LAS VEGAS Less than a month into the implementation of the House settlement, college sports new enforcement entity is adjusting its approach.
Attorneys for the House plaintiffs have struck an agreement with the power conferences and NCAA officials to amend the decision-making from the industrys new enforcement arm, the College Sports Commission, related to how booster-backed collectives can compensate athletes. Multiple sources spoke to Yahoo Sports under condition of anonymity.
As part of the agreement, the College Sports Commission is expected to treat collectives or any school-associated entity in a similar fashion as other businesses when determining the legitimacy of third-party NIL deals submitted to the CSCs NIL Go clearinghouse.
This is a change from the CSCs previously publicized approach.
According to a memo sent to schools two weeks ago, the CSC created and administered by the power conferences explained that it has denied dozens of athlete deals from collectives because it is holding collectives to a higher threshold, announcing that businesses whose sole existence is to pay athletes (i.e. collectives) cannot meet the definition of a valid business purpose.
House plaintiff attorneys Jeffrey Kessler and Steve Berman took issue with that interpretation, sending to the NCAA and power league officials a letter demanding the guidance be retracted and suggesting those rejected deals be reinstated. Kessler, in his letter, threatened to take the issue to the magistrate judge, Nathaniel Cousins, who is presiding over House settlement disputes.
Some of the NIL deals that the CSC rejected while applying the previous guidance will be re-evaluated based on the new approach.
The interpretation of the valid business purpose rule is not insignificant.
It is one of two measurements used by the new CSCs NIL Go clearinghouse to determine the legitimacy of third-party deals. The second is a Deloitte-created compensation range standard that deals must fall within.
The change to the valid business purpose standard potentially opens the door for the continuation of school-affiliated, booster-backed collectives to provide athletes with compensation that, if approved by the clearinghouse, does not count against a schools House settlement revenue-share cap. This provides collectives a path to strike deals with athletes as long as those transactions deliver to the public goods and services for a profit for the organization, such as holding athlete merchandise sales, autograph signings and athlete appearances at, for example, golf tournaments.
The resolution creates what administrators term more of a soft cap as opposed to a hard cap, as SEC commissioner Greg Sankey described it last week in an interview with Yahoo Sports. The expectation is that collectives will create legal ways to provide additional compensation, as Big Ten commissioner Tony Petitti described Monday in an interview with Yahoo Sports from Big Ten media days.
When something works, it gets copied, he said. Things happening out there to provide additional NIL deals for student athletes that make sense and are allowed under rules, youre going to see more versions of that.
The change also, at least for now, prevents a legal challenge from leaders of a group of NIL collectives who began drafting a lawsuit against the CSCs approach. Over the last four years, collectives have served as the driving force for schools to compensate athletes, raising millions in booster money to provide schools a way to recruit and retain players.
However, the CSCs original interpretation of the valid business purpose definition, and resulting denials of collective deals, speaks to one of administrators’ goals of the settlement to shift athlete pay from these booster-run organizations to the schools, which are now permitted to directly share revenue with athletes under the capped system that began July 1. That said, many schools are still operating their collectives as a way to, perhaps, circumvent the system.
For example, schools continue to operate their collectives some out of fear that others are doing the same and some believing that the settlement will fail under the weight of legal challenges.
We know that some people are saying, Were not worried because we dont think they can really enforce it! Ole Miss coach Lane Kiffin told Yahoo Sports last week from SEC media days. They dont think NIL contracts are going to get kicked back (by the clearinghouse) or they think theyre not going to be able to win long-term (legal challenges) because of players rights.
Ultimately, Sankey suggested, schools hold authority to control their own affiliated collectives.
For how long have people been begging for guardrails? Sankey asked. Well, now we have guardrails. Those broadly across the country that claim they wanted guardrails need to operate within the guardrails. If you allow whats happened to continue to escalate, there would be a very small number of programs that would be competitive with each other and wed not have a national sport or a national championship.
The resolution may not completely end what will likely be continuous negotiations over particular enforcement rules between the power leagues controlling the CSC and the House plaintiff attorneys, who hold authority and veto powers over various aspects of the settlement.
Petitti cautioned Tuesday that more such negotiations are expected in the future.
I dont think it will be the last time that an issue comes up in the process, he said. The settlement approval came later than expected. It compressed the time period.
The guidance change may also not prevent future legal challenges over other enforcement aspects, including Deloittes compensation range concept or the appeals arbitration system that athletes can use for deals denied a second time.
The CSC, in its first month of existence, is reliant on athletes submitting deals. Athletes are required to submit any third-party deal of $600 or more to an NIL clearinghouse, NIL Go. Those deals flagged by NIL Go are sent to the CSC and its new leader, Bryan Seeley, to determine an enforcement decision. As of two weeks ago, more than 100 deals were denied and at least 100 more were under review. More than 1,500 deals had been approved.