– October 7, 2019
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NCAA goes exitinct

Last week, California governor Gavin Newsom signed the Fair Pay to Play Act, which prohibits California colleges and the NCAA from declaring student-athletes ineligible if they hire an agent or receive compensation for use of their name, image, or likeness (NIL). The law doesn’t take effect until January 2023, but it has already sent shockwaves through the college sports world. 

To many, allowing student-athletes to be paid is an idea whose time has come, particularly in an area where so many profit off of college athletics. A record number of Americans now support paying college athletes. Support is especially strong among defenders of the free market

Allowing players to be paid is a laudable goal. NCAA critics are right to demand change. But California’s bill isn’t the best way of achieving that result. As a general rule, we should be wary of any proposal that calls for the government to interfere with private organizations. The NCAA, for all its flaws, is a private regulatory body. It has a right to enforce whatever policies its members agree to. That said, having that right doesn’t necessarily mean its policies are right. 

If there is one good thing about California’s bill, however, it is that it is very likely to accelerate player-focused reforms by colleges and even the NCAA that would make college sports operate less like a state-protected monopoly and more like a well-functioning market. That sort of bottom-up reform, not California’s top-down approach, is what we should ultimately strive for. 

Step 1: Recognizing the Failure of Prohibition in College Athletics

A key fact that defenders of amateur athletics often neglect is that the NCAA prohibition on paying athletes doesn’t actually mean no athlete gets paid. It simply shifts this activity to the black market where it cannot be monitored by the NCAA, the IRS, or anyone else. In sports like football and basketball that generate billions in revenue, shady boosters and coaches are going to find a way to pay elite players, no matter what the rulebook says. These middlemen are the biggest beneficiaries of the NCAA’s policies, not coaches, not schools, and most certainly not athletes and their families. The recent NCAA basketball corruption scandal is a striking example.

This brings us back to one of the most important lessons in economics: prohibiting voluntary transactions between consenting adults generally results in negative unintended consequences. The NCAA is effectively using the same playbook as prohibitionists in the 1920s, with the same failed results. As scholars note, prohibition of alcohol resulted in more binge drinking, more alcohol-related deaths (turns out Jack Daniels is a safer product than bathtub gin), and the rise of the Mafia and other criminal enterprises. The same applies to the war on drugs today. All the NCAA’s policy does is force student-athletes to interact with seedy figures and accept payment in less optimal forms than cash (think in-kind benefits like free shoes, cars, etc.) that are harder to trace. Just like with the rise of the Mob during Prohibition, this creates a feeding ground for charlatans and grifters who have a comparative advantage in skirting the rules.

As with drug and alcohol addiction, the first step toward recovery is recognizing there is a problem. The NCAA’s current system of prohibiting player pay has failed, even by its own standards. It doesn’t do anything to “level the playing field.” Programs with the deepest pockets and most boosters have an enormous advantage under the current rules. There is far more parity in professional sports precisely because all of this economic activity takes place above board in a well-functioning market. Nor does it protect student -athletes or their families. If anything, it exposes them to far sleazier figures than they would if they were allowed to be paid.

Step 2: Identifying the Solution — the Private Path to Paying Players, and Why It’s Wise

So where should we go from here? Colleges and athletic departments can and should demand that the NCAA change its rules to allow players to be paid for the use of their NIL nationwide.

Despite its well-earned notoriety for draconian rules and Orwellian supervision of college athletes, the NCAA is not a government authority. It has no “dictatorial” powers. It is a voluntary, “member-led organization” created by its members to serve its members, not the other way around. It is more akin to a homeowners’ association than to the KGB or even the FBI. 

The rules the NCAA enforces are entirely up to its members. If a large enough number of schools push to amend the rules, they can. This united push is what prompted the NCAA to allow graduate transfers and amend countless other bad policies. The same could be done with respect to allowing players to be paid for their NIL. In short, colleges created the NCAA. They can alter its rules and, if necessary, leave it however and whenever they like.

Why should colleges and athletic departments lead the way instead of politicians, besides the obvious reason that governments shouldn’t try to strong-arm private, voluntary organizations?

For starters, it is proactive. Colleges needn’t wait to see if their state legislators pass similar bills. They could start revising the rules immediately. The NCAA has already announced a working group to examine how it can respond to federal and state laws pertaining to paying players for their NIL. This is a step in the right direction. However, it is unlikely to call for dramatic changes absent strong pressure from its members. 

Another benefit is that the NCAA (or any other supervisory body) wouldn’t have to sort through the myriad specifics and interpretations state by state. Once revised, the policy would apply nationwide. This would allay any concerns about the chaos that might result if states enacted a “patchwork of different laws,” which was the motivation for Ohio congressman (and former Ohio State wide receiver) Anthony Gonzalez’s proposal to pass a federal Fair Pay to Play law. It would also avoid the Commerce Clause defense that the NCAA is relying on to claim that the California bill is “unconstitutional.” It’s very possible the Supreme Court could shoot down California’s bill on the grounds it would affect interstate commerce by allowing one state to operate byon a different set of rules. But if the policy came from the NCAA rather than a state government and applied nationwide, there’d be no constitutional dispute. 

Last but not least, allowing players to be compensated is the right thing for the NCAA to do, both morally and practically.

As a rule of thumb, we shouldn’t prohibit voluntary exchanges between consenting adults, particularly if it doesn’t impose a harm on anyone else. This is especially true for many college athletes who come from poor backgrounds and could greatly benefit from any financial support. As the NCAA is fond of reminding us, only a small fraction of student-athletes make it to the pros. That means that college is the only time they have to capitalize on their athletic prowess. Closing that already-narrow window in the name of maintaining the “integrity” of amateur athletics seems highly unnecessary, particularly when coaches, colleges, athletic directors, and many others are allowed to earn billions off their hard work. 

LeBron James expressed this eloquently: “Part of the reason I went to the NBA was to get my mom out of the situation she was in. I couldn’t have done that in college with the current rules.” 

It’s also strikingly unfair that student-athletes are prohibited from making money off their NIL when every other student can. Kansas City Chiefs safety Tyrann Mathieu recalled that his friends made thousands off selling apparel with his NIL while he wasn’t allowed to earn a penny. There are countless cases where everyone profits off an athlete’s NIL except that athlete. 

Iowa student Carson King recently went viral for holding up a sign at the popular college-football show College Gameday that read, “Busch Light Supply Needs Replenishing,” with his Venmo handle at the bottom. King raised more than $3 million, which he graciously decided to donate to the University of Iowa’s Stead Family Children’s Hospital. Had King been a player on the field rather than a student in the stands, he would’ve likely been declared ineligible, even if the money ultimately did go to charity. 

Evolve, or Go Extinct 

What if the NCAA is unwilling or unable to change its policies? After all, the NCAA has more than 1,100 member schools across three divisions. The interest of small and large schools within each division almost certainly wouldn’t be aligned on this issue since the NIL rule would primarily benefit marquee athletes at bigger schools. 

Thankfully there are plenty of ways to reform college sports that don’t require the NCAA as it is currently construed. One option would be for popular schools in profitable sports to break away from the NCAA and devise their own regulatory bodies. Most schools in the Power Five football conferences, for instance, would jump at the opportunity to do this before schools in California can start recruiting players with the promise that they’ll have the chance to profit off the NIL. Some marginal Power 5 and many Group of Five schools might object, but they would have the choice whether to enter the new arrangement or stick with the status quo. 

Similar steps could easily be taken for men’s basketball (albeit with more schools, given the fact that there are three times more Division I men’s basketball schools than football schools), where NCAA efforts to maintain the facade of amateur athletics have already been a complete laughing stock. 

For years, college sports was the only real option for elite high school football and basketball players looking to eventually go pro. Unlike sports like baseball, there was no viable minor league system they could choose over college sports. The XFL plans to allow high school graduates to play professional football immediately starting in 2020. New NBA G League rules and the Euroleague have already made it possible for elite high school basketball prospects to earn six figures right out of high school. Given these developments, the amateur model the NCAA has relied on is no longer viable for football and men’s basketball. 

These developments in football and men’s basketball are important because the entire business model of college athletics is built on these two sports. For all the talk of college sports being a multibillion-dollar industry, they are the only two that are consistently and immensely profitable. The billions of dollars they generate is used to subsidize other sports. So what should the NCAA do about these other sports? It’s true that any move to break away football and basketball programs could cause less funding to be available for other sports. That is precisely why the NCAA should revise its policies to allow players to be paid in order to avoid this outcome. No matter what, changing the NIL rules would benefit all athletes, even those in less popular sports. This includes female athletes like UCLA gymnast Katelyn Ohashi, who was unable to make any money off a viral YouTube video of her floor routine. Many female athletes have criticized the Pac-12 conference for claiming that California’s bill would disproportionately hurt women. 

All this is, of course, speculation. The main point is that colleges have plenty of options for improving or replacing the NCAA. They should get to work on this immediately, before politicians get a chance to swap the unpopular NCAA bureaucracy for an even more corrupt political one. 

Given the enormous pressure it’s under, the NCAA faces a stark choice: evolve or go extinct. Either way, it’s time for change. Allowing players to be paid for using their NIL is an idea whose time has come. Here’s to hoping this is implemented through private action, not government. 

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Scott A. Burns

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Scott A Burns is an Assistant Professor of Business and Economics at Ursinus College. His research focuses on financial innovation in the developing world, including the mobile money revolution that has taken place in Sub-Saharan Africa. He has published scholarly articles in Constitutional Political Economy, Independent Review, and the Journal of Private Enterprise.

Burns earned his M.A. and Ph.D. in Economics from George Mason University and his B.A. in Economics Louisiana State University.

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