Judge Tethers Student Athlete Compensation to Education, Ruling Considered Win for NCAA   

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Late last Friday afternoon, U.S. District Judge Claudia Wilken ruled that the NCAA cannot “limit [the] compensation or benefits related to education” awarded to student-athletes competing in Division I men’s basketball, women’s basketball or the football Bowl Subdivision. The ruling means that schools previously limited to covering the cost of attendance (plus some other expenses like meals) for student-athletes, can now reimburse them for items “related to the pursuit of various academic studies” (think: computers, music instruments, science equipment, tutors). Back in November, the NCAA settled the damages on the antitrust claim for $209 million; a total meant to account for the difference in the value of a scholarship under the NCAA’s previous bylaws and Wilken’s revamped understanding of what it entails – for +/- 50,000 current/former athletes.

Howie Long-Short: The premise of the claim filed by former WVU football player Shawne Alston back in ’14 (and by Martin Jenkins – Clemson football, Nigel Hayes – Wisconsin basketball and Alec James – Wisconsin football since been consolidated within) is that NCAA rules restricting the amount that schools can pay student athletes is anti-competitive and suppresses what they would otherwise command on an open market, so while the decision to provide additional benefits tethered to education is certainly an “incremental increase” it fails to “help collegiate athletes achieve their market value”; remember, the plaintiffs main goal was to eliminate all restrictions. Friday’s ruling upheld the NCAA’s amateurism defense against antitrust legislation (under the premises that by paying the athletes division would occur amongst the student body and that there’s a “valid purpose” to keeping pro and college sports unique to one another), so it’s hard to argue they’re not the biggest beneficiaries of Wilken’s decision.

The reimbursement of education related expenses is a positive change that will be welcomed by college athletes unhappy about the disparity between the “extraordinary revenue” generated (see: March Madness contracts worth $19.6 billion through ’32) and “modest benefits” that they’re afforded, but it’s unlikely to satisfy them. Ramsey Chamie, a sports lawyer and adjunct professor at the NYU Tisch Institute for Global Sport, explained “there’s no amount of educational expenses that could get the players close enough to the $1 billion/year that the NCAA makes on the other end. I don’t think the expenditures could ever be high enough to capture the true market value of the top athletes.”

Speculation exists that tethering compensation to education represents the NCAA’s last ditch effort to refrain from paying student athletes, but Ramsey believes there’s room for further negotiation between educated related expenses and an unregulated market. “A court could, for example, put nominal caps on the dollar amounts – Judge Wilken initially tried that in the O’Bannon case” (a decision that was overturned by the 9th Circuit Court).

Friday’s ruling won’t have much impact in the short-term. The NCAA has 90 days before the permanent injunction goes into place and it is currently stayed, pending appeal. Some believe “this could ultimately go all the way to the Supreme Court, in which case it could be years” before a resolution is accepted.

On Thursday, North Carolina Republican Congressman Mark Walker will introduce a bill that would amend the US tax code and require the NCAA and the schools to allow players to receive third party payments for their name, image and likeness. That’s the potential game-changer that would allow collegiate sports’ biggest stars to “capitalize on their market value – to some extent, while maintaining their amateur status.”

Fan Marino: Wilken’s decision does empower the P5 conferences to decide on education related compensation, but don’t expect a competitive balance issue to arise. There are only so many telescopes and trips abroad that a program could buy before they run out of expenditures that can be explained away.

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Author: John Wall Street

At the intersection of sports & finance.

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