A new lawsuit was filed on January 31, 2024, that could significantly impact the NCAA’s ability to regulate Name, Image, and Likeness (“NIL”) in collegiate athletics.  Filed by the Attorneys General of Tennessee and Virginia in the U.S. District Court for the Eastern District of Tennessee[1], the lawsuit challenges certain NCAA restrictions of NIL payments as an illegal restraint of trade under federal antitrust law. 

The NIL landscape was ushered in by a landmark decision from the United States Supreme Court, Alston v. NCAA.  In Alston, former collegiate athletes argued that the NCAA violated federal antitrust law by placing limits on the education-related benefits colleges and universities can provide to their student-athletes. The Supreme Court determined that the NCAA’s rules limiting such benefits were unreasonable because they substantially suppressed and destroyed competition, thus violating a federal antitrust law known as the Sherman Act.

Importantly, the Supreme Court made it clear in Alston that the NCAA is subject to, and bound by, federal antitrust law, remarking that “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate… And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law.”[2]

Now that the antitrust door has been opened, Tennessee and Virginia are seeking to further apply the Sherman Act and limit the NCAA’s restrictions on certain NIL activity, arguing that the NCAA is “trying to stop the [NIL market] from functioning…after allowing NIL licensing to emerge….”[3] This conduct, the plaintiff-states argue, constitutes an “illegal agreement to restrain and suppress competition in the relevant markets,” and as such violates the Sherman Act.[4] The crux of the plaintiff-states’ argument takes aim at a new set of rules adopted by the NCAA just earlier this month, whereby entities that wish to engage in NIL payments and deals are forbidden from engaging with a prospective or actual college athlete until the athlete: “(1) signs a letter of intent, (2) participates in summer activities, (3) practices with the team or (4) attends class at the school.”[5]

As alleged in the lawsuit, “[t]hese ‘protections’ allow current athletes to pursue NIL compensation, but they ban prospective college athletes (including current college athletes looking to transfer to another school who are in the ‘transfer portal’) from discussing potential NIL opportunities before they actually enroll.”[6] Put differently, the plaintiff-states argue that these new rules significantly restrain high school and transfer portal recruits’ abilities to participate and negotiate in NIL activity.[7] The plaintiff-states argue that the NCAA’s NIL framework cannot stand because student athletes need to be able to freely participate in the market of college sports.

Additionally, like many other states across the nation, Tennessee and Virginia have laws permitting collegiate athletes to profit from their NIL.[8]  Coupled with the alleged violation of the Sherman Act, the plaintiff-states claim that the “NCAA is thumbing its nose at the law.” To remedy this alleged breach, the plaintiff-states are seeking a series of legal actions, including a Temporary Restraining Order (TRO) and a preliminary and permanent injunction to stop the NCAA from enforcing the NIL recruiting ban. 

In effect, the plaintiff-states want to completely halt the NCAA’s involvement surrounding NIL payments and negotiations with the ultimate goal of bringing clarity to the NIL landscape—something they refer to in its current state as a “mishmash of guidance and rules which have been constantly in flux and never clear.”[9]

The legal disputes surrounding NIL payments hold significant implications for the trajectory of college sports. This new lawsuit, reminiscent of the precedent set by Alston v. NCAA, is a seismic example of how the legal arguments that initiated the era of NIL are now being employed to question and potentially reshape its regulatory framework.

[1] State of Tennessee and Commonwealth of Virginia v. NCAA, No. 3:24-cv 33 (E.D. Tenn. Jan. 31, 2024).

[2] National Collegiate Athletic Association. v. Alston, 594 U.S. ___ (2021).

[3] State of Tennessee and Commonwealth of Virginia, No. 3:24-cv 33 (E.D. Tenn. Jan. 31, 2024).

[4] Id.

[5] NCAA Approves New NIL Disclosure and Transparency Rules for Division I Student-Athletes, McGuireWoods, https://www.mcguirewoods.com/client-resources/alerts/2024/1/ncaa-approves-new-nil-disclosure-and-transparency-rules-for-division-i-student-athletes/ (January 25, 2024).

[6] Id.

[7] Tennessee, Virginia AGs File Federal Lawsuit Against NCAA Following NIL Investigation into Vols, On3, https://www.on3.com/news/tennessee-virginia-attorney-generals-file-lawsuit-against-ncaa-following-nil-investigation-into-volunteers/ (Jan. 31, 2024).

[8] Specifically, both states have laws that “protect[] student-athletes’ right to “earn compensation for the use of [their] own name, image, or likeness” at “fair market value[]” and both states “also [] prohibit athletic associations, including the NCAA, from interfering with athletes’ ability to earn NIL compensation.” State of Tennessee and Commonwealth of Virginia, No. 3:24-cv 33 (E.D. Tenn. Jan. 31, 2024).

[9] Id.