"Pay for Play" vs. NIL: Is There Really a Difference?

Former USC star running back and Heisman trophy winner, Reggie Bush, filed a lawsuit against the NCAA on August 23, 2023. The lawsuit includes claims for defamation and false light, stemming from a July 2021 comment made by an NCAA spokesperson in response to a question from an ESPN reporter about whether the NCAA planned to revisit penalties imposed in prior years, including heavy sanctions levied against USC, in light of the NCAA’s adoption of its Interim NIL Policy (“NIL Policy”). The NCAA’s statement was defamatory, according to Bush, because it falsely implied that Bush engaged in a “pay-for-play” arrangement rather than what would now be allowable NIL activity.

The NCAA quickly filed a motion to dismiss the case for failure to state a claim. Putting aside for the moment the merits of the defamation claim itself, the NCAA’s motion to dismiss raises interesting questions about what exactly constitutes “pay-for-play” under the NIL Policy. The NIL Policy, issued in July 2021, permits student-athletes to profit from their “name, image, and likeness” (NIL), when consistent with state law, without affecting their eligibility to compete in NCAA athletics. The NIL Policy, however, contains two major stipulations: athletes still cannot engage in “pay-for-play” arrangements, and schools cannot offer “impermissible recruiting inducements” for attendance.

Bush’s defamation case turns, in part, on whether the benefits that Bush and his family allegedly received constitute “pay-for-play.” Those benefits were outlined in a 2010 report issued by the NCAA’s Committee on Infractions (“COI”) after a four-year NCAA investigation into Bush’s eligibility and other potential violations by USC.[1] The COI found that Bush and his family accepted cash, housing, an automobile, appliances, hotel lodging, and more from third parties while Bush was a student-athlete at USC in violation of NCAA amateurism rules.[2]

In his complaint,[3] Bush asserts that, even assuming as true that he and his family received the benefits alleged in the COI Report, those benefits do not constitute “pay-for-play” because they were not received in exchange for his participation in athletics. To support this, Bush points to the NCAA Bylaws, which define “pay” as “the receipt of funds, awards or benefits not permitted by the governing legislation of the Association for participation in athletics.”[4] According to Bush, it is undisputed that the benefits he and his family allegedly received were not made in exchange for his enrolling at, or competing for, USC. In other words, there was no quid-pro-quo with boosters, the school, or anyone else, that influenced his decision to play football at USC. Therefore, Bush claims, the benefits were not “pay-for-play”; rather, Bush says the benefits were offered simply because of his image and success, making them akin to profits earned through his NIL, which are allowable under the NIL Policy.

The NCAA responded to Bush’s arguments in its motion to dismiss by asserting that the benefits Bush and his family allegedly received were, and are, commonly understood to be “pay-for-play” under NCAA rules. As compared to Bush, the NCAA takes a much broader view of “pay-for-play,” stating in its motion to dismiss that “[m]ost people would understand [“pay-to-play”] to encompass any situation where a purported amateur is using his athletic talent to obtain remuneration, regardless of its source.” (Emphasis added). The NCAA also stated, in response to Bush’s argument regarding the Bylaws’ definition of “pay,” that “[b]y banning pay ‘for’ athletics participation, the Bylaws aim to prohibit all forms of payment made because of, not merely in exchange for, the student-athlete’s participation in athletics.” (Emphasis added). As an example of this, the NCAA pointed to the NCAA Bylaw outlining “Prohibited Forms of Pay,” which forbids “[p]referential treatment, benefits or services because of the individual’s athletic reputation or skill or pay-back potential as a professional athlete.”[5]

The NCAA’s proposed interpretation of “pay-for-play” is curious in that it is so broad that it could easily be construed to encompass nearly all NIL agreements—which, of course, are generally considered to fall outside of the prohibited category of “pay-for-play.” After all, what, if not his or her “athletic reputation or skill,” allows a high-profile student-athlete to command a six to seven figure NIL deal?

Perhaps the distinction is that NIL arrangements require the student-athlete to engage in some kind of promotional activity in exchange for compensation. Therefore, the student-athlete is compensated (arguably) not for his enrollment at a particular school or for his success on the field (both of which would constitute impermissible “pay-for-play”), but for the promotional activity in which he has engaged—be it endorsing a product on social media, appearing at a promotional event, or signing memorabilia. But this raises two issues: first, how exactly can one separate a student-athlete’s athletic reputation and/or skill from the promotional activity for which he is compensated; and second (assuming we can separate those things) why should a student-athlete’s ability to receive compensation while maintaining NCAA eligibility turn on whether he has engaged in a minor promotional activity in exchange for that compensation?

As to the first issue, no one can seriously contend that the lucrative NIL deals many student-athletes have secured were not secured “because of the individual’s athletic reputation or skill.” Sure, the terms of the deal may also require that the student-athlete engage in a promotional activity of some kind. But whatever that promotional activity might be, it is valuable to the company—and therefore, the student-athlete is ultimately compensated by the company—only “because of” the student-athlete’s athletic reputation or skill.

In some areas of law, under Title VII for example, “because of” is read to incorporate the standard test of “but-for” causation. See, e.g., Univ. of Texas Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 350 (2013). “But-for” causation is established whenever a particular outcome would not have happened “but for” the purported cause. Bostock v. Clayton Cnty., Georgia, 140 S. Ct. 1731, 1740 (2020). In other words, “a but-for test directs us to change one thing at a time and see if the outcome changes. If it does, we have found a but-for cause.” Id. When applied to Title VII employment cases, the “but-for” causation standard “means a defendant cannot avoid liability just by citing some other factor that contributed to its challenged employment decision. So long as the [relevant factor] was one ‘but-for’ cause of that decision, that is enough to trigger the law.” Id.

The NCAA’s statements in its motion to dismiss suggest that the “because of” language in the NCAA Bylaws was intended to incorporate a standard similar to the “but-for” causation standard applied in Title VII cases. For example, the NCAA states that “the Bylaws aim to prohibit all forms of payment made because of, not merely in exchange for, the student-athlete’s participation in athletics.” This language indicates that even in situations in which there are multiple reasons that a player has received payment, that payment remains prohibited so long as just one of those reasons is the student-athlete’s participation in athletics. In other words, a player cannot avoid liability just by citing some other factor (i.e., a promotional activity) that contributed to him receiving the payment.

To summarize, under the “but-for” standard, so long as payment to a student-athlete as part of an NIL deal would not have been made in the absence of the student-athlete’s athletic reputation and/or skill, one must conclude that the payment was made “because of” the student-athlete’s athletic reputation and/or skill. And the fact that there may have been an additional factor that motivated the payment would not change this outcome. This, of course, would mean that all kinds of NIL activity that is universally considered permissible under the NIL Policy could actually fall within the category of “pay-for-play.”

Take, for example, Blake Corum, standout running back for the Michigan Wolverines. Boasting partnerships with Subway, Outback Steakhouses, and Celsius, among others, Corum has an annual NIL valuation of nearly $1 million according to On3.com. Under the but-for test, the question we must ask is whether Corum would be likely to receive the same compensation but-for (i.e., even in the absence of) his “athletic reputation or skill.” The answer, of course, is obviously no. Moreover, under the but-for standard, it is irrelevant that any promotional activity Corum may have engaged in as part of these agreements—for example, appearing in commercials or attending a promotional event—also may have motivated these companies to pay him. So long as changing a single factor—here, Corum’s athletic skill or reputation—would affect the outcome, that factor is a “but-for” cause and will trigger the Bylaw. Thus, under the extremely broad interpretation advanced by the NCAA, nearly every NIL deal now accepted as permissible could in fact be prohibited as “pay-for-play.”

The second problem with treating the act of a promotional activity as the distinguishing factor between “pay-for-play” and allowable NIL activity is that the distinction serves no legitimate purpose. Requiring a student-athlete to engage in some promotional activity in exchange for compensation does little, if anything, to advance the NCAA’s purported goal of protecting student athletes “from exploitation by professional and commercial enterprises.”[6]

The following hypothetical illustrates the arbitrariness of the NCAA’s standard. Assume that student-athlete A, who is already enrolled at and competing for a particular school, accepts compensation from a third-party, but does not engage in any promotional activity in exchange for the compensation. Assume also that student-athlete B receives the same amount of money as student-athlete A from a company in exchange for posting an endorsement of the company’s product on social media. In both scenarios, the student-athletes receive the same amount of compensation, the compensation comes from a third-party (as opposed to the school itself, a booster, or someone else affiliated with the school), and the payment is (at least in theory) unrelated to the players’ willingness to attend or play for the university at which he is enrolled. The only difference, of course, is that student-athlete B has participated in a minor promotional activity—here, posting an endorsement on social media. And yet, the former apparently constitutes a “pay-for-play” arrangement for which student-athlete A would be deemed ineligible, while the latter would be entirely permissible as “allowable NIL activity.”

Other examples also demonstrate the absurdity of this distinction. For instance, reports of student-athletes leveraging a more favorable NIL deal by threatening to transfer or declare early for the NFL Draft have become commonplace in the current NIL landscape. In a typical example of these scenarios, the student-athlete assesses the NIL opportunities presented to him by the school’s collective and decides whether the amount he can collect from those opportunities is sufficient to keep him at his current school. In response, the collective scrambles to piece together additional NIL opportunities to increase the student-athlete’s total potential income, thus incentivizing the student-athlete to remain at the school, rather than transfer to a school capable of offering greater NIL compensation.

This scenario would seem to fall squarely within the NCAA’s proposed interpretation of “pay-for-play,” which (according to the NCAA in its motion to dismiss) includes, “any situation where a purported amateur is using his athletic talent to obtain remuneration, regardless of its source.” After all, it is only because of the student-athlete’s athletic talent that the collective at his current school is willing to offer him additional compensation. Moreover, this situation would seem to also involve improper recruiting inducements, given that the additional payments are made with the purpose of dissuading the student-athlete from transferring to a different program. And yet, the NCAA does not condemn these incidents as “pay-for-play” or “impermissible recruiting inducements” in violation of its NIL policy, presumably because the arrangements include a promotional activity on behalf of the student-athlete. Instead, the NCAA pretends that payment was made solely for the promotional activity and thus labels these arrangements “allowable NIL activity.” But, again, even if the promotional activity somehow removes this scenario from the NCAA’s proposed definition of “pay-for-play,” why should a player who receives the same compensation under similar circumstances, but does not engage in a minor promotional activity, receive the harsh punishment of being deemed ineligible for having engaged in “pay-for-play”?

None of this is to suggest that all (or any) of the arrangements discussed above should be prohibited by the NCAA. To the contrary, it simply highlights the absurdity of the NCAA’s position on “pay-for-play” and the general arbitrariness of the NCAA’s rules—not to mention the selective enforcement of those rules. In reality, there is no meaningful distinction between what the NCAA calls “pay-for-play” and what it calls “allowable NIL activity.” Accordingly, the NCAA should concede that any distinction it tries to draw between “allowable NIL activity” and impermissible “pay-for-play” arrangements is completely arbitrary and totally impractical. “Pay-for-play” is already happening—the NCAA just refuses to refer to it as such. But labeling certain arrangements “allowable NIL activity” simply because they include some minor promotional activity does not change the fact that those arrangements fall squarely within the NCAA’s articulation of “pay-for-play.” Once the NCAA accepts this fact, perhaps it will be more inclined to take the next step toward implementing a system that is based in reality with clearer and more transparent rules and limitations, to the benefit of all parties.

Alec McNiff (Twitter: @Alec_McNiff) is currently completing a federal district court clerkship after spending a year as a litigation associate at a major law firm. Alec earned his J.D. from University of Michigan Law School and holds a business degree from University of Southern California. All opinions are his own.

[1] Bush has consistently disputed the allegations contained in the COI Report and continues to do so.

[2] COI Report at 55-56.

[3] The complaint was filed in Marion Superior Court in the State of Indiana. It is available at https://public.courts.in.gov/MyCase#/vw/CaseSummary/eyJ2Ijp7IkNhc2VUb2tlbiI6Imx5QkllMlZLa29GWW92cXpISHNocjRNUmdZN2s3S0wyLUV6N2RzZEh3M3cxIn19(Case No. 49D01-2308-CT-033106). Bush has since filed an Amended Complaint, but the allegations discussed herein are unchanged in the Amended Complaint.

[4] NCAA Bylaw 12.02.10 (2023-24) (emphasis added).

[5] NCAA Bylaw 12.1.2.1 (2023-24) (emphasis added).

[6] NCAA Motion to Dismiss at 3-4.