Sara Allen
Edited by Aida Alyasin, Mac Kang, Sahith Mocharla, and Jia Lin
The rapid transformation of name, image, and likeness (NIL) compensation has reshaped the landscape of collegiate athletics, turning what was once a punishable offense into a lauded aspect of the student-athlete experience. Ongoing legal battles, including House v. NCAA and lawsuits from the State of Tennessee and the Commonwealth of Virginia, reflect the National Collegiate Athletics Association’s (NCAA) eroding control over athlete compensation—and the role of the student-athlete. Over time, state involvement and judicial decisions have redefined the boundaries of athletic compensation and the protection of amateurism in college athletics. The NCAA is under increasing legal pressure to adapt in response to the expansion of NIL compensation and new judicial rulings to preserve its regulatory authority. The NCAA is forced to adapt to the changing nature of college athletics—one that looks increasingly like a professional sporting enterprise.
In 2005, the University of Southern California’s (USC) star running back, Reggie Bush, received the Heisman Award as the most outstanding player in college football. However, an NCAA probe into the USC football program alleged that Bush and his family accepted cash, housing, appliances, and more from third parties. These allegations aligned with the NCAA’s definition of “impermissible benefits” and were at the forefront of reasoning for disciplinary sanctions against the USC football program, which included vacating a national championship, suspension for two years of postseason play, and removing thirty scholarships. Because Bush violated the NCAA’s rules against “pay for play"—compensating athletes for their athletic performance—he voluntarily returned his Heisman Trophy in 2010 [1]. Nearly 20 years later, fellow Trojan and 2022 Heisman Award winner Caleb Williams earned 10 million dollars from his NIL in his final two seasons at USC [2]. These two athletes, playing college football only 16 years apart, faced incredibly different experiences with financial compensation—what changed?
NIL and the Ed O’Bannon Lawsuit
The history of NIL rights in college sports traces back to longstanding debates over student-athlete compensation. Central to the debate was the Ed O’Bannon class-action lawsuit that challenged the NCAA’s historic policy that prohibited student-athletes from profiting from their NIL. In contrast, institutions profited from their athletes’ likeness with jersey sales, advertisements, and even video games. In 2014, Ed O’Bannon, a power forward on the University of California, Los Angeles basketball team from 1991-1995, sued the NCAA and the Collegiate Licensing Company for deprivation of the “rights of publicity” and illegal restraint of trade under the Sherman Antitrust Act. The case originated from O’Bannon’s likeness being used as the basis for an unnamed UCLA power forward sharing O’Bannon’s height, weight, personal appearance, jersey, and characteristics on Electronic Arts (EA) NCAA Basketball 09 video game—all without his permission. The judge ruled that the NCAA’s long-held practice of withholding compensation for NIL usage did violate Section 1 of the Sherman Act [3]. Section 1 of the Sherman Act states that “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce... is hereby declared illegal” [4]. Therefore, the NCAA’s collaboration with EA represented a “conspiracy” in withholding compensation from athletes. The case reached the Ninth Circuit of Appeals, where they ruled that the NCAA must provide student-athletes compensation for all educational expenses (not just tuition), yet struck down the District Court’s proposal of an annual $5000 paid to athletes for the use of their likeness. Ultimately, the lawsuit settled for $40 million, allotting up to $4000 in claims for former athletes featured in EA Sports NCAA Football and NCAA Basketball video games since 2003 without compensation or consent.
The Foundation for NCAA’s Denial of NIL
To understand why the Ed O’Bannon case did not immediately lead to NIL compensation for student-athletes, it is imperative to outline the logic of the NCAA’s denial of NIL. Historically, the NCAA has argued that fans watch college sports because of a degree of protected amateurism, so fans would stop watching if “amateurism” erodes as players are compensated. Secondly, the NCAA argues that preventing athletic pay promotes education at the forefront of the collegiate athletic experience. However, judges have suggested that limitations on practice hours mandated GPA requirements and required class attendance already ensure educational importance, regardless of compensation. The NCAA has also argued that NIL restrictions protect a competitive balance in collegiate athletics, allowing for all schools to be competitive without the risk that schools with more resources recruit and retain the most talented players. The Ed O’Bannon case required the NCAA to compensate athletes for the use of their likeness because they had unlawfully conspired under antitrust laws to misappropriate players’ NIL in contract negotiations for video games, among other revenue-generating products. Beyond that, the NCAA still had reservations about fully integrating player compensation into collegiate athletics.
The Shifting NIL Landscape
While the fallout from the Ed O’Bannon case prompted further conversations about compensation for student-athletes, NCAA policy remained the same. Several years later in 2019, California passed the Fair Pay to Play Act, allowing collegiate athletes to garner compensation from endorsements, sponsorships, and brand deals while retaining eligibility [5]. Following the outcome of the O’Bannon class action suit, the NCAA was sued several times based on the question of athlete compensation, which eventually culminated in the fundamental case of NCAA v. Alston in 2021. In NCAA v. Alston, the Supreme Court unanimously upheld the rulings of lower courts that suggested the NCAA’s restrictions on non-cash compensation—such as scholarships, internships, laptops, and other academic expenses—were violations of antitrust law [6]. This ruling weakened the NCAA’s authority to enforce “amateurism rules” that were meant to distinguish college athletes from professional ones. For example, limitations on cash stipends have changed—schools can now provide athletes with cash bonuses for academic performance and assist them with cost-of-living expenses in addition to tuition. This departs from the previous NCAA policy that prohibited athletes from receiving cash compensation to distinguish them from professional athletes and preserve their amateur status. While the case did not legalize outright salaries for college athletes, it prompted the NCAA to lift NIL compensation bans as long as school policy remained compliant with state and federal law [7]. While schools do not pay athletes salaries, they often facilitate opportunities to contribute to athlete NIL funds through collective groups and boosters that provide funding, like the Texas One Fund, Ohio State’s 1870 Society, and Tennessee’s Spyre Sports Group, which are estimated to contribute an average of $13.9 million per school in the 2024-2025 athletic calendar [8]. Despite this, it is important to note that the NCAA maintains restrictions on official “pay for play,” as players are prohibited from receiving salaries from their schools. Any compensation granted cannot be tied solely to athletic performance or participation. The cascading effects of the NCAA v. Alston ruling extended beyond isolated adjustments to collegiate athletic compensation—increased scrutiny of NIL policy has led to greater challenges for the NCAA, particularly in NIL recruiting restrictions. States such as Tennessee and Virginia are currently at the forefront of combating the controversial NCAA NIL policy.
Tennessee and Virginia Challenge to NIL Restrictions
Historically, state legislatures have played a large role in reshaping NIL laws, specifically with California’s aforementioned Fair Pay to Play Act. Many other states proceeded with this trend by enacting similar laws to both override the NCAA’s authority to limit compensation and restrict schools’ abilities to recruit college athletes. The NIL recruiting ban restricts schools’ abilities to negotiate NIL deals with recruits or transfer student-athletes to prevent recruiting violations based on financial incentives. Tennessee and Virginia challenged the ban in court, arguing that it violates antitrust laws by limiting athletes' negotiation power and suppressing market competition. In 2023, Tennessee’s Federal Court issued a preliminary injunction blocking the NCAA’s restrictions on NIL deals by allowing third-party entities to discuss NIL deals with recruits.
The plaintiffs, Virginia and Tennessee, argued based on the principle that the NCAA’s current NIL-recruiting ban illegally restricts competition due to an inhibition of an open market, based on limited knowledge of NIL valuation by athletes. The market is not free if athletes are acting on limited knowledge of their true market value [9]. The NCAA’s policy banned recruits and transfers from discussing prospective deals until after they signed a letter of intent (recruits) or enrolled in the university (transfer students). According to the plaintiffs, this recruiting ban prevented student-athletes from negotiating opportunities for increased monetary compensation before committing to a university. The logic falls in line with the process for NCAA coaches, who are allowed to negotiate pay before signing a contract. Thus, the plaintiffs held that the ban limited competition and decreased potential compensation [10].
The defendant, the NCAA, held that NIL-recruiting bans preserve college athletics by ensuring a degree of amateurism exists within collegiate athletics, arguing that no irreparable harm is done to student-athletes who pursue recruitment and transfer processes with bans in place.
The court ruled that the NIL recruiting bans are a violation of Section 1 of the Sherman Antitrust Act. This decision marked a divergence from previous cases in which courts decided that the NIL recruiting ban had “pro-competitive” benefits, like the preservation of amateurism. Previously, the Court stated that denial of these NIL funds did not scope beyond monetary compensation, thus there could be no proof of “irreparable harm” against student-athletes. The Court, however, was impacted by the potential for “irreparable harm” done to athletes by denying them marketing leverage and suppressing the knowledge of true market value [11]. The Court also found that less restrictive bans, including minimum credit hours and GPA benchmarks, already existed for athletes who achieved their stated goal. Ultimately, the outcome of the case was that Tennessee’s federal judge granted an injunction that prohibited the NCAA from punishing boosters, collectives, and athletes for negotiating any NIL deal as part of the recruitment process.
The timing of this injunction was not coincidental, as the transfer portal opened on February 7, 2024, and the Court restricted the NCAA’s ability to retroactively punish schools and student-athletes from discussing NIL deals with boosters before commitment with the “rule of restitution.” The court’s ruling was not final but suggested decreased restrictions and further compensation opportunities for student-athletes in the future based on the legal foundation of the injunction [12].
The implications of the injunction have played out in the 2024 season, specifically with the University of Nevada, Las Vegas (UNLV) starting quarterback, Matthew Sluka, announcing that he would redshirt—voluntarily exempting himself from athletic participation to extend his eligibility—for the remainder of the season and leave the school. Sluka claimed that UNLV promised the College of Holy Cross transfer $100,000 in NIL money during recruitment, a promise that was never delivered. UNLV Athletics denied his claim, asserting that no financial arrangement was made and that Sluka’s agent demanded compensation (a violation of NCAA rules and Nevada law) [13]. Ultimately, this episode was made possible by the injunction that allowed for a conversation about NIL deliverance to occur. With states’ increased involvement in the changing NIL landscape, Sluka demonstrates that athletes themselves are not sitting idly by as others advocate on their behalf. The news of Sluka’s redshirt occurred amidst another legal battle unfolding before the NCAA in California.
Athlete Class Action Against the NCAA
In 2020, athletes Grant House and Sedona Prince brought a class action lawsuit against the NCAA and the Power Five collegiate athletic conferences (Pac-12 Conference, The Big Ten Conference, Inc., The Big Twelve Conference, Inc., Southeastern Conference, and Atlantic Coast Conference) to inhibit restrictions on revenue sharing and broadcasting rights for student-athletes. The plaintiffs, House and Prince, were primarily concerned with a lack of compensation for student-athletes in television broadcasting—a move considered to be exploitative of student labor. In House v. NCAA, the plaintiffs argued that the NCAA’s restrictions created an illegal restraint of trade by disallowing NIL profits from schools’ media, ticket, and sponsorship revenue.
The defendants, the NCAA and the Power Five conferences, decided to settle because, in the event they lost the case, the NCAA would have to pay a substantially higher amount of money to athletes and would lose the ability to regulate NIL altogether. In May 2024, the NCAA settled the lawsuit for $2.78 billion while also agreeing to a revenue-sharing model to allow institutions to distribute compensation of up to $20 billion to Division I athletes who have played since 2016 [14]. In the process, the settlement covered Hubbard v. NCAA and Carter v. NCAA in addition to House v. NCAA—all dealing with back damage and future financial benefits for student-athletes. However, Judge Claudia Wilken declined to grant preliminary approval of the antitrust settlement in early September 2024. Judge Wilken suggested that language in the deal requiring NIL compensation from boosters to be used towards “valid business purposes” was not sufficient, requiring attorneys to rework the settlement. Because booster collectives provide NIL payments to athletes that serve as de facto salaries, language in the settlement could potentially allow for the NCAA to have an easy route to eliminate these payments.
Now, however, preliminary approval of the settlement has been reached based on the complaints made by the plaintiffs in House v. NCAA, which allows NCAA schools to implement an athlete pay model of revenue. The approval provides a 10-year revenue-sharing plan that allows institutions to share up to 22% of their annual revenues up to $22 million among all student-athletes (not required, but permissible). Additionally, the NCAA and Power Five conference schools will compensate student-athletes denied NIL from June 2016 forward as “back pay” for NIL deprivation (of the $2.78 billion, 75% is expected to go to football players, 20% to basketball players, and 5% to other athletes) [15]. Beyond this, enforcement authority for NIL deals will no longer extend to all third-party boosters, but instead, only groups "of entities and individuals closely affiliated with the schools” (ie. collectives—Texas One Fund) will be subject to neutral arbitration to determine whether they serve “valid business purpose” or are simply “pay for play” schemes, as well as mandatory reporting if value greater than $600. Scholarship limits were also lifted, allowing NCAA schools to distribute money however they choose and allowing for NCAA antitrust protections given that schools have more freedom of discretion for fund distribution, specifically with the advent of revenue sharing [16].
However, the most glaringly important aspect of the settlement is the new revenue-sharing model, making broadcasting and TV deals all the more important for NCAA schools and Power Five conferences. Student-athletes will be able to receive revenue from schools in addition to their NIL money—schools can officially pay student-athletes (within the cap limitations set by the NCAA) where they have not been able to previously [17].
The settlement is revolutionary in the NIL landscape by officially allowing revenue-sharing for student-athletes but could reshape the current landscape of college sports with the introduction of salary caps (for the settlement, scholarships are also considered “salary”). The settlement’s revenue-sharing model will require increased regulatory oversight of NIL dealings for student-athletes from the NCAA schools. Schools will need to manage and oversee NIL payments to ensure compliance with the NCAA’s evolving regulations and policies, which may prove challenging as NCAA policies become increasingly complex to meet the evolving demands of collegiate athletics [18].
The Future of NIL Compensation
While this settlement provides new rules, restrictions, and opportunities, questions regarding labor issues (athletes as employees, ability to unionize, etc), Title IX standards (equal distribution of funds to men’s and women’s athletic programs), and the possibility of a widening gap between Power Five and non-Power Five schools loom on the horizon. NIL compensation for student-athletes is poised to continue reshaping the landscape of college athletics for the foreseeable future. Cases like House v. NCAA and challenges from state legislatures, like those from Tennessee and Virginia, demonstrate that the NCAA’s traditional regulatory authority is waning. Both institutions, athletes, and states are taking an active role in protecting and expanding the rights of student-athletes—a trend that will only increase so long as NCAA policy chases demands of increased compensation, autonomy, and transparency. The NCAA is under increased legal scrutiny and external pressure to adapt to preserve its regulatory authority, suggesting that the future of NIL is not isolated to financial compensation but encompasses the navigation of the potential transformation of collegiate sports into business enterprises that mirror professional leagues. Thus, the trend of expanded NIL could signal the end of amateurism in collegiate athletics as it has historically been defined.
With the introduction of NIL rights for student-athletes in 2021, a story like Reggie’s is inconceivable. A non-technical version of “pay for play” is not only accepted but encouraged—money, cars, and once “impermissible benefits” are used as recruiting tools, income, and status symbols. NIL compensation is a powerful motivator, driving recruitment decisions and enhancing the allure of top-flight programs while blurring the line between amateur and professional sports. What was once "impermissible” is now becoming the standard for high-profile college athletes. As the value of athletes’ NIL expands and schools become increasingly reliant on compensation for recruitment and retention of student-athletes, state legislatures continue to pressure the NCAA to further expand NIL rights and will continue to do so. While the Heisman Trust returned Reggie Bush’s Trophy in 2024, his legacy—marred by controversy—exemplifies how dramatically the landscape has shifted. The same actions that cost him the Heisman are the new normal for NCAA collegiate athletics, hence Bush’s decision to also pursue a lawsuit against the NCAA, PAC-12 Conference, and the University of Southern California for the exploitation of NIL without compensation and for defamation following his Heisman scandal. The tension between traditional NCAA regulation and the evolving future of NIL rights is continuous, marking an eroding control over amateurism protections in collegiate athletics. The NCAA is now tasked with remedying the injustices of the past while paving a way forward where college athletes are compensated for their NIL yet retain their student-athlete status through the professionalization of the collegiate athletic industry.
[1] Bill Pennington, Reggie Bush, Ineligible for ’05, Returns Heisman, The New York Times, Sep. 14, 2010, https://www.nytimes.com/2010/09/15/sports/ncaafootball/15heisman.html (last visited Oct 25, 2024).
[2] Kalyn Kahler, As NFL Draft Nears, Caleb Williams and Team Intend on Owning the Process, The New York Times, https://www.nytimes.com/athletic/5301341/2024/02/28/caleb-williams-quarterback-nfl-draft-ownership/ (last visited Oct 25, 2024).
[3] O’Bannon v. NCAA, No. 14-16601 (9th Cir. 2015), Justia Law, https://law.justia.com/cases/federal/appellate-courts/ca9/14-16601/14-16601-2015-09-30.html (last visited Oct 25, 2024).
[4] Sherman Anti-Trust Act (1890), National Archives (2021), https://www.archives.gov/milestone-documents/sherman-anti-trust-act (last visited Oct 25, 2024).
[5] SB 206- CHAPTERED, https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB206 (last visited Oct 25, 2024).
[6] National Collegiate Athletic Association. v. Alston, 594 U.S. ___ (2021), Justia Law, https://supreme.justia.com/cases/federal/us/594/20-512/ (last visited Oct 25, 2024).
[7] Name, Image, Likeness, NCAA.org, https://www.ncaa.org/sports/2021/7/9/name-image-likeness.aspx (last visited Oct 25, 2024).
[8] Pete Nakos, On3’s Top 15 NIL Collectives in College Sports, On3 (2024), https://www.on3.com/nil/news/on3s-top-15-nil-collectives-in-college-sports/ (last visited Oct 25, 2024).
[9] Tennessee Federal Court Issues Preliminary Injunction Blocking NCAA’s NIL Restrictions, Ogletree (Mar. 12, 2024), https://ogletree.com/insights-resources/blog-posts/tennessee-federal-court-issues-preliminary-injunction-blocking-ncaas-nil-restrictions/ (last visited Oct 25, 2024).
[10] Complaint – #1 in State of Tennessee v. National Collegiate Athletic Association (E.D. Tenn., 3:24-cv-00033) – CourtListener.com, CourtListener, https://www.courtlistener.com/docket/68208869/1/state-of-tennessee-v-national-collegiate-athletic-association/ (last visited Oct 25, 2024).
[11] John DeWispelaere & Christopher J. Walsh, Tennessee Court Issues Major Decision Enjoining the NCAA’s NIL-Recruiting Ban Effective Immediately Nationwide, McLane Middleton (Feb. 27, 2024), https://www.mclane.com/insights/tennessee-court-issues-major-decision-enjoining-the-ncaa-nil-recruiting-ban-effective-immediately-nationwide/ (last visited Oct 25, 2024).
[12] Richard T. Hewlett, Jessica E. Visser & Lindsay P. Randolph, Attorneys General from Tennessee and Virginia Sue NCAA, The National Law Review (2024), https://natlawreview.com/article/tennessee-and-virginia-state-attorneys-general-sue-ncaa (last visited Oct 25, 2024).
[13] UNLV QB to sit out season after agent says $100,000 promised for transfer has not been paid, AP News (2024), https://apnews.com/article/unlv-sluka-59449174adffe0940266427158d964d3 (last visited Oct 25, 2024).
[14] Karen Weaver, House V NCAA Settlement Proposal Looms, Leaving Title IX, Athlete Employment Questions Unresolved, Forbes, https://www.forbes.com/sites/karenweaver/2024/09/24/house-v-ncaa-settlement-proposal-looms-leaving-title-ix-athlete-employment-questions-unresolved/ (last visited Oct 25, 2024).
[15] Settlement Documents Filed in College Athletics Class-Action Lawsuits, NCAA.org (2024), https://www.ncaa.org/news/2024/7/26/media-center-settlement-documents-filed-in-college-athletics-class-action-lawsuits.aspx (last visited Oct 25, 2024).
[16] Settlement Documents Filed in College Athletics Class-Action Lawsuits, NCAA.org (2024), https://www.ncaa.org/news/2024/7/26/media-center-settlement-documents-filed-in-college-athletics-class-action-lawsuits.aspx (last visited Oct 25, 2024).
[17] NCAA, Power 5 agree to let schools pay players, ESPN.com (2024), https://www.espn.com/college-sports/story/_/id/40206364/ncaa-power-conferences-agree-allow-schools-pay-players (last visited Oct 25, 2024).
[18] Jonathan D. Wohlwend, NCAA Settlement Paves Way for Revenue Sharing and NIL Compliance, The National Law Review (2024), https://natlawreview.com/article/taking-it-house-preliminary-approval-settlement-house-v-ncaa-could-bring (last visited Oct 25, 2024).
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