– November 7, 2019
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On October 29, the NCAA’s Board of Governors voted unanimously to permit student-athletes to receive compensation for use of their name, image, and likeness (NIL). 

The decision marked a dramatic reversal for the NCAA. When California’s Fair Pay to Play bill was signed on September 30, the NCAA slammed it as “unconstitutional.” NCAA president Mark Emmert told athletic directors the act posed an “existential threat” to college sports. 

Fast forward just a few weeks, and the NCAA has totally changed its tune. Its October 29 statement quoted Michael V. Drake, chair of the board and president of the Ohio State University, as saying: “We must embrace change to provide the best possible experience for college athletes.” 

Is the NCAA Admitting Defeat, or Calling a Timeout?

So why did the NCAA make such a dramatic reversal? There’s no doubt that the passage of the California bill put enormous pressure on the NCAA to reform its rules. But it doesn’t explain the sudden timing of its decision. The California bill wasn’t supposed to go into effect until January 2023. This delayed implementation was deliberately designed to give the NCAA ample time to review and reform its policies.

What ultimately forced its hand was the introduction of similar bills in eight other states including other large population hubs like New York and Florida. There has also been a tidal wave of public support throughout the country in recent years. A poll conducted by Seton Hall found that two-thirds of Americans were in favor of allowing student-athletes to get paid. 

But is the NCAA really throwing in the towel on player pay? Or is it simply calling a timeout to stall its opponents’ momentum before other states follow California’s lead? 

It’s complicated. There’s no doubt the NCAA issued its October 29 statement in order to bide its time. Skeptics have pointed out that the statement is light on specifics and, in many important areas, deliberately vague. This ambiguity is on display in the opening sentence of the statement, which states that the NCAA’s board voted unanimously to permit student-athletes to “benefit from” the use of their NIL “in a manner consistent with the collegiate model.” 

The fact that they use the more passive phrase “benefit from” rather than “receive pay for” is intentional. Payments are fairly straightforward. Benefits, however, can be deferred. The NCAA has previously explored the possibility of allowing student-athletes to invest any money they might receive for use of their NIL in a trust fund that they wouldn’t be able to access until their collegiate playing days are over. This would enable the NCAA to maintain the amateur status of its athletes while claiming it is permitting players to receive some form of compensation. 

This might be a step in the right direction, but it hardly addresses a major complaint that many former players and critics have: that student-athletes are forced to live in penury in college while coaches, athletic-department officials, and network executives rake in millions. 

If allowing student-athletes to earn money is the morally just thing to do, it seems strange the NCAA would suggest that we must postpone that justice from a time when that aid is most desperately needed to a future date when it is less critical. This is especially true for star athletes from impoverished homes, whose families must endure prolonged poverty while others profit immensely simply to avoid running afoul of the NCAA’s arbitrary rules. 

Former Oklahoma State and Dallas Cowboys star receiver Dez Bryant, whose family endured grinding poverty while his hard work made millions for others during his college run, is just one example. Although his story had a happy ending (Bryant was drafted in the first round of the 2010 NFL draft by the Dallas Cowboys and received a multimillion-dollar contract), there are plenty of tragic examples of star athletes who were injured in college and never had a chance to play professionally and lift their families out of poverty.

The concluding phrase of the NCAA’s opening statement — “in a manner consistent with the collegiate model” — is also intentionally vague. The “collegiate model” is amateurism. The NCAA has long deployed the term “student-athlete” to emphasize that the role of student, not professional, must always come first. The NCAA also outlines eight “principles and guidelines” for “modernization” in its statement that invite more questions than answers. Each is crafted to leave ample leeway for the NCAA to either strictly regulate or ban direct forms of compensation. 

NCAA president Mark Emmert concluded the statement with a particularly revealing caveat: “The board’s action today creates a path to enhance opportunities for student-athletes while ensuring they compete against students and not professionals” (emphasis added). With phrases like this, it is no wonder that so many are skeptical of the NCAA’s true motives. 

Does this mean that this announcement is a giant head fake and that the NCAA won’t ultimately allow student-athletes to receive compensation for their NIL? Not necessarily. At this point, the push behind allowing players to get paid is too strong for the NCAA to ignore. 

In this respect, the NCAA’s statement, while incomplete, should be seen as a step in the right direction. As I’ve argued, these long-overdue reforms should come from the NCAA — not state or federal legislators. And the American people largely agree. The same Seton Hall survey that found that two-thirds of Americans support allowing student-athletes to get paid also found that 59 percent of respondents believe that this is a matter that the NCAA should handle itself. Only 27 percent believed that state governments should be involved. 

As a private regulatory body, the NCAA has the prerogative to change its rules whenever it likes. It would be much easier for the NCAA to take the initiative to make these changes itself than for it to wait for state legislators in all 50 states to craft their own rules for college athletics. 

The NCAA picked up on this argument in its original statement responding to the signing of the California bill: “As more states consider their own specific legislation … it is clear that a patchwork of different laws from different states will make unattainable the goal of providing a fair and level playing field for 1,100 campuses and nearly half a million student-athletes nationwide.” 

On this point, the NCAA is correct. It’s worth noting that each of the bills in the eight other states that have introduced Fair Pay to Play legislation has different specifics. New York’s bill adds a provision that athletic departments must share 15 percent of their annual revenue from ticket sales with athletes. This means that athletics departments would directly pay players — something the California law expressly prohibits. In South Carolina, colleges would be allowed to pay $5,000 annual stipends to “athletes in profitable sports like football and basketball.” 

The NCAA deserves credit for taking this critical first step. But just because it has opened the door to allowing athletes to get paid doesn’t mean that it is going to allow college athletes to profit off their NIL in a completely free marketplace. In the coming months, the NCAA will release more specifics about how it plans to follow through on its October 29 decision. Only then will we see how serious the NCAA really is about reforming its rules. 

The End of the Era of Prohibition in College Sports?

Does the NCAA’s decision mark the end of the era of amateurism in college sports? Critics of allowing student-athletes to get paid have long argued that keeping money out of college sports is critical to maintaining the “integrity” of the games. 

These critics ignore two things. For starters, we are a few decades and $14 billion too late to “keep money out” of college athletics. When college students began forming sports teams in the 1800s, college sports were nothing more than a club activity. 

Over the years, athletic departments and conferences gradually emerged, culminating with the formation of the Intercollegiate Athletic Association by President Teddy Roosevelt in 1906 (it changed its name to the NCAA in 1910). Still, for over a century there was virtually no money to be made in college sports. College athletics merely provided a clever way for colleges to attract students, generate school spirit, and raise a fairly trivial amount of funds for their sponsor athletic departments and colleges. 

Fast forward to today, and college sports has evolved into a multibillion-dollar industry. Television and radio contracts are now worth tens of billions of dollars. Star college athletes like Zion Williamson and Tua Tagovailoa are just as famous as their professional counterparts. 

No one could’ve predicted what a cash cow college sports would become a century ago. It is an accident of history that college sports have become so entrenched in American life. (Indeed, their massive popularity is entirely unique to the United States.) To some degree it makes sense that colleges, with their large alumni bases and regional influence, would have an easier time establishing and growing a dedicated fan base than any potential competitors. 

The continued success of college sports is in large part a testimony to America’s long-standing passion for sports. It is also a testimony to the power of network effects and path dependence, which have prevented many minor league sports from catching up to the popularity of their much older and more deeply entrenched college counterparts. 

That said, with the billions of dollars that college sports like football and basketball generate today, it is delusional for the NCAA or any group to think that it can possibly keep money out of the hands of star athletes. 

This leads us to the second key fact that defenders of maintaining the amateur status of student-athletes often neglect: the NCAA’s long-standing prohibition on paying athletes hasn’t actually prevented them from getting paid. All it has done is shift this activity to the black market, where it cannot be monitored by the NCAA, the IRS, or anyone else. 

The NCAA has tried to defend its prohibition on paying players by saying that it protects student-athletes from being corrupted by “harmful outside influences.” But in reality, the NCAA has just been using the same failed playbook as prohibitionists in the 1920s, with the same failed results. As scholars of the Prohibition era 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 negative unintended consequences can be seen in the NCAA’s prohibition on paying student-athletes today. Far from protecting them all that the NCAA’s policy has done is force student-athletes to interact with “harmful outside influences” and accept payment in less optimal forms than cash (think in-kind benefits like free shoes and cars) that are harder to trace. Just as 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.

The recent NCAA basketball corruption scandal is a striking example. 

In highly profitable sports like football and basketball, shady boosters and coaches are going to find a way to pay elite players one way or another, no matter what the rulebook says. These black market middlemen are the biggest beneficiaries of the NCAA’s draconian rules, not coaches, not schools, and most certainly not student-athletes. 

This fact highlights an important economics lesson: prohibiting voluntary transactions between consenting adults typically results in negative unintended consequences. 

The U.S. government eventually came to its senses and ratified the 21st Amendment to end federal prohibition of alcohol after 14 years of failure. The NCAA would be wise to do the same with respect to its century-old prohibition on paying players. This prohibition has failed, even by the NCAA’s 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 shadier figures than they would if they were allowed to be paid above board.

Next Steps: Will This Lead to the “Professionalization of College Sports”?

After the California bill was signed on September 30, the Pac-12 (the athletic conference that oversees four California schools: USC, UCLA, Stanford, and Cal) issued a statement denouncing the bill, arguing that the law would “lead to the professionalization of college sports and many unintended consequences.” This sentiment has been echoed by many critics of the bill who believe that student-athletes receiving money will somehow taint the alleged purity of college athletics. 

Will allowing players to profit off their NIL lead to the professionalization of college athletics? Not entirely. For all the talk of college sports being a multibillion-dollar industry, the only two college sports that are consistently and immensely profitable are football and men’s basketball. So we should recognize that any rule change will likely only have a major impact on star players in these sports. Athletes in less popular sports can still benefit, and some, like UCLA gymnast Katelyn Ohashi, who was a leading proponent of the California bill, might even profit immensely. But the biggest payouts will still very likely go to the star players in the most profitable sports. 

Still, the NCAA’s decision is a first step toward making big-ticket college sports like football and men’s basketball more like their professional counterparts. 

What people need to realize is that this is a good thing! We should celebrate the fact that student-athletes might now be able to more fully share in reaping the rewards of their hard work. There is a reason why virtually all great college athletes decide to go pro at the first chance they get and no professional athlete has ever refused a paycheck for fear that it might corrupt them. In a free market, workers are handsomely rewarded for raking in millions of dollars for their companies. College sports is an exception. And this is only because of an accident of history: the Roosevelt administration’s establishment of the NCAA cartel more than a century ago. 

It’s worth noting that the same politicians and pundits who argue that permitting athletes to get paid will destroy the “integrity of college athletics” have no moral qualms about accepting their paychecks and soliciting money for their respective causes. Why should college athletes be treated as second-class citizens and be forced to navigate the underground economy of college sports just to pass a bogus purity test?

One other major objection that has been raised to allowing student-athletes to get paid for use of their NIL is that there would be an enormous inequality in how much some athletes would earn relative to others. This is particularly true for star athletes in the most profitable sports like football and men’s basketball, where the lion’s share of endorsement money would likely go. Many critics, including some California legislators, have expressed a desire to promote “gender equity” and uphold the tenets of Title IX. Others have expressed concern that the inevitable inequality would create resentment in the locker room and tear apart the fabric of college sports. 

Will all college athletes profit equally from this rule change? Of course not. But that shouldn’t be the standard. The goal of any rule change — be it in sports, in politics, or any other facet of life — shouldn’t be equality of outcome. It should be fairness

In this case, fairness doesn’t require that all athletes must receive the same compensation. It requires that the NCAA not place any unnecessary barriers in the way of student-athletes being able to engage in voluntary transactions. Better players should be able to get paid more, just as in professional sports. Sure, less popular players might envy their more successful counterparts. But that hasn’t torn apart the fabric of the NFL, the NBA, or any other professional sports league. 

The NCAA might have some justifiable reasons to regulate endorsement deals. Some have argued that it could apply a “tax” of sorts on these deals. The proceeds of this tax could then be redistributed to less successful players or programs. Of course, this gets into some controversial territory (I can hear the political debates now). The NCAA and its members will have to consider these implications carefully. 

Whether you agree with the ethics of this redistribution or not, we should all agree on two things. First, regulating player pay is a far better solution than prohibiting it entirely. Under prohibition, no one wins except the NCAA and athletic departments that are able to profit off of cheap labor. At least in a regulated system, student-athletes could taste some of the fruits of their labor. 

Second, equal pay is not the goal. If we genuinely believe that college athletes should be paid, we shouldn’t get distracted by ancillary debates over gender or pay equity. After all, based on the economics of college sports, the only way for there to be equal pay for all college athletes is for none of them to get paid. Sure, less popular athletes in less popular sports likely wouldn’t get much money, as is currently the case. But they shouldn’t let envy inspire them to protest others making money. That isn’t an example of fighting for “fairness.” It’s an example of spite. 

This is one of the reasons why the NCAA should take the initiative in implementing these pay-to-play reforms, not state legislators. A number of politicians have already called for colleges and athletic departments to pay players directly. This idea might sound appealing at a superficial level. But it’s a trap. Under Title IX, players might have to be paid equally across all sports if their paychecks come in any way from the government. Again, because of the economics of college sports, equal pay means no pay. That’s why, at least for the time being, it is better that we allow student-athletes to receive pay from approved third parties for use of their NIL. 

Conclusion

There are many issues the NCAA will have to consider in the coming years as it implements these proposed reforms. Equity and players’ safety will be among the top concerns. Reasonable people can disagree as to exactly how it should go about these reforms to ensure fairness and player safety. But what should be undeniable is that the status quo is untenable and change is necessary. 

Progress is often messy and uneven. Figuring out the best way for student-athletes to get paid is no exception. But allowing them to get paid is an idea whose time has come. It’s much better that we embrace the challenge of these reforms than continue to let student- athletes struggle under a broken system. 

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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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