When the NCAA promised to explore rule changes related to name, image, and likeness (“NIL”) and subsequently released a working group report proposing an outline for legislation on the issue, many praised the passage of California’s Fair Pay to Play Act (“FPP”) as forcing the NCAA’s hand. Backed into a corner by the possibility of member institutions being regulated by mismatched state laws, the NCAA developed new rules that would apply equally to athletic programs across the country.
While modifications to NIL had been a long time coming, the NCAA’s expansion of compensation to athletes should be seen as a strategic move for the organization, not just relenting to outside pressure. Shortly following the working group report, the NCAA sent an NIL proposal to Congress, which, most notably, asked Congress to grant the organization a host of legal protections. The NCAA boldly asked for federal legislation to preempt possibly inconsistent state NIL laws and a Congressional decree that no state may regulate the compensation of student-athletes, including with respect to NIL. So, the NCAA will loosen its NIL restrictions for college athletes, but it doesn’t want to be subject to state laws on the issue.
The NCAA has chosen to lobby Congress hard with regard to the FPP and state NIL. Whether that’s a good or bad move strategically is for others to debate. Instead, it’s important to acknowledge the road not taken by the NCAA, and briefly examine what it would have looked like had the NCAA and athletic conferences chosen to fight state NIL laws through litigation.
In response to the California law, the NCAA Board of Governors initially sent a letter to Governor Gavin Newsom contending that the bill is “unconstitutional.” The legal argument implied by that assertion is likely that the California statute violates a corollary to the Commerce Clause of the Constitution known as the Negative, or “Dormant,” Commerce Clause (“NCC”), which prohibits states from interfering with interstate commerce.
Review under the NCC normally proceeds under two lines of analysis depending on whether a state law is either discriminatory or evenhanded. Discriminatory state laws are usually unconstitutional. However, if the state law directly regulates out-of-state commerce in a discriminatory manner, it can still be upheld if there are no adequate alternatives to preserve the important local benefits the law purports to service. Second, if a state law regulates evenhandedly, and its effects on interstate commerce are only incidental, it will more than likely be upheld.
The NCAA would likely argue that the FPP unconstitutionally interferes with interstate commerce by discriminating against out-of-state commercial activity. For this, the NCAA would rely on the precedent set in NCAA v. Miller, in which the Ninth Circuit Court of Appeals struck down a Nevada law that required the NCAA to provide certain procedural due process protections to Nevada individuals or institutions accused of violating NCAA rules. The main problem with the Nevada law is that it would have practically forced the NCAA to adopt the statute’s procedural requirements nationwide. As the Miller court explains:
“In order to avoid liability under the Statute, the NCAA would be forced to adopt Nevada’s procedural rules for Nevada schools. Therefore, if the NCAA wished to have the uniform enforcement procedures that it needs to accomplish its fundamental goals and to simultaneously avoid liability under the Statute, it would have to apply Nevada’s procedures to enforcement proceedings throughout the country.”
At that point, the Nevada statute would be in violation of the NCC because it would “directly [control] commerce occurring wholly outside the boundaries” of the state. The NCAA would argue that the practical effect of the FPP is the same. The NCAA would be forced to change its national rules to match those in California, or else carve out an exception under its compensation rules for California athletes or expel member institutions based in California, two options wholly unsatisfying to an organization whose fundamental goals require uniform national rules.
Chris Sagers, Professor of Law at Cleveland State University, argues, on the other hand, that the FPP does not unduly burden interstate commerce in violation of the NCC. He contends that the law imposes no obligations on the NCAA other than in California, it does not regulate how the NCAA operates in other states, and it does not discriminate against interstate commerce as “players from states that don’t authorize similar NIL benefits remain free to play in California and to compete against California athletes.” Professor Sagers believes the FPP would be evaluated under a court’s “evenhanded” analysis, which would likely find that the few incidental burdens on interstate commerce (e.g., the marginal NIL benefits afforded to athletes only in California) are justified by California’s legitimate interests in enacting the law.
The NCAA could credibly push back on the argument distinguishing the FPP from the Nevada law as one that does not regulate the NCAA’s operation in other states. Facially, neither did the law at issue in Miller operate outside of Nevada, but to be of any substance, that was its practical effect. As regards the FPP, the understanding by many has been that the law had a national effect by forcing the NCAA to change its approach to NIL legislation. As Professor Sagers notes, however, that line of argumentation presents some serious implications. Can states lose authority over purely in-state regulatory areas simply because a private entity operating in interstate commerce (the NCAA) would be unable to uniformly enforce its body of regulations nationwide?
Ultimately, this is a purely theoretical discussion. Individual states are already less likely to take up their own NIL laws given the NCAA’s forthcoming rule changes and the possibility of federal legislation on the issue. If Congress does federally preempt any state NIL laws, then the issues raised herein are entirely moot. Of course, if Congress balks, and laws like the FPP remain in place and inconsistent with NCAA regulations, perhaps these arguments will be coming to a courtroom near you soon enough.