NEW HAVEN, Conn. – The Drake Group shares observations on the “College Athlete Economic Freedom Act” proposed by Senator Chris Murphy (D-CT) on February 5, 2021. This bill was also introduced by Congresswoman Lori Trahan (D-MA) in the House.
The “College Athlete Economic Freedom Act” pertains directly to NIL (Name, Image, and Likeness) rights for college athletes. It goes well beyond existing proposed legislation at the federal and state level, and the proposed new NCAA rules, in giving athletes broad rights, including virtually unrestricted access to earning NIL income in individual and group NIL agreements. Indeed, there are no guardrails to constrain athlete NIL income. Moreover, the Act gives athletes the right to organize through collective representation, like a trade association or 501(c) nonprofit, which is significant for group NIL agreements, and a private antitrust right to sue under the Act that makes any violation per se illegal.
This more open approach is appropriate. There is no reason why college athletes should be controlled by the NCAA, conferences, or their institutions any more than other students in their attempt to earn NIL income. As long as the athlete is contracting with third parties at fair market value, The Drake Group believes that other restrictions are unnecessary. While it is arguable that contracts with alcohol
and gambling companies should be restricted, the NCAA does not restrict its member colleges from signing deals with such companies for ethical reasons, and so athletes should not be restricted either.
Guardrails that restrict deals to third parties and fair-market value, however, are necessary for the following reasons. If college athletes are allowed to enter into employment contracts with their universities (rather than only with third parties), then their relationship with the university is transformed from an educator/student relationship to an employer/employee one. Such a transformation would undermine the fundamental purpose of a college education. While this purpose has already been vitiated, The Drake Group believes that it is both desirable and possible to restore the intended relationship rather than discarding it in the name of free markets. In addition, if the college athlete is compensated in noneducational coin by the university, the contract’s terms become subject to Title IX since universities benefit from $130 billion of federal government subsidies annually. Compensation schemes that reflect athlete revenue production will only reward male athletes and, hence, violate core principles of gender equity.
A fair-market value guardrail is also important because it will prevent the introduction of athlete NIL rights from devolving into an open labor market for high school and college athletes. Absent a fair-market value rule, a university could arrange with a local retailer an exchange such as free use of a luxury box with catering at football games if the retailer offers $100,000 to a football recruit for
making an appearance at its store to sign autographs.
The “College Athlete Economic Freedom Act” is silent on both the possibility of university/athlete contracts and on a possible fair-market value guardrail. It is also ambiguous on the interpretation of the scope of NIL rights. Does it, for instance, include revenues from live broadcasting of games?
While The Drake Group is concerned about these particular issues in the “College Athlete Economic Freedom Act,” we welcome the bill’s broad assertion of athlete rights that goes well beyond those proposed in the Rubio, Gonzales, and Wicker federal bills, the plethora of state bills, as well as the tightly constrained proposals that the NCAA put forward. At the very least, the Murphy/Trahan College Athletic Economic Freedom Act will open up the discussion of athlete rights that have long been artificially and unnecessarily suppressed by the NCAA and, ultimately, help foster a more meaningful and equitable system for college athletes in the United States.