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SCOTUS Blows The Whistle On College Sports

The debate over amateurism in college athletics is neither new nor over, but a recent Supreme Court decision suggests time may be running out for those who oppose paying student-athletes for their efforts and performance.

Americans love college sports, and the NCAA is a hugely profitable enterprise as a result. According to self-reported figures, the NCAA brought in $18.9 billion in total revenue in 2019. For the 2018-2019 season, the men’s March Madness tournament alone brought in a total net income of $864.6 million. That’s a huge pie from which student-athletes have long been denied all but the thinnest slice. The NCAA has argued that many elite athletes are compensated in the form of scholarships that cover their tuition, room and board, and (more recently) other college-related expenses. However, strict association rules prevented these students from securing nearly any other form of payment from the schools for which they perform or from outside endorsement deals.

The NCAA argued that it “plays a critical role in the maintenance of a revered tradition of amateurism in college sports.” Fans enjoy college sports, the organization maintains, because the players are not paid. Many college athletes have found this position understandably grating coming from an organization whose president earns a salary of around $4 million a year. But a unanimous Supreme Court decision opened the door to new forms of student-athlete compensation. The NCAA has at least partially conceded the point, but the high court implied that even larger changes may be on the way.

The court’s decision in National Collegiate Athletic Association v. Alston marks the end of the road for a legal fight that began in 2014. The justices upheld lower court rulings that struck down certain limits that the NCAA places on the benefits colleges can offer student-athletes. The ruling invalidates “rules that limit scholarships for graduate or vocational school, payments for academic tutoring, or paid posteligibility internships.” This means that, in the future, athletes will be eligible for larger and more varied academic, as well as athletic, scholarships and fellowships. These forms of aid may include cash grants, a former no-go according to the NCAA. The association can cap such cash awards, but no lower than limits on awards related to athletic performance. Players may also have access to benefits that extend beyond their time as active players, potentially including paid internship positions arranged through their schools.

National Collegiate Athletic Association v. Alston did not explicitly overturn the rules forbidding student-athletes from profiting off their own names and likenesses through deals with third parties, or the ban on schools directly paying students who play on their teams. But it foreshadowed larger changes, some of which have already arrived and others likely yet to come. In a concurrence to the main opinion, Justice Brett Kavanaugh stated that limits on other forms of compensation may raise “serious questions under the antitrust laws.” He posited that such rules are living on borrowed time. Even in the majority opinion, Justice Neil Gorsuch noted that the main reason the court did not go further in this case was that the plaintiffs had not asked it to do so.

The possibility of a future case posing these questions is strong. Student-athletes have previously made the case that they deserve direct compensation from their schools for the time and effort that they pour into an activity that is lucrative for both their individual educational institutions and the NCAA as a whole. Standards are also changing for third-party payments to athletes. At least a dozen states have already enacted laws or executive orders allowing student-athletes to profit from their name and likeness. In late June, following the Supreme Court decision, the NCAA officially altered its policy to allow athletes nationwide comparable opportunities. While this policy change was designated as a temporary fix, it is likely that new, permanent rules will look similar.

The heart of the NCAA’s argument is that amateurism is worth preserving on its own merits. The association has often couched this position in terms of putting students first. Amateurism, it argues, is fundamental to preserving players’ status as students; if athletes earn money for playing, they might neglect their studies. Too much compensation or compensation in the wrong form could also lead schools to prioritize players as athletes first, neglecting their educational needs. The NCAA further argued that fans are fundamentally attached to the “amateur” nature of college athletics. The organization has suggested that fans might stop watching if they knew the student-athletes were paid for their work.

This last argument is especially hard to swallow, and the Supreme Court treated it dismissively. Gorsuch noted that the district court “observed that the NCAA’s conception of amateurism has changed steadily over the years.” The first argument, about the focus on academics, is not at play in Alston at all. Since the case only discusses scholarships and other education-related incentives, the NCAA’s stated desire to maintain focus on college athlete’s studies is not undermined. Further, it stretches credibility to claim that students cannot work for pay while pursuing a degree. Many nonathletes work while in college, either off campus or as part of work-study programs. Some even monetize their social media channels, sometimes on behalf of their college or university through paid brand ambassadorships. Yet athletes face strict limits on their economic activities at the risk of losing eligibility to play.

Student-athletes, whether paid or not, commit significant time and energy to their sports, especially at the highest levels of play. Their efforts generate significant revenue for their schools and the NCAA itself. Athletes’ skills also reflect years of hard work and financial investment in the form of trainers, equipment, travel and more. The NCAA’s claim that students should play purely for the love of the game might be easier to accept if college sports were not generating millions of dollars for everyone but the participants taking on the most risk.

It is also worth remembering that few student-athletes will go on to secure major earnings as professionals. According to figures from the NCAA, 0.8% of women’s college basketball players go on to the WNBA, 1.2% of men’s college basketball players go on to the NBA, and 1.6% of football players make it to the NFL. Figures for baseball and men’s hockey are higher, but still well under 10%. Even top players in the most lucrative sports risk sustaining an injury that can hinder their future career, or even end it before it begins. No fan who saw the injury is likely to forget University of Louisville basketball player Kevin Ware’s gruesome broken leg on the court in 2013. These athletes give their all. They deserve to have something to show for their work and dedication at the college level. Yes, their degree has some value (assuming they complete it). But if schools want top athletes to choose college over going pro immediately, it is not outrageous to think they should compensate the players who bring in significant revenue with their talent and labor.

In the majority opinion, Gorsuch made clear that while some degree of collusion among competitors in a sports league is necessary for the league to work, this does not give the NCAA carte blanche. The rules at issue, preventing education-related compensation for student-athletes, will not affect gameplay. And while this case did not turn the court’s focus to other forms of payment, Kavanaugh’s concurring opinion put the matter in strong terms: “All of the restaurants in a region cannot come together to cut cooks’ wages on the theory that ‘customers prefer’ to eat food from low-paid cooks.” Kavanaugh suggested that he, at least, would be prepared to go further should a related case reach the high court. Student-athletes may be further emboldened to push for expanded compensation now that they know the Supreme Court is skeptical of the NCAA’s argument.

For current and future college athletes, this raises the question: How can they protect their own interests in this transitional period?

First, college athletes should familiarize themselves with the new NCAA rules about endorsement deals. In 12 states – Alabama, Connecticut, Florida, Georgia, Illinois, Kentucky, Mississippi, New Mexico, Ohio, Oregon, Pennsylvania and Texas – effective July 1, college athletes also have the legal right to profit from their name, image and likeness. The terms of these laws can vary. For example, in some cases, students may need to be enrolled before they can accept an endorsement deal, while other laws allow prospects to do so. Several other states are considering name, image and likeness legislation as well. Players should investigate the status of such proposals in their states. If a law is pending, pay attention to whether it passes and when it takes effect. Congress has also been considering legislation that would standardize the rules for student-athletes accepting endorsement deals or paid social media placements, but at this writing, no action on the bill is imminent. This may complement or displace the NCAA’s new rules, or lawmakers may decide it is unnecessary now that the association has changed its position.

Of course, regardless of their future career plans, young adults should be sure to get a handle on budgeting, saving and other financial basics. There are many resources for students and their families to self-educate on these topics (including our firm’s book The High Achiever’s Guide to Wealth).

Colleges and universities already court the best players, especially in men’s basketball and football, with the incentives available to them. The Supreme Court ruling in Alston widens schools’ options. While no school must offer expanded scholarships or other bonuses, it seems likely that schools with major programs will start doing so. Now, as ever, high school players and their families should take time and care in comparing different programs’ financial aid packages. Be sure to understand what benefits are guaranteed, and which are contingent on certain benchmarks or other restrictions. What happens if the player is badly injured and cannot continue to play? Different programs have different rules, and it pays to understand them before committing to a college or university.

The court’s decision in Alston is heartening for those who want to see student-athletes compensated for the work they do and the risks they run. As the debate over amateurism’s place and definition continues, prospective and current college athletes can look forward to the prospect of clearer, fairer rules to come.

Senior Client Service Manager Melinda Kibler, who is based in our Fort Lauderdale, Florida headquarters, is among the authors of our firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. Her work includes Chapter 5, “Estate Planning”; Chapter 10, “Financing Long-Term Care”; and Chapter 17, “Retiring Abroad.” She also contributed to the firm’s book The High Achiever’s Guide To Wealth.