Loopholes and College Athletics
What Are The Targets of Opportunity?
Speed Read (Get the headlines here, and read on below)
College sports are undergoing a tremendous amount of change in a very short amount of time and there is no single vision for the way forward.
To gain an advantage schools, athletes, and conferences will look for any edge they can find, including loopholes in rules that have yet to be written on enforced. There, in effect, are no rules now until a new Commission is formed if the House Settlement is approved,
Some altruistic student athletes are creating charities to give back. It’s a commendable way for them to use their NIL money but it also may be a loop hole to abuse the system.
If the rules are not written the right way and enforced it may open the door for foul play. Hopefully the NIL data clearinghouse will eventually make the data available not just to universities but to everyone.
It’s a real understatement to say that there are lots of changes going on in college sports these days. They aren’t just small changes or big changes-- there are all kinds of changes happening on campuses across the country. They affect administrators, students, athletes, fans and other stakeholders. The ground is moving under our feet in both big and little ways. And when there are changes, loopholes also sit around waiting to be found. I want to look at one big potential loophole that concerns NIL deals today.
When this much change happens at once people will always look for advantages—every advantage they can get. Just this past week, as SEC schools gathered for their spring meeting in Destin, FL, there was discussion about what the football playoffs will look like in coming years and smaller conferences are decrying the SEC and Big 10’s supposed power grab. NCAA President Charlie Baker also recently announced that going forward the NCAA will no longer be in the business of enforcing rules. That will fall to a soon-to-be created College Sports Commission and Conferences, assuming the House Settlement is approved. In effect, right now there are no NCAA rules. There will be rules at some point, but no one knows exactly how they will be written or if they will differ from conference to conference.
Changing so many rules and forging new paths forward also means that no one knows how the rules will play out when the rubber meets the road. To put a finer point on it, I wouldn’t be the first one to compare college sports to the Wild West right now. And while there may be more written rules now than during the gold rush, we are certainly exploring some new frontiers.
One new development that all corners of college sports are adjusting to is NIL payments to athletes—which will soon be augmented by schools directly paying their athletes as well. Athletes, especially those in more high-profile sports like football and basketball, will see paychecks unlike anything their predecessors could dream of. This change is giving athletes the ability to stay in school longer but there is also data that shows some Division I athletes are gambling in significantly larger amounts. Some athletes are taking an altruistic approach to their windfall. University of Florida quarterback DJ Lagway, for example, started a foundation with his NIL money and is helping local children’s health efforts. This novel development brings me back to loopholes.
Lagway’s foundation is the first time I heard of a college athlete starting a foundation with NIL money, though he follows the example of at least a few other charitable college athletes. And to be quite clear before I go any further, I am not accusing Lagway of any wrongdoing, of abusing any loopholes, or of misusing his foundation or its funds. But this somewhat novel development points the way to some potential abuse in the future that I want to explore as we are now in a phase of nebulous rules and changing processes for student athletes.
As I said, Lagway should be commended for giving back and investing in his community. But if I were looking for a way around a potential cap on paying student athletes or for a way to conceal NIL money that I wanted to pay an athlete for any number of reasons, a foundation would be a great way to do that. Any student athlete can start a non-profit charitable entity, and say, place one of their parents, or other family member in an executive role to receive a salary. That charity can then accept tax-deductible donations and pay salaries to any number of executives. It can even do worthwhile charitable work in the community while paying an athlete’s family member an outsized sum. Additionally foreign nations could use the opportunity to “invest” in an athlete that they might want to woo to play overseas.
And I can take an even more sinister approach to the matter, drawing on threats I’ve described in my writing before. I previously looked at how adversarial nations might use their political interference playbooks to sow doubt in the integrity of sports outcomes. I won’t rehash the whole piece, but, in a nutshell, could a country like, say, Russia, use social media and gambling markets to sow doubt in the fairness of the outcome of a major sporting event? If, for example, such a country obfuscated the donor of a large sum of money to an athlete’s foundation, then leaked the identity at an inopportune time, could it color the public’s perception of fairness? Would the media distraction affect the athlete’s performance on the field?
We can wrap up exactly where we began. All of these changes in the college sports landscape leave a lot of questions. Even if there are rules today, some of them may change in both small and dramatic ways once the House Settlement is approved. Potential loopholes like this one point the way to the need for more transparency in the process to maintain trust in the integrity of sports. A new data clearinghouse is being designed for NIL deals, and making that data public and transparent in a way that also protects athletes would go a long way to preserving trust between sports and fans. Athletes, universities, donors, and fans will surely test the rules and their enforcement by trying to find loopholes and edges that can give them an upper hand. That was true even before these changes started manifesting, but now that athletics departments are increasingly operating as multi-million dollar businesses with millionaire employees they will surely try to find every advantage they can and press it—just like athletes do on the field.