The University Athletic Association (UAA) has recently updated the criteria regarding its ‘legitimate business interest’ rule. Now, when student-athlete compensation is involved, affiliated supporting groups within education institutions are to be treated identically to other businesses. This policy modification was prompted by litigation warnings from the attorneys representing plaintiffs in the University v. NCAA case, cautioning against all-inclusive dismissal of shared deals, an act that infringes upon the bilateral deal’s antitrust measures. Outwardly a minor procedural amendment, it signifies a salient shift in athletic power dynamics, indicating that athletes have attained significant influence and traditional authorities are losing their means of control.
Precipitated by the University v. NCAA case, this leeway developed, formalizing a limitation on profit sharing while concurrently permitting endless third-party NIL (Name, Image, and Likeness) funds, given they comply with UAA scrutiny. This caveat has effectively instigated a contentious situation regarding the determination of ‘legitimacy’.
The UAA attempted to quell this dispute, with an initial directive suggesting any group whose ‘primary aim is to compensate athletes’ did not meet the standard of business purpose. As a consequence, Deloitte reviewers began to reject endorsement and merchandise agreements, deals that made considerable contributions to the NIL market’s $1.7 billion valued last year.
This move led to an immediate legal backlash. Class representatives contested the UAA’s imposition of an unapproved court limitation, suggesting that if this trend endured, it would lead to a rekindling of litigation efforts.
Confronted with the risk of potential antitrust claims, the UAA conceded, pledging to reevaluate rejected contracts under the same criteria applied to corporate benefactors.
In the near future, educational institutions will be making agreements worth upwards of ~$22 million annually. However, these figures come attached with maximum limits and roster constraints. Student-athlete collectives, on the other hand, remain an unregulated alternative. As long as both revenue streams remain accessible, athletes can create competitive situations instead of accepting one-sided conditions.
Last ten years saw every effort to impose a ceiling on athlete remuneration — from O’Bannon to Alston to House — met with opposition in court. The UAA’s retreat points to an understanding among regulators that they would probably lose the forthcoming round in the judiciary too. This augments players’ bargaining power even before a lawsuit is filed.
Scrutinizing thousands of collective’s ‘genuine’ operational activities is impractical. Unless the UAA desires to probe into individual supporter’s golf outings, numerous agreements should progress based on documentation. This allows athletes to solicit offers without apprehension of an overburdened regulatory body stepping in.
Observers have noted that fans expect continuity in teams, boosters are gaining power and coaches require immediate financial capital for recruitment. Any attempt to restrict this emerging system would likely result in talent migrating to establishments or sports that continue to compensate.
Rolling back is not an easy option for educational institutions. On one hand, the revenue-sharing cap already protects budgets. On the other, chasing additional funds might result in increased lawsuits, rather than savings.
State laws tend to side with the collectives. For instance, Florida, Texas, and Tennessee have laws benefiting these supporting groups. Hence, a nationwide suppression effort would conflict with regional regulations and political interests.
If a conference under-finances NIL, it risks losing new talent overnight. The ensuing competition necessitates sports departments to accept these collectives, even if they are uncomfortable with the perception.
Looking forward, monitoring the number of initially declined agreements that are eventually approved will be important. Early validations are likely to inspire more daring contracts. Expect collectives to create media networks, charity events, and membership clubs — these are intermediary businesses that effectively channel funds to players. Realistically, a large-scale restriction on NIL funding could only come from a Congressional act, a prospect that currently appears unlikely. Until that changes, the power lies with the athletes who fill the stadiums.
The post Shift in Athletic Power Following UAA’s Policy Update appeared first on Real News Now.
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