The Fair Pay to Play Act is a bill signed by California, Gov. Gavin Newsom. It would go into effect on January 1, 2023, allowing college athletes to hire agents and make money from endorsements. The measure, the first of its kind, threatens the business model of college sports.

It has been a bedrock principle behind college sports: Student-athletes should not be paid beyond the costs of attending a university. California threatened that standard on Monday after Gov. Gavin Newsom signed a bill to allow players to strike endorsement deals and hire agents.

The Act is a game-changer in college sports. It makes it illegal for California colleges to deny their student-athlete’s opportunities to gain compensation for the use of their names, images, and likenesses. Stated more concisely, the Act guarantees college athletes a right to profit from their identities. The Act also authorizes college athletes to hire agents and other representatives to assist them in negotiating and securing commercial opportunities.

The Act doesn’t go into effect until January 1, 2023. It also contains limitations that attempt to minimize how it might disrupt college sports. A key limitation is that a college athlete can’t sign a contract with a company for the use of their name, image, or likeness if it would conflict with a school sponsorship (quick example: an athlete couldn’t sign a contract to wear and promote Adidas sneakers if his or her school already has an agreement with Nike).

Authored by California Senators Nancy Skinner and Steven Bradford, the Act is inspired by O’Bannon’s historic case against the NCAA. A few years ago, the former UCLA basketball star proved that it is a violation of federal antitrust law for the NCAA to deny DI men’s basketball and football players compensation for the commercial value of their names, images, and likenesses. This is true when video game publishers design avatars based on players’ unique traits, when replica jerseys and other “officially licensed” sports apparel are embroidered with players’ names, and when television rebroadcasts of classic games vividly display players’ images.

The most significant obstacle to the Act is whether it can withstand inevitable legal challenges.
California colleges, the Pac-12 Conference, the Mountain West Conference, and the NCAA all have the standing to challenge the legality of the Act. California colleges realize they have no choice but to follow state law. They also know that by following state law, they will breach their membership requirements with the NCAA and conferences.
The consequences of such breaches are already clear. Once the Act goes into effect, California colleges will no longer be permitted to participate in national championships organized or sponsored by the NCAA. They might be also kicked out of the NCAA altogether. As Smith mentioned, a California college can’t function as an NCAA member school if state law prevents it from meeting NCAA membership obligations.

Any litigation is likely to be protracted, and state officials set the 2023 effective date, in part, to allow California’s colleges and universities ample time to prepare for the sweeping changes. The next few years will also give the NCAA time to contemplate its own strategy, especially if the courts ultimately uphold the measure.

Left to their own rulemaking, California colleges, and the Pac-12 could create amateurism rules that are very different from those adopted by the NCAA. This is true with respect to players’ names, images, and likenesses. It could also prove true in terms of how the NCAA limits competition through athletic scholarship caps. Health care and safety policies could also be reworked to better fit the wishes of these western schools and conference members
Of course, forming a new league would be a substantial endeavor. There would be opposition on many fronts, including with respect to various business partners that entered into contracts under the belief that these schools were NCAA members. Also, while these schools would remain national figures in terms of academics and research, their athletic programs would become more regionalized. The logistics of starting a new league would also be considerable
Pursuant to the Act, college athletes at California schools can negotiate with video game publishers for their avatars to appear in college sports video games. They can also be paid to sponsor summer camps for young athletes and sign endorsement deals with apparel companies, sports beverages, car dealerships and numerous other businesses that would pay for an athlete’s public stamp of approval.

To be clear, the Act does not create a right for college athletes to be paid by their schools. The Act instead addresses how various businesses use their identities. This is true of college athletes who will go on to earn incomes in pro leagues, and true of college athletes who play sports without pro opportunities and whose marketability is at its highest point while in school.

Do not hesitate to contact the attorneys at Tishkoff if you have questions regarding litigation, or business or employment law.