Student athlete compensation

In college athletics in the United States, a student-athlete who participates in a varsity sport on any and all levels is eligible to profit from their name, image, and likeness (NIL). Historically, the National Association of Intercollegiate Athletics (NAIA) was the first association to permit pro-am, as the National Collegiate Athletic Association (NCAA) resisted efforts to compensate college athletes beyond the scholarship and stipend.^[1] The Supreme Court's decision in NCAA v. Alston (2021) allows for non-scholarship earned income across every division.^[2]

The NCAA had long maintained that student-athletes cannot be compensated in the name of "amateurism".^[3] In 1953, the NCAA created the term "student-athlete" in response to the Colorado Supreme Court's ruling in University of Denver v. Nemeth that an injured football player was an "employee" of the University of Denver and therefore entitled to workers' compensation.^[1] Despite further attempts by the NCAA to classify student-athlete compensation as a violation of the Commerce and Contracts Clauses of the U.S. Constitution, "amateurism" in college sports had begun to fade as the push for student-athlete compensation grew stronger.^[1]

The latest movement in the college athlete compensation space focuses on payment for name, image, and likeness, a practice first adopted by the state of California in 2019.^[1] In September 2019, Governor Gavin Newsom signed Senate Bill 206, which generally allowed student-athletes in California to accept compensation for the use of their name, image, and likeness.^[4] The "Fair Pay to Play Act" bill was authored by California state senators Nancy Skinner and Steven Bradford and advanced with testimony from former Stanford volleyball star and 2015 national freshman of the year Hayley Hodson and Oklahoma State University football star Russell Okung.^[5][6][7][8] No federal statutes used to touch on this topic, and the only federal regulation permitting college students to accept compensation was 34 CFR § 675.16, which related to work-study programs.^[9]

The Supreme Court's 2021 decision in NCAA v. Alston shed light on modern federal attitudes towards student-athlete compensation.^[2] In this case, the Court struck down any potential limitations on education-related benefits that student-athletes may receive.^[2] Most notably, the Court – and especially Justice Brett Kavanaugh – rejected the NCAA's "amateurism" argument as an overly broad and outdated defense for failing to allow its revenue-drivers (i.e., student-athletes) to receive compensation.^[2] The NCAA contended that the Court should defer to its amateurism model because it is a joint venture along with its member schools, but the Court instead reasoned that deference was inappropriate since the NCAA has a monopoly in the relevant market.^[2] The Court further rejected the NCAA's appeal that it was not a "commercial enterprise," noting the "highly profitable" and "professional" nature of certain college sports.^[2]

Several startups like ATHLYT have begun to connect advertisers with their student-athlete members shortly after the NCAA enacted their interim NIL policies. Grambling University signed what is believed to be one of the first NIL deals in 2022.^[10] In July 2023, multiple bills were introduced by members of Congress to regulate NIL.^[11][12][13]

In May 2024, NCAA settled the House v. NCAA class action lawsuit for $2.8 billion. The main plaintiffs, Grant House and Sedona Prince, sought an injunction to force the NCAA and affiliated athletic conferences to lift restrictions on revenue sharing from broadcast rights. The plaintiffs also sought damages related to their inability to use their name, image, and likeness. This lawsuit highlights changes in the legal approach to the NCAA's amateurism defense, which had been central to its stance on student-athlete compensation but was nearly eliminated by the NCAA v. Alston decision.^[14]

One area of concern from recent NIL bills are the tax implications for student athletes. The NCAA maintains tax-exempt status by claiming its purpose in "fostering amateur athletics."^[15] NCAA universities are typically exempt from federal income tax because they are classified as charitable organizations.^[16] If the NCAA were to frequently enter contracts with student athletes and compensate them it could be at risk to losing this status. One impact on student athletes would be that their athletic scholarships would be subject to income tax. Additionally, student athletes would have to navigate varying state taxes. Some critics argue that because of these complications, student athlete compensation wouldn't be beneficial overall.^[16]

Another protest about student athlete compensation is that the NIL landscape will take away from the amateurism in the NCAA and commercialize college sports. Top NIL earners such as Livvy Dunne, an LSU gymnast with over one million followers on Instagram and TikTok, are making several million dollars a year.^[17] There are worries that this type of income will blur the line between college and professional sports and remove the unique appeal and camaraderie of college sports.^[18] This has caused concerns about the implications on college recruiting due to the lack of national standardization for NIL legislation.^[17] Shortly after the Court's decision in Alston, the NCAA issued an interim name, image, and likeness policy which permits student-athletes to earn this compensation.^[19] States have also followed suit by enacting similar laws.^[20] To date, 29 states have some sort of NIL legislation in place since the Alston interim policy was put into place.^[21] For example, Illinois Public Law 102-0042 permits athletes to receive market-value compensation for the use of their name, image, and likeness.^[22] An example of the differing state policies might be: if a recruit is comparing two schools with similar athletic and education opportunities but one school is in state that has a Fair Pay to Play Act and the other is not, the school in the state that allows student athlete compensation receives a significant recruiting advantage.

Athletes still in high school began signing NIL deals in May 2022, beginning with Nike signing Harvard-Westlake School soccer players Alyssa Thompson and Gisele Thompson,^[23] followed by NIL deals signed by basketball prospects Bronny James, Dajuan Wagner Jr., and JuJu Watkins in October 2022.^[24] Some high-school athletics associations subsequently adjusted their rules to allow high-school athletes to sign NIL deals while retaining their athletic eligibility. For example, the Oregon School Activities Association approved student NIL deals on October 10, 2022,^[25] leading to a local apparel company signing two Oregon Ducks basketball commits on October 21 in the state's first high-school NIL deals.^[26] Other states allowed high-school NIL deals with restrictions, such as Missouri, which enacted a state law in July 2023 allowing high-school NIL deals only if athletes commit to a Missouri-based college.^[27]

Life Center Academy basketball prospect Kiyomi McMiller signed Nike label Jordan Brand's first high-school NIL deal in February 2023,^[28] and in July 2023 Lake Oswego High School senior Mia Brahe-Pedersen signed Nike's first high-school track-and-field NIL deal.^[29]

Due to the increasing popularity of college sports because of television and media coverage, some players on college sports teams are receiving compensation from sources other than the NCAA.^[30] For instance, CBS paid around $800 million for broadcasting rights to a three-week 2014 men's basketball tournament.^[30] Because of the revenue and positive attention players bring to their colleges, there is a high demand to be fairly compensated.^[30] However, the NCAA forbids players from accepting external forms of compensation, such as payment or improved grades.^[30] Instead, the NCAA traditionally compensates players through athletic scholarships that cover the cost of tuition and other academic expenses.^[30]

The Internal Revenue Service defines collectives as organizations which are "structurally independent of a school, yet fund NIL opportunities for the school’s student-athletes". They can be tax-exempt or for profit entities which can either package business opportunities in a marketplace, or pool booster and supporter funds and deliver them to athletes.^[31] Most Division I universities now have collectives which can provide funds for selected athletes or a full team;^[32][33] however, there has been criticism that the use of collectives may circumvent Title IX, which require equal opportunities between men and women in college sports.^[34][35]

• Schoenfeld, Bruce (January 24, 2023). "Student. Athlete. Mogul? – How Sponsorship Deals are Transforming College Sports". The New York Times. ISSN 0362-4331.
• Samaha, Albert. "The hidden NIL economy of college sports". Washington Post.