College Sports Commission informs schools that NIL collectives can pay athletes directly with limitations

In a revised memo sent to schools on Thursday, the College Sports Commission announced that booster-backed NIL collectives can, in fact, directly compensate athletes if the transactions meet certain “valid business purpose” benchmarks.

The one-page guidance replaces a memo sent to schools on July 10 where the CSC revealed that collectives would not be treated as valid businesses and denied many of their transactions with athletes. After weeklong negotiations with House plaintiff attorneys Jeffrey Kessler and Steve Berman, the College Sports Commission, operated by the power conferences, is adjusting its approach — an expected resolution that Yahoo Sports reported last week after the parties originally agreed on a joint statement that was finally released Thursday.

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The statement “clarifies” what is permitted from collectives to athletes under the NCAA’s landmark House settlement agreement, reversing the July 10 guidance by permitting collectives to strike deals with athletes as long as they “have a valid business purpose related to offering goods or services to the general public for profit and fall within the range of fair market value compensation.”

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The College Sports Commission, the industry’s new enforcement entity led by a former Major League Baseball executive in Bryan Seeley, is charged with determining the legitimacy of third-party NIL deals with athletes. Approved deals hold significant benefit for schools as third-party compensation does not count against the revenue-share cap that each school is working inside.

According to the CSC’s guidance, the entity is determining deal legitimacy not on the “labeling” of businesses or payors, as it originally planned, but on the transaction itself. “Whether or not payments to student-athletes by collectives are permissible under the settlement will be evaluated on a case-by-case basis,” the statement said.

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Previously denied deals are being reevaluated to apply the new, revised guidance, the organization said in its guidance to schools.

While the statement notes that traditional NIL collective pay-for-play deals remain prohibited, the change in approach paves the way for collectives to pay athletes if those deals satisfy three benchmarks: (1) deliver the public a good or service; (2) turn a profit beyond paying athletes; and (3) fall within a Deloitte-created “compensation range” standard in the CSC’s NIL Go submission platform.

This provides a path for collectives to hold an assortment of events to pay athletes, including merchandise sales, autograph signings and athlete appearances at, for example, golf tournaments.

“The College Sports Commission will enforce the settlement as written,” Seeley said in a statement. “Pay-for-play will not be permitted, and every NIL deal done with a student-athlete must be a legitimate NIL deal, not pay-for-play in disguise.”

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The guidance distributed to schools focuses on the “for profit” benchmark, even noting that the entity may require athletes or businesses to provide information and documentation “to establish compliance” with the benchmarks. “Refusal to provide this information or the provision of insufficient information to establish compliance may result in deals not being cleared by the CSC,” the guidance says.

This is a notable line that was approved by the House plaintiff attorneys, Kessler and Berman.

The resolution between the House plaintiffs and the power conferences operating the CSC may create what some coaches and administrators refer to as a “soft cap,” certainly softer than the CSC’s original approach to collectives. From his football media days earlier this month, SEC commissioner Greg Sankey said deeming collectives as any other business could result in a “very different management system” and a “softer cap,” a reference to the new revenue-share cap. Schools can directly share no more than $20.5 million with athletes in Year 1 of the concept, excluding compensation from CSC-approved third-party deals.

Last week in an interview with Yahoo Sports, Big Ten commissioner Tony Petitti was asked about collectives finding ways to strike deals with athletes if restrictions were loosened.

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“When something works, it gets copied,” he said. “Things happening out there to provide additional NIL deals for student athletes that makes sense and are allowed under rules, you’re going to see more versions of that.”

The approach change also, at least for now, may prevent a legal challenge from leaders of a group of NIL collectives who began drafting a lawsuit against the CSC’s approach. Over the last four years, collectives have served as the driving force for schools to compensate athletes, raising millions in booster money to provide schools a way to recruit and retain players.

Tom Mars, a well-known attorney representing the collectives, released a statement to Yahoo Sports about the resolution: “It should be concerning that it took the four commissioners more than a week to agree on the language of the new guidance. That speaks volumes about their ability to agree on anything. Stephen King wrote a 219-page novel in less time than it took them to write up what was published today.”

To be clear, the power conference commissioners have been negotiating with the House plaintiff attorneys over the dispute.

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Mars did not completely rule out any further legal action, telling Yahoo Sports, “The collectives I represented suffered a lot of damage as a result of the improper guidance given on July 10 and I will be discussing their legal options with them.”

The CSC’s original interpretation of the “valid business purpose” definition, and resulting denials of collective deals, speaks to one of administrators’ goals of the settlement — to shift athlete pay from these booster-run organizations to the schools, which are now permitted to directly share revenue with athletes under the capped system that began July 1. That said, many schools are still operating their collectives as a way to, perhaps, circumvent the system.

“We know that some people are saying, ‘We’re not worried because we don’t think they can really enforce it!’” Ole Miss coach Lane Kiffin told Yahoo Sports earlier this month from SEC media days. “They don’t think NIL contracts are going to get kicked back (by the clearinghouse) or they think they’re not going to be able to win long-term (legal challenges) because of players’ rights.”

Ultimately, Sankey suggested, schools hold authority to control their own affiliated collectives.

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“For how long have people been begging for guardrails?” Sankey asked. “Well, now we have guardrails. Those broadly across the country that claim they wanted guardrails need to operate within the guardrails. If you allow what’s happened to continue to escalate, there would be a very small number of programs that would be competitive with each other and we’d not have a national sport or a national championship.”

The resolution may not completely end what will likely be continuous negotiations over particular enforcement rules between the power leagues controlling the CSC and the House plaintiff attorneys, who hold authority and veto powers over various aspects of the settlement.

Last week, Petitti cautioned that more such negotiations are expected in the future.

“I don’t think it will be the last time that an issue comes up in the process,” Petitti said. “The settlement approval came later than expected. It compressed the time period.”

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The guidance change may also not prevent future legal challenges over other enforcement aspects, including Deloitte’s compensation range concept or the appeals arbitration system that athletes can use for deals denied a second time.

The CSC, in its first month of existence, is reliant on athletes submitting deals. Athletes are required to submit any third-party deal of $600 or more to an NIL clearinghouse, NIL Go. Those deals flagged by NIL Go are sent to the CSC and its new leader, Seeley, to determine an enforcement decision. As of three weeks ago, more than 100 deals were denied and at least 100 more were under review. More than 1,500 deals had been approved.