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. The once imperious National Collegiate Athletic Association (NCAA), under pressure from a spate of state laws, changed its rules in 2021 to allow athletes to reap the financial benefits from marketing their own name, image and likeness (NIL). Once limited to meager allowances on top of full scholarships, student athletes now can hire agents and receive a cut from sales of jerseys and posters, as well as appear in television ads for casinos, car dealerships, sports drinks, and more. NIL compensation can be serious money. LeBron James’s basketball-playing son attracted $7.5 million in sponsorships while still in high school. Louisiana State gymnast Olivia Dunne received $3 million from streaming photos to 10 million followers on Instagram and TikTok, and another social media “influencer,” University of Texas track star Sam Hurley, pockets over $1 million. Meanwhile, football powerhouses are lining up groups of donors, called collectives, to promise lucrative deals to recruits. A high school quarterback from California was reportedly in line for $10 million-plus pledged by University of Miami boosters before that deal fell apart. According to the New York Times, some 120 collectives have been created, at least one for every college in the five major football conferences.

The IRS, however, is signaling caution. On May 23, 2023, its Chief Council’s Office released a 12-page memo expressing a preliminary opinion that collectives should not be granted 501(c)(3) status, whether the collective is created independently of a university or created as an activity or program (such as a booster club) that supports a university’s athletic program. The memo posits that collectives do not serve charitable purposes or have a public benefit, and that many are not likely to receive IRS tax-exempt status if it is sought. How the IRS memo will affect NIL collectives in the short-term is unclear, but if tax-exempt status is lost, it could jeopardize the donations they receive. Many are likely to accept an IRS ruling and simply declare themselves as for-profit enterprises. The agency, however, has already granted 40 collectives tax-exempt status.

The NCAA is attempting to standardize many NIL processes across its member institutions; its Division I Council proposals will likely be voted on at the January 2024 NCAA Convention. NCAA President Charlie Baker recently praised the proposals, which were largely formulated by an association working group. “Today’s action by the DI Council is a great step forward toward achieving our shared priority at the NCAA, which is better outcomes for all college athletes who participate in NIL activities,” he said. The NCAA is also supportive of congressional action to standardize the various state NIL regulations. Two bipartisan bills on NIL have been introduced in the U.S. Senate. Senators Richard Blumenthal (D-CT), Cory Booker (D-NJ), and Jerry Moran (R-KS) introduced the College Athletes Protection and Compensation Act to “set national standards for name, image, and likeness to give athletes the economic and educational opportunities they deserve.” A second bill by Senators Joe Manchin (D-WV) and Tommy Tuberville (R-AL) would seek to accomplish similar objectives as the Blumenthal, Booker, and Moran bill regarding “NIL activities.” The bill would require “student-athletes to complete their first three years of academic eligibility before allowing them to transfer without penalty, subject to a few exceptions.”

Subsequent to the bills’ introduction, the Senate Judiciary Committee held a hearing on NIL and collectives (and other student-athlete related issues) on October 17. Among the witnesses were Charlie Baker, Big Ten Commissioner Tony Petitti, two athletic directors, and a representative of a collective, Walker Jones. “I think if we’re doing our part, we can provide really transparent and tangible benefits to all the stakeholders,” Jones testified. His comment was met with skepticism. “We are concerned that management of college athletics is shifting away from universities to collectives,” said Petitti. Not surprisingly, Baker also was skeptical about collectives, according to reports. NCAA rules prohibit collectives from using compensation for athlete recruits, but as the Big Ten’s Petitti complained, collectives are “a pay-for-play scheme disguised as NIL.”

In the meantime, some states are amending their NIL laws to make them more favorable to student athletes’ earning potential. Missouri is the latest to do so, enabling payments to high school athletes who have signed letters of intent to attend a Missouri university.

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 name, image, and likeness. Some may be a credit to their institutions—and some a discredit. And, of course, only a fraction of the half-million college athletes will actually benefit from NIL sponsorships—just as only a tiny few will make it into the pros.

Meanwhile, the National Labor Relations Board (NLRB) office in Los Angeles in December 2022 found merit to a complaint by a players’ association who want college athletes to 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 National College Players Association brought the complaint against the University of Southern California (USC), the PAC-10, and the NCAA. The NCAA has long insisted athletes are amateurs and should be treated as such. The NLRB hearing is scheduled for November 2023.

During the October 17 hearing before the Senate Judiciary Committee, 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.” Several words are key here: “enhance benefits,” “codifying … regulatory guidance into law,” and “special status.”

The University of California, Los Angeles, and 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, and the University of Utah joined the Big 12, and Stanford University and the University of California moved to the ACC. In Oregon, the House Interim Committee on Higher Education has taken notice. At the committee’s October hearing, the president of Oregon State University, which has not changed conferences, testified that the PAC-12’s collapse would have “devasting” financial consequences for the university. On the other hand, the president of the University of Oregon testified that the move to the Big 10 will help the university to “remain financially stable and self-sufficient.” The venerable PAC-12’s only hope for survival is to merge with another conference, possibly the Mountain West.

The conference switches also mean repeated transcontinental flights throughout the year for most men’s and women’s sports. The moves could further expose the vulnerabilities of big-time collegiate sports to political or judicial scrutiny.

An NCAA “transformation” panel recommended a raft of changes for Division I schools, including a requirement to provide at least two years of medical coverage after college for injured players and funds to complete their degree if they leave college without a diploma. And, as discussed in a previous section, the Department of Education is finalizing new Title IX regulations that would add gender protection for LGBTQ students, and the Biden administration has proposed a rule specifically addressing transgender students’ eligibility to play on male or female teams. Eighteen states bar transgender students from playing on teams other than the sex listed on their birth certificates.

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 on point spreads, half-time scores, and other so-called “props.”

An unholy alliance is forming between state legislatures that allow betting on college sports, online betting companies and casinos that sponsor on-line betting, and university athletic administrators that benefit from the large sums to promote gambling on their campuses (even on their own teams and by their own student body) saying that it provides needed revenues for their athletic programs.

But history 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, the largest since the infamous “Black Sox” baseball players conspired to throw the World Series in 1919. Similar events are happening in modern times. A recent betting scandal has involved allegations against 15 current and former athletes 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 have pleaded guilty to underaged gambling; the legal age for gambling in Iowa is 21.

A related issue emerging as cause for concern is gambling addiction. How many students will be affected? A photo accompanying a recent New York Times article on collegiate gambling showed a massive digital message scrolling below a prominent Big 10 institution’s football stadium scoreboard just above the student section that said, “Download the Caesars Sportsbook & Casino App” and “Official Sports Betting Partner of Spartan Athletics.”

In response, federal and state lawmakers and regulators are taking action. Senator 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, sport books, and gambling companies, and the use of partnership revenues. He requested written responses by April 27. Responses have not yet been released.

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—suggest other states, awakening to new-found 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 and Michigan State, the large dollars involved in NIL compensation, in the courting of sports betting to attain more revenue, and in skyrocketing coaches’ salaries increasingly comparable to those offered in professional sports force the question of whether big-time athletics can continue to sustain the amateur athletics model before policymakers or the courts determine that model is no longer viable or defensible. Some have suggested that college athletics could become subject to taxation through the unrelated business income tax, or that the tax-exempt status of the NCAA itself should be called into question.

• Has the board considered the implications related to compensating our student-athletes for their name, image, or likeness?
• 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.