to ensure, as they put it, “uniformity” among conferences, institutions, and sports. Preemption would throw out any state law in conflict with the federal scheme or, if taken to its most extreme, make any state law related to college athletics unlawful. In an example of crossover between the two broad camps identified above, student-athlete Trinity Thomas also agreed that a federal law is necessary to promote equity. She argued an overarching federal law would provide clear guidance to student-athletes, protect women’s sports in support of Title IX, and encourage national uniformity. Conversely, a leading student-athlete advocacy group, the National College Players Association (NCPA), argued that the past few years have demonstrated that the NCAA, the conferences, and the universities have no problem meeting the requirements of the various state laws. In their view, passing preemptive federal legislation should be a low priority because it risks allowing the NCAA and the conferences to push wrong-headed policies nationwide while eliminating the traditional role of state governments as laboratories of democracy.
- The Role of the NCAA: The NCAA, the conferences, and the universities have coalesced around the position that if federal legislation is passed, the legislation should empower the NCAA or the conferences to implement the day-to-day enforcement of its provisions. Under this approach, Congress would delegate to the NCAA/conferences its oversight powers and deputize the NCAA/conferences to continue in its traditional oversight role. The NCPA and representatives of the burgeoning NIL collective movement vigorously opposed this approach. As they put it, this legislation would leave college sports in the hands of “traditional powers,” which have already displayed a willingness to engage in anticompetitive conduct. According to these parties, leaving the NCAA in charge would harm student-athletes and be akin to leaving the fox in charge of the hen house.
- Employee Status: Questions regarding the employee status of student-athletes for purposes of the Fair Labor Standards Act (FLSA) were at the forefront of the testimony given by conference leaders and university representatives. They were adamant that Congress needs to act to exclude student-athletes from the FLSA before a contrary court ruling issues from one of the U.S. District Courts. FLSA status would of course trigger wage and hour reporting requirements, and could ultimately lead to unionization. In particular, the testifying athletic directors emphasized the threat the FLSA could pose to the nature of college athletics as we know it by imposing prohibitive financial burdens on many universities and leading to complex questions related to collective bargaining. Illustrating this problem, they pointed out the varied state-level policies relating to public-sector unions and implied that certain public institutions in certain states would have competitive advantages over other institutions. Surprisingly, the “pro student” testimony did not really address the FLSA issues, indicating that it is a lower priority for these groups than the focus on limiting the future role of the NCAA.
- Pay-to-play: All stakeholders agreed that NIL cannot become a form of pay-to-play inducement. Student-athletes testified that this is not what they want, members of the collective movement testified that this is not what they do, and the NCPA testified that this is the only area where congressional action to impose restraints on free trade would be appropriate. Ultimately, however, the stakeholders disagree over the best method to enforce pay-to-play rules. The NCAA, the conferences, and the universities shared a belief that Congress should grant the NCAA and the conferences the power to enforce the rules. The NCPA countered that this would amount to an antitrust exception for the NCAA and the conferences, while leaving the traditional power brokers in place with the tools to continue to consolidate college athletics into super-conferences unrestrained by geographic limitation, to the detriment of student-athletes. According to this view, the NCAA and the conferences cannot be trusted to wield any anticompetitive power because that power will be used to harm student-athletes. Instead, they advocate that Congress pass a narrow ban on pay-to-play, which would presumably be enforced by the federal government.
Based on the testimony presented, all stakeholders appear to agree that federal NIL legislation is imminent. The primary battle will be over its scope, particularly with respect to its preemptive effect, its impact on other federal laws such as antitrust statutes and the FLSA, and the degree of control it leaves for the NCAA and the legacy conferences. University leaders, student-athletes, and sports management agencies interested in exploring the NIL space all need to prepare for the day when federal legislation comes. This preparation can include devising efforts to lobby for institutional priorities, preparing for a compliance regime backed by the weight of the federal government, and investing in compliance programs and staff education to anticipate and respond to the new regulatory space that is likely to change in potentially unexpected and sudden ways. In this fluid environment, the attorneys at McCarter & English stand ready to help clients navigate the current NIL environment and also prepare for the future regulatory landscape, whatever it may bring.