Arbitrator Rules in Favor of College Sports NIL Watchdog in First Appeal

‘Warehousing’

Last year, the House v. NCAA settlement established new restrictions over NIL deals to ensure that deals would offer fair-market value for a valid business purpose, rather than act as pay-for-play in disguise. The CSC investigates and adjudicates these deals, which must be submitted to NIL Go for scrutiny. If the CSC rejects a deal, players have the opportunity to request an appeal through a third-party arbitrator.

The Nebraska arbitration centered around NIL deals offered to 18 football players, sources familiar with the case previously told FOS (the details of the arbitration were previously confidential). The deals were procured through Playfly, one of several companies that partner with schools to get sponsorship and other media partnerships for the athletic departments and now, in the NIL era, the players.

The CSC had rejected the deals for two reasons. One was related to whether the deals offered fair market value for a valid business purpose; the other was over the validity of the deals because they were considered to be “warehousing,” a process where an entity agrees to pay players a specific amount of money for non-specific deals they may procure in the future. In many cases, players complete “deliverables,” like creating content, that the multimedia rights company will then attempt to sell.

The arbitrator found that the “warehousing” of deals was against the rules outlined in the settlement, and that the deals themselves therefore didn’t have an adequate valid business purpose.

The arbitrator did not, however, rule on whether the deals were being offered for a fair market value.

The other issue the arbitrator ruled on was the definition of “associated entities.” The House settlement also created a classification of certain organizations, originally thought to be NIL collectives, which were associated with particular universities and created with the goal of securing deals and helping pay players. These “associated entities” were subject to extra scrutiny through NIL Go. The CSC has begun calling MMR partners associated entities, since schools partner with them to procure opportunities for both the school and players.

The arbitrator said Playfly was an associated entity, and therefore subject to extra scrutiny. This could impact thousands of deals procured by Playfly and other MMR companies like Learfield, which will be subject to extra scrutiny in the NIL Go system.

But the question of whether a multimedia rightsholder like Playfly or Learfield, as well as potentially third-party apparel companies, should be considered “associated entities” will be heard in federal court at the end of May. In April, plaintiff attorneys Jeff Kessler and Steve Berman—who have been tasked with overseeing the settlement implementation—filed a motion requesting a magistrate judge to rule these entities no longer be classified in the same category as collectives.

The House defendants have since filed an opposition motion including a signed letter written by Seeley defending the position that MMR partners are, in fact, associated entities.

Representatives for Playfly declined to comment.

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