Student Athlete Pay Shouldn’t Be Modeled After the Pro Leagues

March Madness is here, and the NCAA stands to reap more than $1 billion from that single three-week tournament. But intercollegiate competition is in dire straits as the NCAA grapples with the conundrum that college basketball and football athletes have never shared in the revenue generated by their efforts.

We shouldn’t adopt ill-fitting market-based laws to remedy the exploitation of student athletes, lest we destroy colleges sports altogether. The desires to treat college athletes fairly and preserve a traditional charitable activity aren’t mutually exclusive.

But they can’t both be accomplished by applying free-market principles designed to facilitate profit taking. The NCAA should be instructed, and then given space, to adopt revenue-sharing rules that don’t implicate those laws.

Intercollegiate competition is still a nonprofit and appropriately tax-exempt activity even when it generates astronomical profits. It produces intangible public goods the NFL and NBA also produce—as long as those things don’t interfere with “just win, baby!” in the professional leagues.

But in college sports, the effort to win is a means to instill traits comprising character and integrity, such as perseverance, sportsmanship, cooperation, resilience, pride, and humility. Winning is as secondary as profit, believe it or not.

Even if the value of education is incalculable, people aren’t arguing anymore that tuition-free education is a fair return to student athletes. The US Supreme Court noted in 2021 that pretty much everybody else—coaches, athletic directors, and conference and NCAA administrators—are paid tangible dollars commensurate with the financial returns generated by their efforts.

Nothing in tax exemption jurisprudence precludes “reasonable compensation,” which may be determined by reference to financial returns, among other things. Only the NCAA’s monopsony prevents student athletes from sharing in the financial bounty.

Last month, an administrative judge ruled that student athletes at Dartmouth are employees, entitled to the protections of the National Labor Relations Act. Separately, a federal court determined that NCAA efforts to prevent student athletes from monetizing their personhood and athletic prowess violate the Sherman Act. Another lawsuit will soon vindicate student athletes’ rights to transfer like at-will employees every year.

The law is responding to the exploitation of student athletes the same way it responded to exploitation of workers and to monopolistic practices during America’s rise as an industrial power. But those laws preserve and perfect capitalism; they undermine a vibrant civil society undergirded by altruism and tax-exemption rather than profit.

College sports may no longer be “amateur,” but amateurism has never been a requirement for charitable tax exemption or to prove an activity nonprofit. We don’t insist that physicians working at nonprofit hospitals be amateurs or that they forego reasonable compensation.

The single enduring legal and practical requirement distinguishing taxable for-profit and tax-exempt nonprofit activities is that the net revenue from the latter—the revenue remaining after payment of reasonable salaries and other expenses necessary to the charitable purpose—don’t “inure to the benefit of a private shareholder.”

Nonprofit and tax exemption laws don’t prohibit profit making; they only prohibit profit taking. Unlike the NFL or NBA, the NCAA must invest its net assets back into the educational effort benefiting us all by the production of better citizens. Though it might resolve the exploitation, it makes little sense to insist that colleges and universities conduct themselves according to laws ensuring a fair chance at profit taking. That isn’t the purpose of charity.

This doesn’t mean we can’t use the language of capitalism at all; we just shouldn’t impose its laws. The problem, popularly conceived, is that the colleges pay their most indispensable “workers” almost nothing. Instead, colleges use student athletes to earn an ocean of tax-free revenue shared among all the less indispensable workers.

Labeling student athletes “employees” will force colleges to end the exploitation. Student athletes will unionize and bargain for reasonable compensation. Antitrust laws will allow student athletes to sell themselves to the highest bidder. But at the same time, free-market laws will destroy the nonprofit endeavors from which generations of students and fans have derived educational benefits that can’t be valued monetarily.

NCAA President Charlie Baker warned last month that the insistence that college sports behave like professional sports would drive 95% of student athletes away from learning and developing through nonprofit athletic competition. That’s because in professional sports, only those who generate profit by winning get to play.

Baker renewed pleas to Congress to pass legislation exempting college and university sport from antitrust laws. He should have also included a plea that Congress and states pass laws abrogating common law rules treating student athletes as employees.

A cynic might conclude that Baker is simply trying to preserve a system that’s favorable to the NCAA, but it’s worth noting that 19th and 20th-century market protection laws aren’t always good—not even for 21st-century capitalism. In California, for example, citizens adopted a law so that Uber Technologies Inc. and Lyft Inc. drivers wouldn’t be treated as employees. The result preserved an entire industry allowing drivers to earn fair compensation using a flexible business model.

Laws intended for the for-profit market are neither a panacea nor inviolate—especially not in the nonprofit market.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Darryll K. Jones is a law professor at Florida A&M University College of Law and a co-editor of the Nonprofit Law Professor Blog. He is currently serving as visiting professor of law at the University of Connecticut Law School.

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