Top Public Policy Issues Facing Governing Boards in 2023–2024:
College Athletics

The debate over whether college athletes—or at least some—should be compensated is over. It is already happening. To some, it’s long overdue. To others, it’s unsettling.

The NCAA was forced to change its ban on compensating athletes when it lost a 9–0 ruling on a related issue in the Supreme Court in 2021. The NCAA quickly developed name, image, and likeness (NIL) rules for its members. Under the rules, student athletes can hire agents and receive a cut from sales of jerseys and posters, as well as appear in local or national television ads for car dealerships, sports drinks, charities, and more. NIL compensation can be serious money. In the past three years, football powerhouses have lined up groups of donors, called collectives, to promise lucrative deals to athletes. According to the New York Times, some 120 collectives have been created, at least one for every college in the five major football conferences. In the Times article, Big Ten Commissioner Tony Petitti called collectives “a pay for play scheme disguised as NIL.” Many collectives are in competition with one another to help recruit top athletes, offering considerable sums of money. Some collectives may face IRS scrutiny when and if they apply for 501(c)(3) tax-exempt status. Their public benefit and charitable purposes were questioned in a May 2023, 12-page memo from the IRS Chief Council’s Office.

At its January 2024 convention, the NCAA proposed a significant amendment to its NIL rules, amendments that could become effective in this fall. The amendments would attempt to standardize NIL processes across member institutions and allow all Division I institutions to directly pay their athletes through NIL deals. But in trying to assert control over the process of athlete compensation through NIL deals, several external events appear to be intervening.

In February 2024, the federal court in the Eastern District of Tennessee issued a preliminary injunction against the NCAA, saying its NIL rules violate antitrust law. The ruling resulted from a lawsuit brought by the attorneys general of Tennessee and Virginia over an NCAA investigation of the University of Tennessee and its associated NIL collective for an NCAA rules violation that prohibits using NIL deals as a recruitment incentive for future athletes. The court’s injunction will enable collectives to pursue athletes still in high school and those enrolled at another university and considering transferring. The court’s ruling affects prospective athletes in all 50 states; they will now be promised the financial rewards of NIL contracts just like their fully enrolled counterparts.

More consequential, a class action antitrust case has resulted in a historic settlement. In House v. NCAA, current and former athletes had sued the NCAA and the Power Five conferences (also called the Autonomy 5) over restrictions placed on their rights to sell their name, image, and likeness. The former athletes argued for back pay from years prior to 2021. According to the NCAA, the settlement amount to former athletes is $2.78 billion to be paid over 10 years for back damages. The NCAA also notes that starting in the 2025–2026 academic year:

• Institutions “may pay student-athletes directly for their NIL rights.”
• Schools will be allowed “to provide up to 22% of the average Autonomy 5 athletic media, ticket, and sponsorship revenue to student-athletes.” This “could result in student-athletes receiving $1.5 billion to $2 billion in new benefits annually.”
• Third-party NIL agreements (meaning collectives) “will be subject to review to ensure they are legitimate, fair market value agreements and not used for pay-for-play, and would not apply toward the 22% cap.” The NCAA estimates that many Power Five conferences would be providing nearly 50 percent of athletics revenue to their student-athletes.
• A clearinghouse will be established for NIL payments over $600 to “give institutions access to information about external NIL activities, providing a level of transparency that does not currently exist to allow for better management of third-party influence and better assurance of legitimate NIL activity.”

The settlement must be approved by California federal judge Claudia Wilken. A recent New York Times article revealed several questions and concerns about the settlement (which also includes two other related court cases). More than third of the cost of the settlement will be borne by other Division 1 schools and conferences, and they’re displeased, in part because revenues from the college football playoff will not be used. The remaining settlement money is to come from the men’s basketball tournament. Other concerns are compliance with the equal opportunity requirements of Title IX, which the settlement parties hope they have avoided, and the future of Olympic sports at Division I institutions—the concern being that financial support for them will be drained to pay for football and basketball. The NCAA reports that 75 percent of the members of the 2024 U.S. Olympic team competed at a two- or four-year college.

In the meantime, the NCAA has announced that it is suspending all NIL-related investigations for rule infractions. It is also advocating for congressional action to preempt and standardize the various NIL regulations in more than 30 states, which could interfere and conflict with the settlement. Two bipartisan bills on NIL have been introduced in the U.S. Senate, but whether either one will advance is very much an open question.

And while the biggest money to be made by athletes is at the powerhouse universities and in top divisions, athletes at every college, small or large, now control their NIL. It is truly becoming an open market among colleges for recruiting and retaining top athletes.

As the NCAA notes in its explanation of the settlement in House v. NCAA, the settlement still leaves many unresolved issues. One issue is the effort to designate athletes as employees. The NCAA faces at least three lawsuits on direct athlete compensation, as well as two National Labor Relations Board (NLRB) cases.

In December 2022, the NLRB office in Los Angeles found merit to a National College Players Association complaint alleging that college athletes should be classified as employees with the right to unionize and bargain. NLRB General Counsel Jennifer Abruzzo reiterated her 2021 guidance that athletes do have the right to organize and were employees, not “mere student athletes.” The players association brought the complaint against the University of Southern California (USC), the PAC-12, and the NCAA. Hearings were held in Los Angeles in December 2023 and January 2024, and featured testimony from former USC football players and arguments by NLRB lawyers restating their December 2022 position that athletes should be considered employees under federal labor law. A ruling would allow players to receive direct compensation, worker’s compensation, and the ability to unionize. In another case, the Dartmouth College men’s basketball team petitioned the NLRB, seeking to be defined as employees with the ability to unionize. A hearing was held in October 2023, and in early February 2024, the NLRB regional director ruled in favor of the team. The Dartmouth players subsequently voted to unionize and be represented by the local Service Employees International Union. Dartmouth has appealed the ruling to the NLRB national board.

In yet another antitrust case filed in December 2023, Carter v. NCAA, Duke football player DeWayne Carter and other plaintiffs argue that the NCAA should have no authority to limit its member schools from directly paying athletes. Finally, the Third Circuit Court of Appeals heard Johnson v. NCAA. The case was brought by a Villanova University football player and other plaintiffs who argued that all Division I athletes should be employees and should be paid minimum wage. The appeals court ruled in July that athletes could be considered employees and eligible for compensation, and sent the case back to the district judge making the initial ruling and requested additional fact finding. The NCAA had hoped the case would be dismissed.

The NCAA has long insisted athletes are amateurs and should be treated as such. During an October 2023 hearing before the Senate Judiciary Committee, NCAA President Charlie Baker said, “To enable enhanced benefits while protecting programs from one-size-fits-all actions in the courts, we support codifying current regulatory guidance into law by granting student-athletes special status that would affirm they are not employees.”

The University of California, Los Angeles (UCLA), and the University of Southern California (USC) decided their football teams weren’t making enough competing in the PAC-12. Both decided to bolt to the storied Big Ten to play the powerhouse universities in the Midwest and on the East Coast. They were soon followed by the University of Oregon and the University of Washington, likely spurred, as were UCLA and USC, by the Big Ten’s lucrative football TV contract. The University of Arizona, Arizona State University, and the University of Utah soon left the PAC-12 to join the Big 12, and then Stanford University and the University of California, Berkeley, moved to the ACC. Oregon State University and Washington State University, the only remaining PAC-12 members, have reached a football scheduling agreement with the Mountain West Conference for the 2024 season, with the possibility of greater integration of teams and sports later. The conference switches mean repeated transcontinental flights throughout the year for most men’s and women’s sports.

In what some see as a reaction to the major conference consolidation, NCAA President Charlie Baker revealed a plan to create a new subdivision for top college athletic programs, primarily intended for the top football programs. These institutions would be given the flexibility to make many of their own rules and design their postseason playoffs, and not be dependent on the votes of any of the majority of Division I institutions. The plan, however, is likely to be superseded by the NCAA’s settlement of the House v. NCAA case, assuming the settlement is approved by federal judge Claudia Wilken, as it provides considerable autonomy to the top Division I schools and conferences.

An NCAA “transformation” panel recommended a raft of changes for Division I schools, including a requirement to provide injured players with at least two years of medical coverage after college and the funds to complete their degree if they leave college without a diploma. And, as discussed in a previous section, the Department of Education finalized new Title IX regulations that would add gender protection for LGBTQI+ students. The Biden administration has yet to release a proposed Title IX rule specifically addressing transgender students’ ability to play on male or female teams, but the rule is unlikely to be finalized until after the November election. Twenty-three states have moved to bar transgender students from playing on teams other than the sex listed on their birth certificates. The National Association of Intercollegiate Athletics (NAIA), the association of more than 240 smaller institutions, approved a rule banning transgender women from participating in its 14 women’s team sports. Meanwhile, the NCAA is operating under a 2022 rule that leaves transgender athletes’ participation to the international governing body for each individual sport. It should also be noted that women athletes filed a lawsuit arguing that the 2022 policy allowing trans women to participate in women’s sports violates Title IX.

The explosion of legal sports gambling across America presents complications for colleges and universities, in part due to a dizzying array of state rules. Two-thirds of states legalized sports betting after a 2018 Supreme Court ruling allowed it in New Jersey. And today, some states permit betting on college teams but not on in-state teams, with exceptions for March Madness. Some allow wagers not only on outcomes but also on point spreads, halftime scores, and in-game performances.

Several university athletic administrators sought to benefit from betting companies’ sponsorship dollars, allowing the companies to promote gambling on their campuses (even on their own teams and by their own student body), saying that doing so would provide needed revenues for athletic programs. Fortunately, officials at Michigan State University had second thoughts about a partnership with Caesars Sportsbook and ended the deal in May 2023. The University of Colorado and University of Maryland also ended their agreements with sports betting partners. No doubt, a major concern is the emerging issue of gambling addiction. How extensive is sports betting on college campuses? In May 2023, the NCAA released survey results finding that 67 percent of college students bet on games, and that 41 percent of students bet on their own schools’ games. NCAA President Charlie Baker is reportedly asking states to ban betting on athletes’ individual performances. These in-game wagers are known as prop bets.

History also offers a cautionary tale. Players on the City College of New York basketball team, then reigning national champions, and six other colleges and universities were caught up in a notorious point-shaving scandal in 1951. A recent betting scandal has involved allegations against 24 current and former athletes and student managers at the University of Iowa and Iowa State University. According to a Des Moines television station, some placed bets on games in which they played. Some 16 of the accused have pleaded guilty to underaged gambling; the legal age for gambling in Iowa is 21. In a turnabout, several of the athletes are suing the Iowa Division of Criminal Investigations, charging that investigators violated their constitutional rights by illegally inspecting their cell phones without warrants. At least four cases against Iowa State athletes have been dismissed.

In response, federal and state lawmakers and regulators are taking action. Sen. Richard Blumenthal (D-CT) has threatened legislation to regulate advertising on sports betting on or near college campuses. In March 2023, the senator sent a letter to athletic administrators at 66 major college athletic programs, requesting answers to five questions, including ones on gambling contracts and partnerships with casinos, sportsbooks, and gambling companies, and the use of partnership revenues. He requested written responses by the end of April 2023, but his office has not released anything since.

The introduction of bills in Massachusetts, New Jersey, and Maryland—as well as regulatory actions in Ohio and New York that prohibit certain advertising, ban betting on in-state teams, or require full transparency on any contracts or partnerships between gambling companies and universities—suggests other states, awakening to newfound concerns, will follow suit.

Elected leaders are proud graduates of their alma maters, and many are strong supporters of those with Division I athletic programs. Nevertheless, coaching scandals at Northwestern University, Michigan State University, and elsewhere; the large dollars involved in NIL compensation; the pending NLRB decisions; the courting of sports betting to attain more revenue; and skyrocketing coaches’ salaries force the question of how much longer big-time athletics can continue to sustain the amateur athletics model. The only hope for all who support the amateur model may be an antitrust exemption for the NCAA. The organization has pursued an exemption, most recently during a January 2024 hearing on athletics before the House Energy and Commerce Committee where NCAA President Charlie Baker advocated for it. We will see if the NCAA continues to advocate for it.

• Has the board considered the implications related to compensating our student-athletes for their name, image, and likeness?
• How important is the amateur model to the board and the institution? Are we competing in the athletic association, athletic conference, and division that best reflect our institutional mission and the welfare of our student-athletes?
• Is our university considering a financial relationship with an online gambling company? If so, has the board been engaged in discussions regarding, or been made fully aware of, any pending contract?

Board members are fiduciaries first, and fans second. In keeping with fiduciary duty and recognizing that boards should delegate administrative responsibility for intercollegiate athletics to the institution’s chief executive officer, institutional governing boards are ultimately accountable for athletic policy at colleges and universities. Boards of institutions that choose to offer these enhanced educational benefits to athletes must accept responsibility for upholding the integrity of the athletics program and ensure that the program continues to advance the institution’s educational mission.