Pak seeks to block NCAA limits on athletic donors

The attorneys general of Tennessee and Virginia filed suit against the NCAA on Wednesday, saying the agency that regulates college athletics has no right to block the increasingly common practice of wealthy boosters paying to attract top recruits.

The business suit was filed a day after the revelation that the NCAA was investigating the University of Tennessee football program for recruiting violations involving a donor group that arranges to pay athletes. It could spark a broad legal battle over the nature of college athletics, which is in the midst of a rapid transition from a tightly controlled amateur system to an unfettered professional market.

The driving force behind that change has been donor collectives, which are groups of alumni and other boosters who donate money used to compensate elite athletes, sometimes in amounts approaching professional levels. They're doing this by taking advantage of the NCAA's new name-image-likeness, or NIL, rules, which were intended to let athletes pay for endorsements but in practice allow almost anyone to pay them , and for pretty much any reason.

In fact, the collectives pay salaries disguised as endorsements, and now play a central role in the process of pursuing players in football, basketball and other sports.

The lawsuit seeks to strike down one of the few NCAA rules limiting these collectives — and one of the last vestiges of the amateur model.

That rule means that collectives cannot recruit high school students or transfer students to the school of their choice by offering them money.

The attorneys general, who addressed the issue before the NCAA made specific allegations against the University of Tennessee, said the restriction amounted to an unlawful restraint of trade. They argue that collectives should have the freedom to outbid each other for recruits, as schools do for top coaches.

“This NIL recruiting ban restricts competition,” the attorneys general said in the lawsuit, claiming the cap “artificially reduces the NIL compensation that college athletes could otherwise receive in an open market.”

The NCAA did not immediately respond to a request for comment.

The lawsuit was filed by Tennessee Attorney General Jonathan Skrmetti, a Republican appointee who has often taken conservative legal positions during his 17 months in office. Tuesday's reports of the NCAA's investigation into the University of Tennessee prompted a blistering response from the school and sparked outrage among its fan base.

The donor collective at the center of the Tennessee case paid to fly a high school quarterback to campus on a private jet, according to a person familiar with the matter. The Tennessee collective released a statement saying it had followed NCAA rules, and that his contract with the quarterback — which reportedly allowed him to earn $8 million — did not require him to attend Tennessee.

Virginia's participation in the lawsuit raised the possibility that a number of other states with high-profile state college athletics programs could join the legal action. Virginia Attorney General Jason S. Miyares is an elected Republican.

Collectives first emerged in 2021, when the NCAA — after losing a series of lawsuits that eroded its regulatory authority — declined to challenge a series of state laws that allowed players to profit from their name, image and likeness.

For much of the time since then, there was little evidence that the NCAA wanted to police these collectives. The New York Times has counted more than 140 collectives now operating in schools across the country, with budgets that can reach $10 million or more.

In just a few years, college coaches and players say, the money offered by collectives has become the dominant factor in recruiting and retaining athletes. For example, last year the University of Iowa starting quarterback told The Times that he transferred from the University of Michigan after the Iowa collective made him a written offer outlining what he would be paid.

University athletics officials have complained that the NCAA allowed the name-image-likeness system to become a pay-for-play system in disguise.

Many state laws, including one enacted in Tennessee nearly two years ago, mirror the NCAA's ban on pay-for-play payments. Tennessee law states that compensation cannot be provided in exchange for athletic performance in order to “maintain a clear separation between amateur intercollegiate athletics and professional sports.”

That contrasted with the Tennessee attorney general's argument in Wednesday's lawsuit, which appeared to accept that collectives paid players to play for their schools. The attorney general said athletes had the right to maximize these payments by surveying schools to find out where they would be paid the most.

“Very few collegiate athletes go 'pro' in their sport, and thus their NIL value is highest during their short collegiate careers,” the lawsuit said. “Their ability to negotiate the best NIL deal is critical.”

The result was a windfall for many players, but also a chaotic market that lacked the rules, unions and minimum wages that govern labor markets in professional sports. In this semi-underground free-agent market, college athletes had little sense of their true value.

In recent weeks, the NCAA has also shown some signs that it wants to rein in collectives.

NCAA President Charlie Baker has proposed that schools be allowed to enter into NIL agreements directly with athletes — a move that could reduce the impact of collectives and could be codified by the association later this year. A top NCAA committee this month proposed other rules that would tighten regulations, including requiring athletes to report deals worth more than $600 and forcing schools to further distance themselves from boosters found to be involved in misconduct .

The NCAA's enforcement division has fined Florida State University after a football coach there brought a potential transfer student to meet with a collective. And the University of Florida is under investigation, where a collective offered a high school quarterback $13.85 million but then didn't pay.

The lawsuit filed Wednesday seeks to make a legal ruling that would allow these types of transactions, ushering in an era in which college athletes are treated like professionals even before they enter college.