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The U.S. Supreme Court’s 2021 decision in <a href="https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf" target="_blank" rel="noreferrer noopener">National Collegiate Athletic Association v. Alston</a><a id="_ftnref1" href="#_ftn1">[1]</a> permanently altered compensation rules for athletes attending and playing at National Collegiate Athletic Association (NCAA) member universities. The plaintiffs in Alston argued that the NCAA’s rules restricting compensation for athletes violated federal antitrust law, which prohibits any “contract, combination, or conspiracy in restraint of trade or commerce[.]” The Court in Alston noted that the NCAA “admitted horizontal price fixing”—a well-established category of illegal conduct—in the market for athletic services in college basketball and football “where the [NCAA] exercise[s] monopoly control.” The Court affirmed the lower courts’ findings that certain aspects of the NCAA rules and regulations (specifically, limits on education-related benefits) violated federal antitrust law. Justice Kavanaugh’s concurring opinion went even further, writing that “the NCAA’s model of using unpaid student athletes to generate billions in revenue for member institutions raises serious questions,” and “it is highly questionable whether the NCAA and its member colleges can justify not paying student athletes a fair share of the revenues on the circular theory that the defining characteristic of college sports is that the colleges do not pay student athletes.” With that, the Supreme Court kicked off a new era of collegiate athlete compensation regarding an athlete’s name, image and likeness (NIL). And now the NCAA is not the sole entity attempting to regulate collegiate athlete compensation – state legislatures have suited up and entered the NIL game.

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In response to Alston, 32 states and U.S. territories passed NIL legislation protecting college athletes’ rights to earn NIL compensation. The state legislatures of Arkansas, Missouri, New York, Oklahoma and Texas passed legislation that prevents the NCAA from enacting penalties for NIL activities permitted by state law. Layered in with these new state laws and regulations is an <a href="https://ncaaorg.s3.amazonaws.com/ncaa/NIL/May2022NIL_Guidance.pdf">interim NCAA policy</a> which allows current athletes to enter NIL contracts but prohibits NCAA collectives from using NIL contracts as a “recruiting inducement” for prospective athletes (referred to hereinafter as the “NIL Recruiting Rule”). While there is no concrete definition of “collective,” the NCAA classifies boosters as collectives, and a collection or combination of businesses and alumni who create business opportunities for prospective athletes for a particular school are viewed as collectives by the NCAA. Collectives are independent of NCAA member institutions and are the vehicles by which an overwhelming majority of NCAA athletes receive their NIL compensation. The NIL Recruiting Rule prohibiting collectives and institutions from using NIL contracts to recruit prospective athletes, rather than current athletes, is the subject of the pending litigation involving two of the states that passed NIL legislation.

The State of Tennessee and the Commonwealth of Virginia, both of which had passed legislation post-Alston prohibiting the NCAA from interfering with collegiate athletes’ ability to earn NIL compensation (see <a href="https://casetext.com/statute/tennessee-code/title-49-education/chapter-7-postsecondary-and-higher-education-generally/part-28-intercollegiate-athletes-name-image-or-likeness/section-49-7-2803-interference-with-intercollegiate-athletes-ability-to-earn-compensation-prohibited" target="_blank" rel="noreferrer noopener">Tennessee Code Section 49-7-2803</a> and <a href="https://casetext.com/statute/code-of-virginia/title-231-institutions-of-higher-education-other-educational-and-cultural-institutions/subtitle-ii-students-and-campus/chapter-4-general-provisions/section-231-4081-intercollegiate-athletics-student-athletes-compensation-and-representation-for-name-image-or-likeness" target="_blank" rel="noreferrer noopener">Virginia Code Section 23.1-408.1(B)(1)-(3)</a>), sued the NCAA on January 31, 2024, in Tennessee federal court seeking a temporary restraining order and a preliminary injunction prohibiting the NCAA from enforcing its NIL Recruiting Rule. In their <a href="https://www.tn.gov/content/dam/tn/attorneygeneral/documents/pr/2024/pr24-10-NCAA.Antitrust.pdf" target="_blank" rel="noreferrer noopener">complaint</a>, the states allege that the NIL Recruiting Rule amounts to an “illegal agreement to restrain and suppress competition” in violation of federal antitrust law. The NCAA, as it did in Alston, argues that the NIL Recruiting Rule provides pro-competitive benefits by protecting amateurism and promoting the balance of academics and athletics. But the Tennessee court, much like the Supreme Court in Alston, rejected that argument and credited the states’ argument that those benefits are adequately protected by less restrictive alternatives, namely the NCAA’s current bylaws. The court granted the states’ request for a preliminary injunction. The injunction will remain in place while the case is pending and prohibits the NCAA from enforcing the NIL Recruiting Rule as well as “the NCAA Bylaws, or any other authority to the extent such authority prohibits student-athletes from negotiating compensation for NIL with any third-party entity, including but not limited to boosters or a collective of boosters.”

The Tennessee suit is one of the first plays in the evolving NIL contest, an opening salvo in a potentially chaotic field where the NCAA’s prohibitions may be enforced in certain jurisdictions but not in others. This uneven application could result in athletes selecting only universities in states where the NCAA’s prohibitions have been struck down. The Thompson Hine corporate team has conducted a 50-state survey and continues to monitor legislative and litigation developments regarding NIL regulations.

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<a id="_ftn1" href="#_ftnref1">[1]</a> 594 U.S. ___ (2021) (Slip Op.).

https://admin.thompsonhine.com/wp-content/uploads/2024/03/Business-Law-Update-March-2024.pdf

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This client update may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

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Trouble in the Huddle – Uncertainty and Opportunity with the NCAA’s NIL Rules

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