The College Sports Commission won the first major test of its authority to enforce a salary cap in college sports Monday when an arbitrator upheld the fledging agency’s decision to deny a set of deals involving Nebraska football players.
The case concerned millions of dollars in payments to a group of 18 Cornhuskers players from Playfly Sports, a marketing firm that secures sponsorship opportunities for Nebraska and dozens of other high-profile athletic departments. The College Sports Commission, which was created last July to police how college athletes are paid, blocked the deals in March and defended its decision at an arbitration hearing in late April.
“This process shows the system is working as intended: a decision we made was challenged and a neutral arbitrator assessed the facts to inform a final decision,” CSC CEO Bryan Seeley said in a statement Monday evening announcing the arbitrator’s decision.
Nebraska’s players have the option to resubmit new contracts from Playfly that comply with the rules, and Seeley said he expects them to do so.
“I am proud of our football student-athletes and how they represented themselves during this process and the patience they have shown,” Nebraska athletic director Troy Dannen said. “We continue to operate within the parameters of the House settlement and the CSC process, while monitoring changes in the collegiate landscape.”
Under the new rules in college sports, which were established as part of the antitrust settlement commonly referred to as the House settlement, schools are allowed to spend up to $20.5 million per year in direct payments to their athletes. However, the going rate for building a competitive roster in football alone in the coming season is closer to $30 million or $40 million, according to numerous industry sources. Many programs are bridging the gap by arranging “above-the-cap” payments to players — ostensibly endorsement deals between players and boosters or other “associated entities” that function in reality as extra payroll dollars.
Some schools have relied on marketing partners such as Playfly and apparel companies such as Nike or Adidas for some of their above-the-cap payments. Nebraska, for example, revamped its contract with Playfly last December in a deal that would send less money directly to the school if Playfly promised to invest millions of dollars into NIL opportunities for Cornhuskers athletes.
One of the CSC’s main functions is to evaluate deals between athletes and any associated entity of their school to decide if they are legitimate endorsement opportunities. In the first case testing that power, an arbitrator ruled that the new enforcement group had appropriately applied the rules and that the Nebraska contracts were “warehousing” deals — a prohibited type of payment in which a company purchases the rights to use the player’s likeness in the future but doesn’t provide specific information about how it intends to use those rights.
The CSC’s arbitration win this week sets at least a temporary precedent that the practice that became common among power conference schools this winter is not an acceptable way for the wealthiest schools in college sports to work around the rules. The cap was designed to try to give all FBS schools a chance at recruiting a competitive roster.
However, the enforcement victory could be short-lived. The plaintiff attorneys from the House case have asked a judge overseeing that settlement to review how the CSC is applying the new rules. The attorneys argue in court documents that the settlement’s rules that block boosters from funneling money to athletes should not apply to companies like Playfly. A hearing on the matter is scheduled for May 27.
Nebraska’s attorney general could also eventually sue the CSC for blocking the Playfly deals. A state law in Nebraska prohibits any college sports governing body from punishing athletes for accepting money from a third party. The players are likely to resubmit the deals with more specific terms, according to sources familiar with their plans, which means any state legal action is not likely to happen soon.
