Power conferences working on contract to bind schools to new enforcement rules, with strict punishments

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On May 1, in perhaps an intentionally quiet signing, Tennessee Gov. Bill Lee scrawled his name across the bottom of a six-page state bill.

Tennessee Senate Bill No. 536, its details unearthed last week, paves the way for state schools — University of Tennessee, Vanderbilt, Memphis, etc. — and their affiliated collectives to break House settlement-related rules and prevents college sports’ new enforcement entity from penalizing those schools.

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In layman’s terms, the law is a launched missile toward plans from the NCAA and power conferences to police the revenue-sharing era of college sports, taking aim at the athlete compensation cap, the severe penalties for rule-breakers and the policies that prevent phony booster-backed name, image and likeness deals to players.

But power conference executives have plans to combat such laws.

Officials from the Big Ten, SEC, Big 12 and ACC are circulating a draft of a groundbreaking and first-of-its-kind document intended to prevent universities from using their state laws to violate new enforcement rules and, in a wholly stunning concept, requires schools to waive their right to pursue legal challenges against the new enforcement entity, the College Sports Commission.

The document, now viewed by dozens of leading school administrators, would bind institutions to the enforcement policies, even if their state law is contradictory, and would exempt the CSC from lawsuits from member schools over enforcement decisions, offering instead a route for schools to pursue arbitration.

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The document, described as an “Affiliation” or “Membership Agreement,” is not finalized but a draft of the contract has been distributed to several school presidents, general counsels and athletic directors — many of whom have expressed legal concerns with several of the document’s concepts, which are now being refined.

The document is meant to be signed by all power conference schools, perhaps as well as others opting into the settlement, as a way to bind the group and provide stability around the enforcement of rules. That includes, most notably, decisions from the new Deloitte-run NIL clearinghouse, dubbed “NIL Go,” an entity expected to more strictly enforce booster pay.

The consequence for not signing the agreement is steep: a school risks the loss of conference membership and participation against other power league programs.

“You have to sign it,” says one athletic director who has seen the document, “or we don’t play you.”

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“As a condition of membership, you must comply with the settlement and enforcement,” says a power conference president with knowledge of the document.

The membership agreement has evolved since Yahoo Sports first learned of its existence in February. Over the last few weeks, administrators received the latest version. But the document’s future remains murky.

Firstly, a finalized version cannot be signed until the House settlement is granted approval from California Judge Claudia Wilken. At that point, will all schools sign a document that, many legal experts contend, creates legal issues for public universities? Are these concepts even enforceable?

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“Arbitration itself isn’t surprising but saying that you agree not to follow your state law … that may or may not be enforceable,” said Gabe Feldman, a sports law professor at Tulane and an expert on college sports legal matters. “No matter what the sides do, they’re going to be sued. This is an effort to rein in the lawsuits. It’s just not clear how enforceable all these provisions will be.”

Signing an agreement that exempts a state university from following its own state law is particularly troubling, says Ramogi Huma, the executive director of the National College Players Association. That’s especially true when the consequence is potential eviction from your own conference.

Such a concept is actually addressed in Tennessee’s state law. The law prevents an athletic association from adopting and enforcing rules that violate state law and prohibits any association from “interfering” with a school’s membership status, voting rights and revenue distribution.

Huma has helped dozens of states adopt laws that provide their universities with advantages in the NIL era. He calls the affiliation agreement a “literal smoking gun in liability” for public universities.

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Mit Winter, a sports law attorney at Kennyhertz Perry LLC who works with both schools and collectives, unearthed details of the Tennessee law last week. The law gives schools and third parties in the state “cover” not to follow rules that may be subject to antitrust scrutiny, he says. Many of the House settlement-related concepts — most notably the clearinghouse — could be in jeopardy of such scrutiny.

“Even if Judge Wilken approves the House settlement, her order will not address whether new NCAA rules that come out of the House settlement comply with antitrust law,” Winter says. “She’s only ruling on whether the settlement agreement is fair to absent class members.”

The settlement — an agreement by the NCAA and power conferences to settle consolidated lawsuits over athlete compensation — will usher in a new more professionalized model where schools can share millions of revenue with athletes in a capped system that features a new enforcement arm to police booster deals.

A decision to approve or deny the settlement is now in the hands of Wilken. While the timeline is at her own discretion, the settlement’s revenue-sharing concept is scheduled to begin July 1 — a fast-approaching date that launches college athletics into a new world.

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At the center of much of the scrutiny around the settlement is “NIL Go,” the Deloitte-run clearinghouse charged with determining if third-party NIL deals with athletes are legitimate and of fair market value. The clearinghouse is using an algorithm to establish a “compensation range” for an assortment of deals — a concept that many legal experts expect to trigger a bevy of legal challenges.

In a gathering at ACC spring meetings last week, Deloitte officials shared notable figures with athletic directors and coaches, including that 70% of past deals from booster collectives would have been denied, while 90% of past deals from public companies would have been approved.

In March, Deloitte shared more figures with administrators. About 80% of NIL deals with public companies were valued at less than $10,000 and 99% of those deals were valued at less than $100,000.

These figures suggest that the clearinghouse threatens to significantly curtail the millions of dollars that school-affiliated, booster-backed collectives are distributing to athletes — salaries that are masquerading as endorsement or commercial contracts.

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The affiliation agreement aims to, above all, protect the clearinghouse’s decisions, exempting it from lawsuits from schools and preventing those schools from circumventing the settlement’s compensation cap through affiliated entities such as collectives.

“If we go back to external NIL that is separate from the House pool revenue share and back to a pay-for-play model, then why did we settle?” asks Baylor athletic director Mack Rhoades, who is aware of the affiliation agreement. “We are going to spend $20.5 million (the per-school cap in Year 1) and then on top of it go to pay-for-play with collectives?”

“In this new era, we are already trying to circumvent the rules,” Colorado athletic director Rick George said during a panel at the Fiesta Bowl Spring Summit earlier this month. “We’ve got to stop trying to circumvent the rules.”

State NIL laws permit schools to do just that, and many of them were adopted after encouragement from school administrators seeking an advantage for their university.

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At a recent meeting of SEC administrators, Oklahoma athletic director Joe Castiglione addressed the subject of circumvention in an impassioned plea to colleagues.

“We understand (the settlement) may not be perfect, but we all must commit to it and I mean truly commit to it or it doesn’t have a chance of working,” Castiglione told Yahoo Sports in a recent interview. “There’s more talk out there about people already dismissing the chance of this working than finding durable solutions. It’s up to us to change the narrative.”

State laws have been a prickly issue for NCAA and conference administrators. The laws vary greatly by state, providing schools, even within the same conference, different and often advantageous ways to skirt league and national standards.

For instance, while 14 states currently permit direct school-to-athlete payment, another nine states have laws prohibiting such.

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According to research from the NIL platform Opendorse, roughly half of the states in the U.S. have adopted NIL laws with language that may delegitimize the impending House settlement regulations and enforcement rules. In fact, the five-year-long, multi-million-dollar congressional lobbying effort from NCAA and conference executives is rooted in encouraging lawmakers to pass a federal bill that, among other things, preempts these varying state laws.

The attempt to exempt the College Sports Commission from legal action from schools is an example of the liability that faces any new entity, says Julie Sommer, executive director of the Drake Group, an organization whose mission is to defend academic integrity within college athletics.

The CSC, soon to hire an executive director, board and enforcement staff, is expected to manage the enforcement and infractions of the new athlete revenue-share era, in a way replacing a much-maligned NCAA-controlled process of lengthy investigations, controversial enforcement decisions and what some believe to be unnecessary committee hearings.

“The NCAA is an association of its member schools,” Sommer says. “The same challenges of potential monopoly power and antitrust issues that the NCAA currently faces could easily transfer to a new, similarly structured organization. You can leave the NCAA, but you can’t escape the problems of the NCAA.”

This news was originally published on this post .

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