Nebraska Football Case Update

With the chaos of the NCAA Basketball Tournament, it is easy to forget that there is currently a groundbreaking case in arbitration involving 18 University of Nebraska football players challenging the denial of over one million dollars in combined third-party NIL deals. Two weeks ago, I wrote an initial blog highlighting the details of the case and what it could mean for college athletics. Since then, a lot of information has come out. The core issue remains whether these deals are legitimate NIL agreements or “warehousing” as the College Sports Commission (CSC) put it. According to ESPN, warehousing is when a company buys the rights to use an athlete’s NIL in the future, but doesn’t provide specific tasks and deliverables the athlete must complete. 

The CSC and its NIL Go clearinghouse were created to enforce the new system within college athletics, which includes a soft salary cap for each institution as far as revenue sharing is concerned and a third-party deal approval process. The CSC frowns upon “pay-for-play” compensation tied to athletic performance, as this seemingly creeps too close to the “employment” line drawn in the sand. Since the group that gave these athletes deals, Playfly Sports, is speculated to be an entity associated with the University of Nebraska, it appears as if the institution was attempting to use this entity as a loophole to work around compensation limits. 

Since this has all been established, the arbitration is being considered a defining moment for college athletics. According to ESPN, one athletic director described it as a “litmus test for the system.” It is also believed that other programs, depending on how the arbitration is resolved, will likely bring similar challenges towards the CSC. 

The issue with the deal structure comes from the fact that Playfly Sports is the University of Nebraska’s multimedia partner, according to ESPN. The CSC has taken issue with the appearance of the institution directing payments to Playfly and making it appear as if it is a third-party agreement, when in reality, according to the CSC, Playfly’s status as an associated entity could mean that it is simply acting on behalf of the institution. 

The alleged loophole that the University of Nebraska seems to have exploited is shining a light on the weakness of the NIL Go clearinghouse and its mechanism of enforcement. According to ESPN, the entire system is being viewed as more of a speed bump than a blockade. 

On a relevant note, the intended “salary cap” established seems to have no validity. According to reports by ESPN, top college football programs are spending over double the intended cap on their rosters. One athletic director was quoted as saying “we have a soft cap, which means we got no cap.” This issue reflects the concern that the CSC has about programs manufacturing ways to get around the limits, creating deals that do not reflect legitimate fair market value or that have a valid business purpose. 

Though arbitration is expected to be completed soon through an expedited process, the legitimate formal impact of this case could be limited by it. Although arbitration is binding between the parties involved, it does not create binding legal precedent like a formal court decision would. This is not to say that no impact will be had when this is decided, however, as schools will likely conduct their business based on the outcome. 

Another major factor in this entire story is the Nebraska state law that goes as far as any law in the country when it comes to preventing athletes from being penalized for benefitting from their Name, Image, and Likeness. According to the Nebraska Legislature, this statute applies to both schools and athletic associations (like the NCAA). This statute could allow intervention by state officials in the event of enforcement from the CSC. This is a natural and broad legal tension that we could see a lot more of in states with NIL protections as we move forward without a uniform national system for regulation on this front. 

The CSC is discovering that what started out as a task to determine legitimate NIL deals has quickly turned into defining what constitutes a third-party in the NIL ecosystem. The large question throughout the short history of the CSC has been about whether it has meaningful legal authority without any sort of agreement (see my blog post “Power Four Remains at Odds with CSC over Contract”). It appears as if this major new loophole discussion regarding indirectly funding athlete compensation through associated entities has taken center stage. 

The final talking point from the developments of this case is the question of funding for the legal battle. There are no confirmed details that are known to the public about who is paying for the costs associated with Husch Blackwell’s representation, but the involvement of such a large firm essentially confirms how influential the case could be for the future of college athletics.  

Moving forward, the position of the 18 football players is likely to align with the interests of donors, collectives, and partners due to the expansion of how money could be directed toward athletes. The model in question with this case (the Playfly arrangement) could prove to be an extremely common form of handling NIL around the country to exploit the loose cap situation that the House settlement has created. On the other hand, if arbitration goes poorly for the 18 Nebraska football players, it could lead to less opportunities for athlete compensation and potential enforcement credibility for the CSC in future cases. As ESPN put it, this case truly reflects the “messy middle” that college athletics has found itself in, where rules technically exist but do not seem to be in touch with the economic reality of the NIL era. The power struggle over authority and enforcement continues.