Universities, NCAA see pros and cons of new state NIL laws

The way Texas A&M athletic director Ross Bjork sees it, his department is taking on a new role in helping athletes make money from name, image and likeness deals starting this month: matchmaker.

Bjork and his staff won’t serve as athletes’ agents, but as of July 1, a new law taking effect in Texas clears the way for them to get more directly involved in pairing athletes with local companies or thick-walleted fans. The law also provides the Aggies and other schools in Texas with some new ways to encourage fans to open those wallets.

Bjork’s comfort level with their new reality is miles away from the hands-off approach he felt was necessary two years ago when athletes first started making NIL money.

“It’s a big shift, honestly,” Bjork told ESPN in an interview earlier this week.

He’s not alone. Athletic departments have overcome their initial wariness and are growing eager to get more involved in the NIL marketplace to help athletes navigate an evolving set of rules — and to make sure their teams stay competitive in recruiting. However, with each additional step toward helping direct the flow of money from fans to athletes, the schools move closer to paying players directly, a line that separates the NCAA from professional sports.

The NCAA’s national office believes parts of the new law in Texas step over that line. Texas is one of a handful of states, including Arkansas, Missouri and Oklahoma, among others, to pass laws in recent months that clash with the NCAA’s stance in seeking to protect the ability of schools to get more involved.

Without a clear nationwide set of rules, each new state law presents an opportunity for lawmakers to give their schools a leg up on rivals in raising money for athletes, and therefore in recruiting the best talent.

Bjork and his colleagues view this shift as the best way to help their athletes make the most of the market without getting themselves into trouble.

“I think it just puts the universities and the marketplace and donors in a position to work closely together,” Bjork said. “We can’t throw up our hands and say that this is not happening. The more we’re involved in this, to me, helps make sure it can be done the right way.”

NCAA president Charlie Baker and his staff disagree. They view the state-by-state competition as a “race to the bottom.”

“Those laws are seeking competitive edges. They are not seeking to improve outcomes for student-athletes,” said Tim Buckley, NCAA senior vice president of external affairs. “People recognize the need to transform college sports, and we’re making some real changes to get that done. But state-by-state, this race to the bottom, it’s not the right way to realize that change.”

What does the new Texas law allow?

The Texas law, similar to laws in other states, opens the door for fundraising organizations that traditionally raise money for athletic departments to pay athletes via NIL deals. The fundraising groups, such as the 12th Man Foundation at Texas A&M or the One Razorback Fund at Arkansas, are legally separate entities from the schools, but most have an established hand-in-glove working relationship with the athletic department, which leads the NCAA to view them as “an extension of the university” and therefore too closely associated to pay athletes.

The law allows fundraising groups in Texas to distribute perks and benefits to fans who donate to an NIL fund. Both Texas and Texas A&M told fans in late June that donors who provide money to NIL funds will receive points in a ranking system that determine priority status for home game seating, postseason tickets to events and other perks. Ranking systems already exist at many fundraising operations, but points were previously given only for donations that went directly to the athletic department.

“[It’s] providing some value, providing some incentive for donors to support student-athletes,” Bjork said.

Lastly, and perhaps most importantly, the Texas law includes a clause that makes it illegal for the NCAA and its conferences to punish any school in the state that takes full advantage of these new capabilities. Laws in Oklahoma and Missouri are among other states with similar clauses.

How do the laws help schools in Texas?

Industry experts say that the overwhelming majority of NIL money flowing to athletes — roughly 80 to 90% — in the past year has come through deals with collectives rather than through athletes endorsing a product. Most of the dollars raised by collectives come from fans who are more motivated by seeing their teams remain competitive in recruiting than whatever nominal benefit they receive in exchange for their money.

Collectives, and the schools they support, are concerned that fans won’t sustain the same level of spending without getting some more value in return, according to Jason Belzer, the founder of SANIL, a company that helps operate roughly two dozen collectives at a variety of schools.

At Texas Tech, for example, a collective called The Matador Club has deals in place to provide $25,000 to all 120 of the Red Raiders football players in the coming year. Cody Campbell, the group’s founder, said it has raised roughly $8 million to give to those athletes as well as members of the basketball, baseball and softball teams. Campbell said the new law in Texas will help the collective partner with the school’s private fundraising arm, which adds legitimacy to their sales pitch to fans. He thinks the new incentives will help them sustainably hit that $8 million figure in future years.

Belzer said he believes collectives will have to start offering more — exclusive access to interviews with players, for example — to keep the money flowing. He said regardless of what strategies the collectives use to find new revenue, those that have help from their state’s laws will be in the best shape.

“Universities are going to keep pushing the needle,” Belzer said, “and the ones with state laws are going to push it the most.”

What is the NCAA’s argument against these new laws?

While the new laws in Texas and elsewhere give schools permission to offer new perks or work more closely with their fundraising arms, the NCAA is not asking schools to break state laws. The laws don’t say that they must do those things. The NCAA’s recent letter tells schools that if they take full advantage of everything permitted in a new law, they will be violating the association’s rules.

Buckley, who joined the NCAA’s national office when Baker took over as president in March, said the recent letter is meant, in part, to serve as a reminder that schools themselves create and agree to follow the NCAA’s rules — they aren’t imposed by the national office.

“It’s important to remember the NCAA and the conferences are voluntary organizations and the volunteers set the rules for those organizations.” Buckley told ESPN. “Until a member of this volunteer organization makes those changes, the national office staff will continue to enforce the rules that are on the books.”

The universities have opted to lobby for changes in state laws rather than attempt to rewrite the rules of their own voluntary organization. That approach might be faster or easier than navigating the cumbersome NCAA rule-making process, and it also gives the states at least a temporary competitive edge over their competition in states without laws.

The NCAA letter told schools it was “not fair to those schools who follow the rules” for the association to refrain from punishing others that feel they are protected by a state law.

“Schools who do not like the application of a particular rule should work through the NCAA governance process to change that rule,” the letter said.

What’s the alternative to state-by-state competition?

Buckley said the competitive nature of state laws provides an example of why the NCAA and many leaders across college sports are pushing for Congress to pass a federal law that would set up national standards for NIL rules.

Buckley said the NCAA wants a federal law that protects athletes from predatory agents who take large fees or sign them to long-term deals that might not be in a young player’s best interest. He said the new state laws aren’t designed to improve the outcome for athletes.

Opponents to federal legislation argue that competition in the NIL market has created more ways to deliver money to athletes. Competition from different states is what initially forced the NCAA to allow athletes to make NIL money two years ago.

“We’re not seeking any type of restrictions,” Buckley said. “What we’re looking for are basic consumer protections. I haven’t seen a state law passed on the NIL front that puts together any meaningful consumer protections.”

However, the proposed legislation coming from Capitol Hill in recent weeks goes far beyond measures to protect athletes from shady agents. For example, members of both the House and Senate in June suggested that athletes should have to wait several months after arriving on campus to sign any NIL deals.

When asked if the NCAA supported those types of restrictions being considered by Congress, Buckley said it was “too early to say.”

How could these changes impact other legal challenges to the NCAA’s rules?

A fan pays money that lands in the hands of a football player at their favorite school. In exchange, the fan earns points to get a better seat inside that school’s football stadium. While there are clear layers of legal paperwork in place to make sure that money never passes directly through a school’s hands on the way to its athletes, it doesn’t take a great leap to see how these groups are all working together.

Bjork and his colleagues believe there is still a clear line that separates college athletes from employees of their schools in this scenario. The question, though, is whether federal judges or members of the National Labor Relations Board will feel the same way. Federal courts and the NLRB are expected to rule at some point in the next couple years on whether college athletes are legally employees of their schools, conferences or the NCAA.

“I think that’s part of why the NCAA has toed the line,” said Maddie Salamone, an attorney who works in college sports. “They don’t want to bend on anything because they are afraid of how the court will view them bending on their own rules.”

As schools push to get more involved, they are trying to thread the needle between helping athletes as much as possible while stopping short of any intervention that would convince the courts that they should be treated as employees.

“Those are the moving parts that we’re all navigating right now,” Bjork said. “How can we get to a place where we have a legally defensible, collegiate model, whatever that might be? Does more need to happen for the student-athletes? Clearly it does, right?”

What happens next?

The NCAA’s letter in June serves as notice that the association intends to pursue sanctions against schools that allow closely-associated fundraising groups to raise NIL money and offer perks in exchange for contributions. Shortly before that letter was sent, Bjork and Texas athletic director Chris Del Conte both told fans they intend to offer those perks.

“The state law is going to govern how we do business,” Bjork told ESPN earlier this week. “…And we’ll continue to be as aggressive as we can.”

If both sides stick to those positions, the NCAA likely will seek sanctions against some of these schools. The schools then would sue the NCAA. A judge, or a series of judges, would then be left to decide whether the NCAA is unfairly restricting its schools or if state law was unfairly restricting the NCAA’s ability to enforce the voluntary rules of its private organization. Lawyers familiar with past NCAA cases say it’s not immediately obvious who would win that battle.

It does, however, raise a bigger question: If the college sports industry reaches a point where a small faction of the richest schools that voluntarily agreed to play by the NCAA’s rules are challenging those standards in court, why don’t they simply part ways?

Advocates for reform in college sports in recent years have increasingly suggested that splitting off the top-tier of college football from the rest of the NCAA could help to quell a good deal of the current unrest in their industry. Disagreements like the one brewing with these new state laws, could help build momentum for that type of divorce.

When asked if the NCAA might eventually just revoke membership from some schools, Buckley said that was too much of a hypothetical to consider. Bjork, likewise, wasn’t ready to weigh in on whether Power 5 programs like Texas A&M would be better served leaving the association.

“I’ll answer that in six months when you come back to me,” he said with a smile. “To be determined. No, no, I won’t give you my thoughts on that one.”

Then again, it was less than two years ago when Bjork and most of his colleagues would have felt unready to talk about getting directly involved in helping their athletes with NIL deals.