Today, California Governor Gavin Newsom executed California Senate Bill 206, commonly referred to as the Fair Pay to Play Act (“Act”), making it law in the State of California.  Beginning on January 1, 2023, student-athletes attending four-year universities in California will be permitted to accept compensation for the use of their names, images, and likenesses.  In pertinent part, the Fair Pay to Play Act permits and requires the following:

1. A postsecondary educational institution shall not uphold any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness. Earning compensation from the use of a student’s name, image, or likeness shall not affect the student’s scholarship eligibility.
2. An athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association, shall not prevent a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.
3. An athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association, shall not prevent a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student’s name, image, or likeness.

Once a student-athlete enters into a contract providing compensation for the use of his/her name, image, or likeness, the student-athlete must disclose the contract to a designated “official of the institution.”  Student-athletes are also permitted to obtain the services of an agent to represent him/her in pursuit of marketing opportunities.  However, the statute is clear that an institution of higher learning “shall not” compensate a student-athlete for use of his/her name, image, or likeness. Additionally, student-athletes are not permitted to enter into a contract providing compensation for use of his/her name, image, or likeness if the contract is in conflict with the student-athlete’s “team contract;” however, a “team contract” shall not prevent a student-athlete from using his/her name, image, or likeness “when the athletes is not engaged in official team activities.”

Now at that the Act has been signed into law, lawyers will follow.  The NCAA has made overtures in the media that it will challenge the Act and argues the Act is unconstitutional.  The NCAA is relying on Miller v. NCAA, a case decided by the Ninth Circuit in 1993.  Miller v. NCAA involved Nevada legislation that was enacted after a lengthy NCAA compliance investigation and litigation involving Jerry Tarkanian and the University of Nevada, Las Vegas.  The statute in Nevada required the NCAA (and other intercollegiate bodies) to provide Nevada institutions, employees, student-athletes, and boosters who were accused of rules infractions with certain procedural due process protections during an NCAA enforcement investigation.  The statute gave individuals the right to confront witnesses, have written statements signed and notarized, official record of the proceedings, and judicial review of the NCAA Committee on Infractions decisions.  A state district court could enjoin NCAA proceedings if they violated the statute.  The statute also entitled an aggrieved party to costs, attorney’s fees, and compensatory damages suffered as a result of a penalty.

Like the NCAA will do here, the NCAA argued in Miller v. NCAA, among other things, that the statute in Nevada violated the Commerce Clause of the United States Constitution.  The Ninth Circuit agreed and found the Nevada statute directly regulated interstate commerce and ran afoul of the Commerce Clause both because it regulated a product in interstate commerce beyond Nevada’s state boundaries, and because it put the NCAA in jeopardy of being subjected to inconsistent legislation arising from the injection of Nevada’s regulatory scheme in the jurisdiction of other states.

Here, the NCAA will argue that the Act directly regulates interstate commerce and affords student-athletes participating in intercollegiate athletics for institutions of higher learning in California with protections and opportunities that student-athletes in other states do not have.  The NCAA will further argue that the Act favors in-state economic interests over out-of-state interests and, thus, will afford California institutions of higher learning a competitive advantage over other institutions of higher learning in other states.  In turn, the NCAA will argue it will only be able to enforce its amateurism legislation uniformly if it adopts the California legislation.  It appears this will be another opportunity for the Ninth Circuit to weigh in on amateurism and potentially reshape the landscape of intercollegiate athletics.

For any questions, feel free to contact Christian Dennie at cdennie@bgsfirm.com.