Implications of Possible NCAA v. Alston Decision: Is Pay for Play Inevitable?

Bass, Berry & Sims PLC

Bass, Berry & Sims PLC

On March 31, the Supreme Court heard oral argument in NCAA v. Alston, the closely-watched case that will determine whether certain NCAA rules, limiting compensation provided by colleges and universities to student-athletes, violate the antitrust laws.  While important, the Court’s decision in Alston, expected by the end of June, is only part of what college and university counsel need to be aware of when considering possible benefits for student-athletes on their campuses.

Starting on July 1, various state laws are slated to take effect that will prevent colleges, universities or athletic conferences from prohibiting student-athletes from receiving compensation from third parties for the rights to their name, image and likeness (NIL).  How the NCAA and individual athletic conferences react to these developments remains to be seen and will have important ramifications for the athletic programs at individual colleges and universities.

With these developments, it appears that the pressure is increasing on the system to allow student-athletes to receive greater compensation for their athletic pursuits.  Below we cover some of the moving parts that university counsel should be aware of in advising their clients on these complex matters.

Antitrust Challenges: “Pay for Play”

As discussed in our prior alert, the Supreme Court is considering an injunction affirmed by the Ninth Circuit against the NCAA concerning certain NCAA rules defining amateurism.  If the Supreme Court affirms the Ninth Circuit’s ruling, the NCAA will no longer be able to prohibit colleges and universities from providing non-cash education-related benefits to student-athletes, or from providing cash or cash-like awards to student-athletes for academic achievement in an annual amount up to $5,980.

Before individual schools start devising plans for their student-athletes to receive greater educational benefits than currently allowed by the NCAA, they need to be aware that under the Ninth Circuit’s ruling, individual conferences may still set limits on benefits provided to student-athletes for educational or academic purposes.  We may see some conferences enact rules that impose limits identical to those previously imposed by the NCAA, while others may choose to allow schools to provide educational benefits to student-athletes to the full extent now allowed by the NCAA consistent with the injunction.

Based on the oral argument, a full win for the NCAA, overturning the injunction and holding that a more abbreviated form of review is appropriate for the NCAA’s amateurism rules, seems unlikely.  The Supreme Court may, however, try to issue a ruling that is mixed in some regards, that is, affirming the injunction issued by the district court but establishing a test that will make it difficult for student-athletes to continue to challenge additional amateurism rules imposed by the NCAA, including rules limiting what student-athletes receive from third-parties for their NIL rights.

In any event, whatever limits the Supreme Court rules the NCAA may impose, and whatever subsequent rules are put in place by the individual athletic conferences, decisions as to what benefits are provided to student-athletes are ultimately made by each institution.  No institution will be required by law or NCAA rule to provide additional benefits to student-athletes based on the Supreme Court’s ruling in Alston.

State Legislation on NIL

On July 1, about the same time we expect a decision from the Supreme Court in Alston, a Florida law is slated to go into effect that requires that student-athletes be allowed to receive compensation from third parties for the rights to their NIL.  The Florida law is patterned after the California Fair Pay to Play Act, which was passed before the Florida law but does not go into effect until 2023.

Other state legislatures have passed or are considering similar laws.  Under this Florida law, and others like it, student-athletes must be allowed to receive compensation not from their institution, but from third parties, for the right to use their NIL.  These laws allow student-athletes to profit from social media and entrepreneurship in the same ways that their non-athlete classmates can, and also in ways such that student-athletes are compensated for their NIL rights connected to their athletic status.

NCAA Reaction to State NIL Legislation

Under the current NCAA rules, any student-athlete who receives compensation for their NIL rights from third parties violates the NCAA amateurism rules.  As these NIL rules are not among the rules being challenged in Alston, the Supreme Court ruling will not affect them.  If the NCAA does nothing, and the Florida law goes into effect, colleges and universities in Florida would be expected to be disqualified writ large from competing in the NCAA, unless their student-athletes voluntarily refrain from being compensated for their NIL rights.

The NCAA had proposed changes to their rules to “modernize” their approach to student-athletes’ NIL rights and were planning to vote on those changed rules in January 2021.  The NCAA postponed decision on the NIL rules indefinitely, however, upon receiving correspondence from the United States Department of Justice reportedly noting antitrust concerns with the proposed NIL rules, as well as proposed changes to the NCAA transfer rules.  The NCAA is purportedly now set to liberalize the transfer rules later this month, but there is no report that the NCAA has made any additional moves to adopt “modernized” NIL rules.  Even the rule changes proposed by the NCAA in January 2021, however, would not have allowed student-athletes to obtain NIL compensation to the extent required by Florida and other state laws.

The NCAA is lobbying for federal legislation, seeking at most an exemption from the antitrust laws, and at least a federal law regulating NIL rights that would preempt any state laws on the topic.  Given all that Congress has on its plate at the moment, betting on federal legislation being adopted between now and July 1 would appear to be risky.

If there is no federal law adopted before the Florida law goes into effect, do not be surprised if the NCAA launches a legal attack on the Florida law based on the Commerce Clause of the United States Constitution.  While the NCAA would be expected to seek immediate injunctive relief to stop the Florida law from taking effect, there are no guarantees that such relief will be granted.

What Should University Counsel Do?

College Athletics remains a volatile area for university counsel, especially for those campuses participating in Division I.  The Alston decision will provide important guidance as to the extent to which NCAA rules will be scrutinized under the federal antitrust laws.  The media focus on the Alston case may provide an opportunity to provide counseling in good antitrust practices which is never a bad idea.  If the Supreme Court upholds the injunction issued in Alston, university counsel should be ready to explain to campus leadership the educational benefits that may be provided consistent with that injunction, assuming that individual athletic conferences do not move swiftly to impose more restrictive rules.

Given the state law activities on NIL rights, however, university counsel should be aware of the state law efforts in their jurisdiction regarding any such laws and their effective dates.  Even if your state is not considering such legislation now, however, university counsel should consider engaging with appropriate campus constituencies about the possibility of NIL compensation for student-athletes becoming a reality everywhere in the coming months.  If the NCAA does not obtain relief from the Florida law, either from the Congress or the courts, it is difficult to predict what will happen next and counsel should be aware that their student-athletes may be able to obtain such NIL compensation soon.  University counsel should work closely with other campus leadership to ensure that relevant decision-makers are aware of the changes that may occur in the coming months so that various constituencies are not surprised and so that compliance mechanisms can be put in place at an appropriate time.

Again, we have only scratched the surface of the many issues facing college athletics.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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