SHOULD Congress get involved in NIL?
Let's forget trying to handicap IF they will for a second. Should they?
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On March 29, the House Energy and Commerce Committee will hold a hearing on Name, Image and Likeness issues. This will be the first time the current Congress takes a formal stab at potential college athletic legislative issues, and the first time a Republican-controlled committee will lead the charge.
Energy and Commerce is a big committee, but a few of the names on the list will be recognizable to anybody who has closely followed college athletics in Congress. Rep. Lori Trahan (D-MA), a former college athlete herself, was a co-sponsor for the College Athlete Economic Freedom Act and has aligned herself with folks like Sen. Murphy (D-CT) and Sen.Booker (D-NJ) in pushing for more expansive college athletics reform bills. Rep. Jan Schakowsky (D-IL), whose district includes Northwestern University, also previously supported College Athlete Bill of Rights legislation.
How various Republican members on the committee feel about this issue is less clear, and since NIL and college sports issues aren’t neatly partisan, I don’t want to make sweeping assumptions. Over the last month, I’ve called the offices of Rep. Balderson (R-OH), Rep Curtis (R-UH) and Rep. Miller-Meeks (R-IA), among several other lawmakers on different committees, but nobody has called me back yet.
Rep. Gus Bilirakis (R-FL), who will co-chair the hearing, wrote an editorial in Sportico back in January arguing specifically for a national NIL standard.
We already have a pretty good idea for what legislation the NCAA wants. Specifically, the NCAA is looking for national legislation that would preempt state legislation, national legislation that would prevent college athletes from being classified as employees, and a limited antitrust exemption that would allow the NCAA to enforce NIL (and other) regulations.
I don’t know to what extent this committee hearing will delve into antitrust exemptions or employee status, and digging into those particular questions warrants a different newsletter. I imagine I will write also additional newsletters that will try to handicap the chances of particular legislation happening.
But here, I just want to focus on a specific, narrow, question. Forget IF Congress will pass some sort of national NIL law for a second. Should they?
As best as I can tell, the NCAA and school leaders are making two main arguments to support federal involvement in NIL.
One argument is centered on legislative unity. Over two dozen states currently have their own NIL laws on the books, each slightly different from another. Several of those states, like Florida and Alabama, have already amended or completely released NIL laws that they passed less than two years ago. I have heard multiple school leaders and employees express deep frustration in not only their inability to really understand what is permitted, but how schools in other states might have some sort of advantage thanks to more lax state legislation.
The thinking goes, a national standard will clear up those inconsistencies, provide additional clarity to schools, and provide a more level playing field.
That’s a very intellectually compelling argument, right? Intuitively, having one standard feels like it should make more sense than having 28 different standards.
In practice, I am more skeptical.
The truth is, very few state NIL laws have any enforcement mechanisms written into the law, and to the best of my knowledge, no state government has actually tried to enforce any of their NIL laws. There have been no state investigations, no state penalties for non-compliance, no highway patrols pulling over athletic directors over alleged recruiting crimes.
So even if laws really do vary dramatically from state to state, there’s little reason to worry about enforcement risks for non-compliance. But the state laws typically don’t differ that much from state to state. One state having slightly more liberalized language over prohibited NIL categories, or reporting mechanics, or veto capacity from the school…means virtually nothing as far as recruiting advantages, no matter what agents or recruiting websites might tell you.
The only people getting on Al Gore’s internet and saying that an athlete might potentially pick one school because their state law allows for greater flexibility to use university IP in NIL deals are trademark attorneys. C’mon.
Even regulations that actually mandate reporting are largely toothless, as thousands of athletes who are still technically required to report NIL activity to university compliance offers…aren’t. Anybody who believes they can make a 19-year-old do financial paperwork without the meaningful threat of punishment has never met a 19-year-old.
The only possible exceptions to this are rules over high school eligibility and NIL, where states that allow high school athletes to enter into NIL deals and retain high school athletic eligibility (like California) may have talent advantages over states that broadly do not (like Texas). We’ve seen a few cases of high-profile prep athletes moving to other states to take advantage of those rules. But why would that be an NCAA problem? They don’t have any jurisdiction over high schoolers…if that legislation is such a crisis, it sounds like something state high school athletic associations should take up with state lawmakers.
The potential advantages of a unified set of NIL rules might still outweigh the disadvantages. But in congressional hearings, in op-eds or in public, I believe athletic administrators need to be much, much more specific about the actual problems they’re experiencing because of the status quo, not the perceived problems.
The other argument is rooted in consumer protection
In a recent interview with the AP, NCAA president Charlie Baker said that the current NIL market ‘lacks transparency and uniformity, and the athletes would benefit from legal protections to ward off unqualified, unaccountable and even unscrupulous actors.”
Back at the NCAA Convention, I asked Baylor president Dr.Linda Livingstone about the practical challenges that the NCAA actually faces from divergent state NIL laws, given a lack of enforcement mechanisms. She also brought up consumer protection, telling me,
I'll give you a specific example. We really believe that a national clearinghouse of NIL deals would be extremely helpful because it would help you understand what the market is for different types of activities. It would actually help you understand our student-athletes actually being asked to do anything to earn the NIL, which is a real concern.
Potential federal NIL legislation could strengthen reporting requirements, making some level of dealmaking public (or at least, public to athletes and universities). It could also potentially include some sort of standard or certification for agents that represent college athletes. Right now, in practice, those do not exist.
There are a few entities that are working to share some level of price transparency. Opendorse as an NIL “book” that they share with schools and partners, that pulls average deal information by sport and position across their data set. On3 also has their well-publicized NIL Valuation tool, which, to my knowledge, is the only tool trying to assign a number to an athlete’s financial “roster value.”
The loudest voices I’ve heard against any legislation that would increase reporting requirements typically come from those working as either agents, or in the greater College Sports Industrial Recruiting Complex.
On one hand, you could argue that few other industries have substantial reporting requirements for outside income, and even then, that reported data is rarely made public. Endorsement data for professional athletes is not public or collected in a database. Putting that requirement on athletes, absent a CBA, could be construed as an unfair, anti-athlete, obligation.
Of course, such a requirement would also hurt agents, since increased price transparency may reduce the need for athletes to use agents, and make it harder for agents to potentially upcharge brands or collectives.
This is just me, but of all the constituencies involved in crafting NIL policy…brands, athletes, parents, athletic departments, collectives, etc…I am least sympathetic to concerns from collectives and agents. The world will survive if CAA makes a little less money, I suspect.
I’ve seen variations of the argument below, and I personally don’t believe it. There are thousands and thousands of other college athletes who are engaging with NIL who are not top 500 college football recruits or top 100 college basketball recruits/transfer targets. What Congress may do here is not going to hurt the earning potential of a Missouri Valley Conference softball player or a Big Ten baseball player or a Southland football player.
Not going to be liked for this tweet, but the group that would be most harmed by any form of a federal bill would be the athletes. 100% athletes would generate far less NIL income. https://t.co/MOsVXoXPt1
— Shannon Terry (@ShannonTerry)
Mar 15, 2023
It might impact the total valuation of roster-driven pay-for-play deals, which would impact a much smaller number of athletes. How much that valuation would be impacted would depend entirely on what the bill ends up saying.
The more important question, I think, is whether it is possible for federal NIL legislation to actually provide positive consumer protection outcomes.
The feds don’t do a very good job regulating sports agents, generally, right now. They don’t do a great job at consumer protection law enforcement either. The NCAA doesn’t do a good job at enforcing virtually any rule, and presumably, any new federal law is going to rely on some level of federal enforcement. this all means that the nuts and bolts of who is supposed to actually enforce any national standard are going to matter a lot.
A major challenge to crafting any sort of NIL bill also stems from the fact that we’re really talking about two almost completely different markets when we talk about NIL. The challenges regarding brand deals, and Pay for Play Collective Talent Acquisition Deals, are very different.
I actually think that greater price transparency and regulation could actually expand the brand-oriented NIL market, since those regulations could potentially reduce brand risks. There’s a possibility that regulations could impose downward price pressure on some elite NIL collective deals. Different constituencies, different markets, different problems.
I actually agree with Baker in that I believe the lack of transparency in collective-affiliated deals is a net negative for athletes (and also parents and schools). One simple solution to that problem, of course, would be to let schools pay athletes directly, so a shadow ecosystem of donors, lawyers, agents, and software companies doesn’t have to exist at all.
I doubt that’s the package Baker wants to take to Congress right now.
So absent that, could a federal NIL bill help? Could mandated price transparency, agent guardrails, and regulatory clarity help more athletes than it would financially hurt? Is trading some financial earnings for the top 5% of athletes worth it if it provides value for thousands of other athletes?
I don’t want to rule out the possibility completely, because there isn’t a bill right now. I think it could be possible.
But if the NCAA, and members of Congress, stick to the same platitudes both sides flung out last year, then I think the answer would be clearly be no. Building something that works for everybody is going to require better arguments, more specifics, and a willingness to commit real resources.
That could happen. But I don’t blame anybody who looks at this Congress, and this NCAA, and decides to be very, very, skeptical.
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