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Tech & Sourcing @ Morgan Lewis

TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

California has become the first state to allow collegiate student athletes to benefit financially from the use of their name and likeness and to enter into licensing contracts by recently passing Senate Bill 206, a bill known nationally as the “Fair Pay to Play Act.” But, we recommend holding off on preparing templates for student athlete license and promotional agreements for now; the legislation will undoubtedly face zealous resistance from the National Collegiate Athletic Association (NCAA) in the time before the law takes effect.

On September 30 the California Senate enacted Senate Bill 206, which would effectively end amateurism for NCAA athletes and therefore is a game changer for the NCAA, which currently prohibits college athletes from receiving compensation. The California law does not require colleges to pay athletes a wage, but it allows athletes to procure business and sponsorship deals.

The following are key points of Senate Bill 206:

  • The law allows student athletes to obtain legal representation and to engage in contracts in order to profit from their names, likenesses, and media rights. For example, under the new law, athletes can be paid for sponsorship or for licensing their image to video games.
  • The law pertains to California only and does not require colleges outside of California to comply.
  • The law states that athletic scholarships are not considered compensation.
  • The law bans colleges from declaring athletes ineligible on the basis of an athlete receiving compensation for the use of his or her name, image, or likeness.
  • The law does not allow athletes to enter into arrangements that would violate the terms of any sponsorship or licensing deals that their college already has in place with other companies.
  • The law was passed unanimously by the California General Assembly on September 8 and enacted September 30.
  • The law will officially take effect on January 1, 2023, and will likely face numerous legal challenges by the NCAA prior to its institution. On the same day Senate Bill 206 was passed, the members of the NCAA board of governors argued in a letter to California Governor Gavin Newsom that the law was “unconstitutional” and would “remove the essential element of fairness and equal treatment that form the bedrock of college sports.”

California’s actions are already influencing other states that are in the process of making similar proposals. Similar legislation is being introduced in Colorado, Florida (HB251), Illinois (HB3904), Kentucky, Minnesota, Nevada, New York (Senate Bill S6722A), Pennsylvania, and South Carolina. Additionally, US Representative Anthony Gonzalez (R-OH) is planning to propose federal legislation that will allow all athletes across the country to earn money in endorsements.

What is next for Senate Bill 206 and the other similar legislation? The NCAA has indicated that it will vigorously oppose this legislation, and has already threatened to make all 58 of California’s NCAA schools ineligible to participate in NCAA competitions because they would allegedly have an unfair recruiting advantage. It is fairly safe to assume that the NCAA will bring forth legal challenges to Senate Bill 206 and any other similar legislation that passes in an effort to delay, or perhaps more narrowly define, how athletes can be paid and how much student athletes can earn for sports-related activities.