Crowdfunding has been a popular platform for start-ups and small businesses to raise money on the internet. Given the success of crowdfunding platforms, such as Kickstarter, and the costs of playing sports, it was only a matter of time before platforms were introduced solely directed at crowdfunding athletes. Now, several platforms for crowdfunding athletes exist, including:
represent their countries in the Olympics.
Although these crowdfunding platforms can be vital for organizations, olympians, professional athletes, or some amateur athletes, crowdfunding is an attractive and potentially unknown danger for athletes with collegiate eligibility.
NCAA Bylaw 12.01.1 states that "Only an amateur student-athlete is eligible for intercollegiate athletics participation in a particular sport." However, Bylaw 2.9, the NCAA's core principle of amateurism, states "student-athletes should be protected from exploitation by professional and
commercial enterprises." Although the NCAA's definition of amateurism has shifted over the years, receiving any form of compensation (including having something paid for) has been violative of the NCAA's amateurism principles, and has resulted in fines as well the loss of athletic eligibility. For example, Georgia running back Todd Gurley is currently suspended pending investigation into whether he received payment for autographs.
With the increasing prevalence of costly training camps and showcases for young athletes, meaning those who are not yet college eligible, it is easy to see how crowdfunding can be an attractive means of funding attendance at training camps and showcases. Although young athletes may be aware that they cannot be "paid," crowdfunding raises the following questions:
Young athletes and their parents, assuming they are aware that athletes cannot receive compensation, may not inherently view crowdfunding to attend specific events as compensation. Taking a simplistic view, the young athletes and their parents may assume that the rule barring payment prohibits salary-like payments for on field performance. Therefore, those athletes and parents may believe that crowdfunding for a specific event is not violative of NCAA regulations.
This dangerous assumption could be problematic when the young athlete attempts to play in college. Should the NCAA become aware of previous crowdfunding, the player could be fined an amount equal to the funding received and/or suspended. Such a fine could be prohibitive to a college athlete if they used the crowdfunding service several times.
Potentially, the NCAA could hold the young athlete accountable for his or her parents' crowdfunding in support of their athletic endeavors. The NCAA's prohibition against players receiving extra benefits also extends to their parents. The NCAA's investigation into Reggie Bush and his family is a good example of this, although the investigation took place after he turned pro.
While attending USC, Bush's family rented a home from Michael Michaels, who at the time was establishing a sports agency that hoped to sign Bush. Throughout their time in the house (approximately a year) Michaels provided multiple impermissible extra benefits and inducements, including rent free housing, transportation, and money to pay off debts. Although it was alleged that Bush was aware of Michaels providing the benefits to his family (under the purported agreement that he would repay Michaels when he turned pro), Bush's knowledge was immaterial as parents are also prohibited from receiving extra benefits and inducements. The NCAA found multiple violations to have taken place (including violations not mentioned here), and retroactively sanctioned Bush, as he was now a pro player. Bush's experience should serve as a cautionary tale to crowdfunding parents, as an athlete can be sanctioned for their parents' actions as they relate to the athlete.
Lastly, there is a question of whether athlete crowdfunding sites should be responsible in some way for the potential repercussions of athletes utilizing their service. Although there is little, if any, legal recourse against such a site for an athlete unknowingly committing NCAA violations, there is no question that the websites should include a warning regarding college eligibility when signing up for the service, especially if the websites are hosted domestically. That warning should not be buried in their terms of service agreement, but should be explicit. If these sites are truly supporting the advancement of athletes, then they should seek to protect their aspirations by at least providing a warning.
Of course, crowdfunding for athletes is only problematic from an NCAA perspective if the user plays an NCAA sport. For those that don't play such sports, crowdfunding could be instrumental to their amateur and/or professional career. It is unfortunate that NCAA regulations would stand in the way of future NCAA athletes going to specialized camps, or showcasing their abilities, that will help them reach the next level. However, it makes sense. Allowing crowdfunding for future college athletes would create a vehicle by which highly touted young athletes could be financially swayed by colleges, professional teams, and agents. Such inducements are not only banned by the NCAA, but also the professional sports leagues.
Crowdfunding can be positive for many athletes, just not those athletes who plan on playing in the NCAA.
This past Sunday I appeared on Law and Batting Order for a Live Q&A on the state of the NCAA. The discussion included:
If you have never seen a Law and Batting Order podcast, its worth checking out. The Sports Law topics are timely and the content is always informative. I truly enjoyed taking part in the Q&A. Here it is:
Earlier today, I added a Media page to the website, where I will post videos and articles I am featured in. Currently, there are two videos and an article posted. Stay tuned for more, and also keep an eye on the blog for video posts.
Below is the most recent video, which you can find on the Media page. In the video, I discuss my practice and the O'Bannon v. NCAA ruling on the Price of Business show on Business KTEK 1110 in Houston.
On August 8, 2014, one of the most important Sports Law cases was decided. The case, O'Bannon v. NCAA, was a class action lawsuit brought by current and former college athletes that sought to challenge the NCAA's rules prohibiting compensation for FBS football and Division 1 basketball players on antitrust grounds. Specifically, the athletes were challenging the rules that disallowed athletes from receiving a portion of the revenue the NCAA, and its institutions, receive for the use of the athletes' names, images and likenesses in video games, game broadcasts, and other forms of media. The athletes alleged that these rules violated the Sherman Antitrust Act.
Ultimately, the Court found in favor of the athletes, holding that "the challenged NCAA rules unreasonably restrain trade in the market for certain educational and athletic opportunities offered by NCAA Division I schools. The procompetitive justifications that the NCAA offers do not justify this restraint and could be achieved through less restrictive means." Based on its findings, the Court imposed an injunction to:
This case is notable for the implications it has on college sports in both the present and the future. Although the remedies were limited in scope, much of the decision reads of contempt for the NCAA's business practices under the guise of amateurism. This decision may not be the deathblow to the NCAA and/or its practices, but it certainly provides a step in the right direction for athletes to be compensated. Further, and perhaps more importantly, this decision provides the foundation for future legal challenges to the NCAA's practices. Currently, there are multiple challenges to the NCAA's business practices, and since the O'Bannon decision was filed, another class-action antitrust suit has been commenced against the NCAA.
Effects of the O'Bannon decision
Unfortunately, this ruling does little to put money in the players' pockets during college, when they need it. Athletes who have full scholarships can struggle financially during their time in college, as scholarships do not cover the full cost of attendance. Further, there is a public perception that all collegiate football and basketball players are scholarship athletes. This notion is simply untrue. Many athletes, even at the Division 1 level, do not have scholarships. For instance, per NCAA regulations, a FBS football team can have up to 85 players on full scholarship at any given time. However, prior to the college's first day of classes or the team's first game (whichever is sooner) a team's roster cannot exceed 105 players. This means that football teams are allowed to have 20 athletes, approximately one-fifth of the total roster, who are not on scholarship prior to their first game. These walk-on athletes must attend college on their own dollar, and many struggle financially to do so.
However, this decision is still a victory for players' rights. The NCAA has hidden behind its principles of amateurism and the "student-athlete" since its inception, and has vehemently refused (by both actions and omissions) measures that it believed would align it with professional sports leagues. Some of these measures include:
Although this decision did not provide remedies that impact athletes during their college careers, it effectively obliterated the NCAA's concept of amateurism. In discussing the inconsistencies of how the NCAA has defined amateurism throughout its history, Judge Wilken opined that "Rather than evincing the association's adherence to a set of core principles, this history documents how malleable the NCAA's definition of amateurism has been since its founding." The NCAA's convenient principle of amateurism is the foundation of many, if not all, of players' rights issues that should be addressed in further litigation. Most notably, amateurism is one of the NCAA's primary oppositions to the unionization of college athletes.
Importantly, the O'Bannon case has provided a roadmap for future lawsuits on how to challenge many of the NCAA's practices. The decision itself has provided a large amount of language for Courts to utilize in decisions for years to come. The NCAA is currently facing several similar class action cases. One of the current class action antitrust cases alleges that the NCAA has unlawfully capped player compensation to the value of the scholarship. This effectively seeks a free market for player compensation. This case is similar in theory to the O'Bannon case, and could benefit from utilizing the analysis of the O'Bannon decision, particularly Judge Wilken's discussion of amateurism. Certainly, at least some of Judge Wilken's analysis from the O'Bannon decision will be used to frame that case moving forward. Time will tell whether or not the case succeeds, but the O'Bannon decision has exposed a weakness in what has been the NCAA's strongest argument.
Changes through legislature?
In her conclusion to the O'Bannon decision, Judge Wilken opined "It is likely that the challenged restraints, as well as other perceived inequities in college athletics and higher education generally, could be better addressed as a policy matter by reforms other than those available as a remedy for the antitrust violation found here. Such reforms and remedies could be undertaken by the NCAA, its member schools and conferences, or Congress." This statement, while not a ringing endorsement of change through antitrust challenges, also highlights the ease (technically speaking) by which the NCAA's inequitable practices can be remedied, or solidified, through negotiation or petitioning Congress. As the NCAA has refused to budge thus far on these athletes' rights issues, the only remaining path (other than litigation) is by seeking Congressional action.
In light of the several cases the NCAA was facing recently, the NCAA spent $240,000 on lobbying in the last six months. Not only is this amount approximately $80,000 more than the NCAA spent all of last year on lobbying, it is also the most the organization has ever spent on lobbying. There are likely two reasons the NCAA is pursuing this lobbying campaign. Either the NCAA is attempting to solidify its practices with respect to athletes by seeking Congressional action, or their lobbying is a means of damage control.
Despite the NCAA's lobbying, college athletes' rights have become a topic of discussion in Congress. Recently, Congress formed a bipartisan caucus "to inform Congressional members about physical, academic and financial issues college athletes face so they're treated fairly." The Congressional Student-Athlete Protection Caucus, as it has been named, was designed to foster discussions that would "lead to greater accountability on the part of the NCAA" (Charles Dent [R-Penn]). Perhaps as Judge Wilken opined, Congressional action may obviate the need for further litigation to give athletes the rights they are entitled to.
Although the O'Bannon decision did not result in sweeping changes to NCAA practices, the ruling importantly exposed a weakness in the NCAA's arguments that future litigants may be able to utilize to their advantage. Certainly, the several ongoing actions against the NCAA will borrow some of the analysis from the O'Bannon decision. However, as Judge Wilken opined, Congressional action may obviate the need for further litigation. Hopefully, the Congressional Student-Athlete Protection Caucus yields legislation supporting college athletes' rights. Otherwise, the lawsuits will continue until these athletes get the rights they deserved.
Last week, the NCAA eliminated a controversial provision of the contracts it requires DIvision 1 athletes to sign. That is, the organization removed the provision that allows the NCAA, or an assigned third party, to use the name and likeness of the athlete to promote NCAA events without compensation.
Currently, the NCAA is awaiting the decision of a Federal Judge in the O'Bannon v. NCAA trial, which is a class action lawsuit brought by former, and current, Division 1 athletes principally challenging the NCAA's use of the athletes' names and likenesses in television broadcasts, rebroadcasts, and video games without compensation. The NCAA's elimination of the name and likeness provision appears to be an effort to distance the organization from the practices which resulted in the O'Bannon lawsuit.
Name and likeness rights, also known as publicity rights, are the personal rights to control the use of one's name, image, or likeness for commercial use. These rights continue to exist after death and are freely assignable. Publicity rights are State specific.
Publicity rights are an important issue for collegiate athletes because intercollegiate athletics, particularly Division 1 football and basketball, is a multi-billion dollar industry where the athletes do not get paid to play, nor for the use of their names and likenesses. Meanwhile, some NCAA conferences and schools have been making millions on media deals and broadcast rights for their sporting events which rely on the use of the athletes' names and likenesses. Additionally, the NCAA had been licensing the use of these athletes' likenesses, at a profit, for video games. In some cases, athletes' likenesses were used years after their college career had ended, capitalizing on players' success and popularity as a professional. Not only were the athletes unpaid for their on-field performance, but they were also unpaid for the use of their likeness, seemingly in perpetuity prior to the O'Bannon lawsuit.
Although there has yet to be a decision by the Federal Judge in the O'Bannon case, it is telling that the NCAA is removing its name and likeness provision from its athlete contracts. However, some individual colleges and conferences still require athletes to sign name and likeness releases. It will be interesting to see how the Court rules on the O'Bannon case, as it has the potential to reshape the business of intercollegiate athletics.
Quiles Law is an esports and sports law firm based in New York City.
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