What is the impact of Sunset Clauses on NIL contracts? While most states have similar laws governing student-athletes monetizing their NIL, seven states differ from the rest. Texas, Oklahoma, South Carolina, Tennessee, Louisiana, Mississippi, and Illinois implement a mandatory Sunset Clause to govern the length of all NIL contracts. Six are within the purview of the SEC. As a former high-level Division One student-athlete, I know what players experience daily. The opportunity to earn life-changing money is real, but so is the chance of unfair exploitation. The purpose of the law is to balance the playing field, bringing both parties to neutral grounds. It is not meant to place one party at a significant disadvantage in negotiations and future transactions. Sunset Clauses are clauses in a statute, regulation, or contract that expire automatically on a specified date. It provides for an automatic end once the Sunset Date arrives, voiding the contract. An advantage is that both parties will no longer have obligations once the Sunset Date arrives. It provides easy outs since there are no formal actions either side must take to trigger termination. Normally, both sides negotiate the clause upfront and know the exact end date, making drafting and execution effortless. However, in these seven states, the exact Sunset Date is unknown, and parties cannot negotiate the statutorily established Sunset Clause. This leads to confusion and predatory acts. A party can use the provision to combat changing market conditions by delaying their performance until the clause is triggered, leaving the other party without legal recourse. So, in an NIL context, if the offeror knows of the Sunset Clause’s existence and the athlete does not, they could spring the end of the contract on the unsuspecting athlete. The objective of Sunset Clauses is to limit the length of NIL contracts and force expiration when a student-athlete stops competing in collegiate sports. A commonality between all seven states is a potential “game-changing” loophole stemming from the word participation. The statutes basically articulate that “the contract cannot extend beyond a student-athlete’s participation in the athletic program at a college.” Yet, none of the seven states define the term participation, raising several important questions. First, what does participation mean? After all, participating in a sport can have several different meanings—if not clearly defined. Does participating mean being on the team, playing in games, or “dressing” for games? Participation could mean any of those definitions. Both sides could broaden and narrow the definition of participation to escape contracts. If a player suffers an injury that keeps them from participating, can offerors terminate the contract? Technically, the injured player is not participating in the program. If this qualifies as not participating, then offerors gain significant leverage by using this loophole to terminate contracts with sidelined players of little NIL value. When a player is suspended by the team, school, or NCAA, their marketability takes a hit. So, when suspension periods begin does that count as not participating and trigger the Sunset Date? Suspensions range from practices and games to entire seasons, creating chances for offerors to end contracts with suspended players by citing how the athlete is not participating in the program. Even though the athlete is suspended and has violated rules unrelated to the contract, this potential escape is unfair to the athlete. What happens if the athlete takes a leave of absence from the team? The student-athlete in both scenarios likely entered the NIL contract with the intention of it lasting until their playing career ended. Expanding off the participation loopholes are questions surrounding when the Sunset Date commences. Does the Sunset Date end the contract when the student-athlete plays their last game for the school? Or does it last until graduation? Would the contract void if the player declares for the draft and then returns to school? Here, Sunset Clauses provide leverage to the player. To illustrate, if the Sunset Clause voids the contract when players declare, they can renegotiate better terms because they are likely coming off a successful season. What happens if players transfer? When transferring to another program, their participation in the initial program—the one they were with when they signed the NIL deal—would be considered over. Brands could use this to terminate the contract. However, players would argue that they are still participating in an athletic program, just not the athletic program they were in when the deal was made. Ambiguously worded Sunset Clauses in NIL statutes will lead to expensive litigation and inefficiency if every deal only lasts one to six years. Opportunities presented to college stars who don’t turn pro will dwindle because Sunset Clauses force an automatic end and renegotiation of any contract. The leverage the offering party possesses after the Sunset Date is difficult for the former student-athlete to counter. This will lead to athletes entering underpaid contracts based on arguments that their marketability decreased because they are no longer competing. Brands could also be placed at a disadvantage when negotiating with superstars possessing bright professional futures. These players can then secure huge paydays and escape contracts they signed as budding college players. The renegotiation process would consume valuable time and resources, delaying the inevitable partnership. These problems could be fixed if Sunset Clauses are clarified or removed. The first option for solving the Sunset Clause issue is to remove them and allow parties to negotiate an agreed-upon end date. These clauses create more issues than benefits and are unfairly one-sided. Leverage is removed from student-athletes, earning opportunities for athletes are capped, and the current statutes create unintended loopholes. Sunset Clauses should be eliminated from NIL contracts altogether, allowing each side to freely negotiate the length. If a player and brand find it equally enticing to agree upon a length beyond a player’s collegiate career, this should not be precluded. Players should be allowed to bet on themselves and plan several years ahead when negotiating. Brands will also benefit because they could establish partnerships with players that could create greater returns. With both sides profiting from the removal of Sunset Clauses, the legislation of these seven states should abolish Sunset Clauses within NIL statutes. The second option is to preserve them in the statute but define participation. By clarifying this term, unfair escapes will be prevented and both sides will fully understand what it means to participate in an athletic program. Offerors cannot argue the Sunset Date commenced when a player is injured, suspended, or takes a leave of absence. The definition of participation in NIL contracts should be when a student who is a player on the team engages in all team activities. Participation ceases only when a player is kicked off the team and dismissed from the athletic program entirely. Being injured, suspended, or on a leave of absence does not impact a player’s participation in an athletic program. Student-athletes cannot prolong participation by becoming a staff member upon the end of their playing career because they are no longer athletes at this point. Declaring for professional drafts and returning to school does not impact one’s participation in an athletic program. Further, transferring to a new school does not end participation as long as the player continues to play the same sport. Option three is to enact a clear Sunset Date. The best decision is to end the contract on student athletes' graduation date. I strongly support the abolition of Sunset Clauses within NIL contracts. They are unnecessary, outdated, unfair, and ambiguous. Texas, Oklahoma, South Carolina, Tennessee, Louisiana, Mississippi, and Illinois should join the rest of the country and remove Sunset Clauses from their statutes. Fewer restrictions are better for everyone involved because parties do not have to worry about tiptoeing around unclear end dates. If Sunset Clauses are removed, confusion and ambiguity surrounding the meaning of participation cease. The uncertainty of Sunset Dates will also be solved. Further, serious litigation will be avoided because loopholes will no longer exist. Money will be saved, brands and players will be placed on even grounds free to negotiate in good faith, and both sides will be in prosperous positions. Abolishing Sunset Clauses is the best approach for solving uncertainties surrounding these statutes while protecting student-athletes. By following the legal recommendations provided, the Sun will not Set on the SEC. Dan Henry is a former Division 1 Men’s Basketball Player for Saint Francis University and a current law student at Stetson University College of Law. He has experience in the sports and entertainment industry. You can follow him on Twitter @dan_henry3.

The NFL revised its gambling policy last week to include harsher punishment for players caught betting on games involving their own teams. The NCAA also announced that it will consider updating its policy. The NFL’s changes and the NCAA’s proposed updates signal a more lenient disciplinary approach for athletes engaged in betting on sporting events not involving their own teams. NFL Gambling Policy Changes Under the new NFL policy, bets placed by players on NFL games will result in a one-year suspension at minimum while the punishment for a player betting on his own team will increase to at least a two-year suspension. The NFL has reduced the length of suspension, however, for bets placed on non-NFL sporting events while in the workplace or on team-related travel. Under the revised policy, the NFL will impose a suspension of two games for a first violation, six games for a second violation, and at least one year for a third violation. Prior to the policy change, the punishment for betting on a non-NFL sporting event, even as a first offense, was at least a six-game suspension. The effects of the updated policy will be felt immediately for some teams around the league. For example, Detroit Lions wide receiver Jameson Williams and Tennessee Titans offensive tackle Nick Petit-Frere each received a six-game suspension this offseason for gambling on non-NFL games while at a team facility. In light of the new policy, the NFL agreed that both players may return to practice this week after missing only four games. Though these changes come as a win for the NFLPA, expect the Players Association to pursue more significant changes to the League’s gambling policy, including the removal of the provisions prohibiting gambling while at a team facility. NCAA to Consider Revising Its Student-Athlete Gambling Policy On the heels of the NFL’s policy changes, the NCAA directed two committees to examine penalties for student-athletes caught betting on games not involving their own teams. The committees will consider the following changes: ● On a first offense, eliminate penalties that result in student-athletes being withheld from competition — regardless of the dollar value of the wagers and including bets placed on other sports at a student-athlete's school — and require education on sports wagering rules and prevention. ● On a second offense, potentially involve withholding penalties, depending on the dollar value of the bet(s) in question. ● On a third or subsequent offense, the resulting penalty could be a loss of one full season of eligibility. Like the NFL’s changes, the concepts under consideration by the NCAA offer more leniency for first-time violations with escalating punishment for repeat offenders. The NCAA suggested that the new guidelines, which they expect to be voted on at the end of October, could be applied retroactively. These changes come amid a broader push by the NCAA to encourage state legislatures to update sports betting laws to protect student-athletes from harassment or coercion. Alec McNiff (@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 the University of Michigan Law School and holds a business degree from the University of Southern California.

MLB owners are expected to vote on the Oakland Athletics proposed move to Las Vegas when they convene in November following the World Series. The A’s relocation saga has been well-documented since the news broke back in April and is undoubtedly an unfortunate situation. Whether you want to place blame on the team or the city of Oakland, the bottom line is that the parties were unable to come to terms on an agreement to build a new ballpark. As a result, the A’s looked elsewhere and found a better deal in Las Vegas. Two fanbases that don’t have to worry about their team leaving, however, are the Tampa Bay Rays and Baltimore Orioles. Both franchises have agreed to deals with their respective cities to stay in place for the foreseeable future. The Rays announced plans to build a new ballpark in downtown St. Petersburg and the Orioles will continue to call Camden Yards home for the next 30 years. What does this mean for the Rays, Orioles, and MLB as a whole? Let’s discuss each situation. Last month, the Tampa Bay Rays reached an agreement with the city of St. Petersburg and Pinellas County to build a $1.3 billion new ballpark as part of a redevelopment of the Historic Gas Plant District in downtown St. Petersburg. The Historic Gas Plant District is an 86-acre area where Tropicana Field currently stands. The new ballpark, which is expected to open in 2028, will have a 30,000-seat capacity, three seating levels, a fixed roof, an artificial turf surface, operable walls, and a pavilion design. It’s great news for the franchise, the city of St. Petersburg, and Rays fans in greater Tampa. Tropicana Field has received a number of upgrades over the years that have improved the in-game atmosphere but was still not a long-term solution for the team moving forward. In addition, there had been rumors that have surfaced over the past few years that the Rays were considering relocation, including an odd arrangement where they would spend part of the season in Tampa and part in Montreal. Therefore, the Rays announcement they were “Here to Stay” had to induce a huge sigh of relief for Rays fans. The agreement includes nearly 8 million square feet of mixed-use development that will surround the new site of the Rays ballpark. As I’ve written before, there is a growing trend in baseball and the sports industry in general of building entertainment districts surrounding ballparks. Yes, it’s nice to have 81 nights a year where fans commune in the area around the ballpark. However, seeking additional revenue streams, teams want to attract consumers 365 days a year, and these mixed-use developments are a great way of doing so. Hopefully, the Rays will see an uptick in attendance by building a new ballpark. The Rays attendance issues have been well-documented over the years, highlighted in their recent home loss in the Wild Card round. It’s worth mentioning that this ballpark is being built in St. Petersburg and not in downtown Tampa. Many have claimed that Tropicana Field’s lack of convenience from the majority of Tampa’s population is why the team consistently ranks towards the bottom of attendance. Well, the convenience factor isn’t changing, so hopefully the specter of the new ballpark does lead to some changes. I would highly doubt the Rays are oblivious to that fact and look at the benefits of the additional revenue streams offered by the surrounding amenities more so than the detriment of its proximity to downtown Tampa. According to the latest drafted agreement obtained by the St. Pete Catalyst, the city and Pinellas County will contribute a total of $600 million toward the stadium development, and the Rays will pick up the remainder of the cost – roughly $700 million, pending multiple needed approvals. Staying in the American League East, the Baltimore Orioles also won’t be going anywhere any time soon. On the day they clinched their first division title since 2014, the Orioles announced they reached a deal with the state of Maryland and the Maryland Stadium Authority to extend the lease on Camden Yards an additional 30 years. The current lease was set to expire at the conclusion of 2023, and there was some, albeit far-fetched, speculation that team CEO John Angelos was considering relocation. Earlier this season, Angelos was seeking taxpayer funds to build, well you guessed it, an entertainment district around Camden Yards. However, due to the occupied area around Camden including a parity clause with the Ravens with M&T Bank Stadium nearby, it was seen as an unrealistic ordeal. Add this with the fact that long-time Baltimore sports fans remember when the Colts left for Indianapolis in the middle of the night in 1984 when the city didn’t agree to build a new stadium, and it’s understandable that Orioles fans may have had some nerves. But all of those nerves can go out the door now. In addition to the lease agreement, the partnership with the state includes a 99-year ground lease for select areas around the ballpark giving way to redevelopment. As mentioned, there isn’t a whole lot of room for development around Camden Yards, but there are plans to upgrade the surrounding area in some way. No specifics were given at this stage and the team is expected to fund such development. Camden Yards is one of the most iconic ballparks in the league, so it’s nice to know it will continue to be one of baseball’s most heralded cathedrals for the next three decades. While these two developments with the Rays and Orioles are obviously great for those two respective franchises, there are ramifications for the league as a whole. Rob Manfred has often claimed that MLB will not consider expansion until the stadium situations in Tampa Bay and Oakland are sorted out. With the Athletics likely headed to Vegas and the Rays staying in St. Pete with a new ballpark, it looks like we have some finality on the stadium situations. Therefore, expansion talks could be on the horizon soon. With the decline of RSNs likely sapping some teams of local television money in the near future, expansion fees of upwards of $2 billion could be a huge boon for the 30 current MLB owners. Nashville, Charlotte, Portland, and Salt Lake City are among the cities attempting to land an expansion franchise. In addition, it’s worth mentioning that Oakland could be in position as well. It’s still located in a big media market and has shown it will support a winner over the years. Regardless, it will be interesting development to watch play out when and if MLB expands. Brendan Bell is a 1L at the Sandra Day O'Connor College of Law at Arizona State University. He is also a Master of Sports Law and Business Concurrent Student as well. You can follow him on Twitter @_bbell5

Citing new information presented by the University of North Carolina, the National Collegiate Athletic Association (NCAA) has approved UNC wide receiver Devontez “Tez” Walker’s transfer waiver. Walker is now eligible to play for the remainder of the season. NCAA rules allow athletes to transfer one time. Walker enrolled at North Carolina Central University in 2020 but never played as NCCU canceled its football season due to COVID-19. Subsequently, Walker transferred to Kent State University, becoming one of the best wide receivers in the country. After the 2022 season, Kent State football coach Sean Lewis left the university to become the offensive coordinator at Colorado. Originally from Charlotte, Walker elected to transfer again to be closer to home, enrolling at UNC on January 9, 2023. On January 11th, the NCAA altered the guidelines for multi-time transfers, making it more difficult for players to acquire a transfer waiver. On August 8th, before the football season, the NCAA denied Walker’s waiver to play. The university appealed, but the NCAA denied the appeal in September. In its announcement, the NCAA reasoned that the decision to approve the waiver was based on new information UNC had not previously presented. Interestingly, in September, after the NCAA denied the university’s appeal, the UNC Board of Trustees met to discuss options for the Tez Walker, including legal options. While it is unclear what occurred during the meeting (discussions were in private session), North Carolina Attorney General Josh Stein admitted to writing a letter last week to the NCAA regarding Walker’s eligibility. The Attorney General’s letter may be entirely coincidental, but the NCAA’s statement leaves everyone wondering what information triggered the NCAA to reverse course. Due to the NCAA reversing course, more public universities may lean on state/legal resources to pressure the NCAA into reviewing their actions and decisions. Landis Barber is an attorney at Safran Law Offices in Raleigh, North Carolina. You can connect with him via LinkedIn or via his blog offthecourtdocket.com. He can be reached on Twitter @Landisbarber.

Dartmouth basketball players joined together and informed Service Employees International Union (SEIU), Local 560 of Concord, N.H. that they wanted to unionize. This is the same process that Dartmouth library workers, graduate students, visitor center employers and dining service workers all performed to successfully unionize. The SEIU, also known as the Dartmouth College Employees’ Union, then filed a petition to the NLRB regional office in Boston which is directed by Laura Sacks. It is now up to that regional office and Sacks to perform an investigation and determine if Dartmouth basketball players meet the requirements under the NLRA to form a union. How a Union is Formed Forming a union is a process involving many hurdles. First, employees must come together to request to be unionized to a union organization (i.e., SEIU). The employees could request for their employer (i.e., Dartmouth College) to voluntarily recognize them as a union so they can begin collectively bargaining. If the employer chooses not to recognize them as a union, or the employees do not seek employer approval, the union organization (i.e., SEIU) will file a petition with the NLRB in that region. If the regional director of the NLRB (i.e., Laura Sacks) finds that the requirements to form a union have been met (i.e., the filing party members are employees of their employer; the employer is a private organization; and at least 30% of the employees support the petition) then the regional director will allow the employees to vote on becoming a union. If the employees get 50% +1 votes, they are a valid union. The SEIU President Mary Kay Henry did say, “With their unanimous decision to join together in a union...” showing that a vote to validate union status of the basketball team is likely. Obviously, the big problem here is that no student-athletes have been deemed employees under federal law, so the question becomes whether Laura Sacks will find that they meet the definition of an employee under the National Labor Relations Act (NLRA). Sacks could use the 2015 NLRB holding in the Northwestern Football case to find that the NLRB does not have jurisdiction to consider whether the college athletes are employees under the NLRA. Sacks could also use General Counsel of the NLRB Jennifer Abruzzo’s memo issued in 2021, saying college athletes at private universities are NLRA-protected employees because they perform services for their colleges and the universities display a level of control over the athletes that is similar to an employment relationship. It should be noted that in the 2015 Northwestern Football unionization attempt, the NLRB regional director in that case did find that they were employees under the NLRA. It was on review by the NLRB (who oversees all the regional offices) where it was issued that the NLRB did not have the jurisdiction needed to determine if student-athletes were employees of their university. How Could This Play Out (1) Sacks could find that there is no NLRB jurisdiction to determine if they are employees and rule that they cannot unionize. (2) Sacks could find there is NLRB jurisdiction, and that Dartmouth is an employer of the basketball players and allow them to vote to attempt to unionize. The matter would then likely be reviewed by the NLRB, like the 2015 Northwestern Football case. Which I remind you... was decided before the 2021 memo issued by General Counsel Jennifer Abruzzo. (3) Dartmouth could voluntarily recognize the basketball players as employees and allow them to unionize. Dartmouth College stated, “We are carefully considering this petition with the aim of responding promptly yet thoughtfully in accordance with Dartmouth’s educational mission and priorities.” Not demonstrating which avenue, they will take. (4) Sacks or the NLRB could wait for the determination from the NLRB complaint against USC, the Pac-12, and the NCAA (“the defendants”) that an NLRB administrative law judge is deciding. The administrative law judge is set to hear the case in November 2023. The main issue of that complaint is whether the defendants in that case misclassified USC student athletes as not being employees. Items To Be Noted Dartmouth College is a private Ivy-League school. Being a private “company”, the NLRB has jurisdiction over them. However, the NLRB does not have jurisdiction over public or state-run college (without a joint-employer theory). Also, the Ivy-League does not allow student athletes to have obtain athletic scholarships. This would put this decision into a separate category when talking about most other colleges if they attempted to do the same thing. Lastly, other students at Dartmouth have joined unions. Student workers in the dining hall, library, visitor center, and graduate students are all a part of a union. This tends to resemble the argument made in other student-athlete employment cases; “how can other students be declared employees of the university when they supply services to the university in return for compensation and athletes cannot?” The Big Takeaway For the first time since Northwestern’s 2014 attempt and NLRB General Counsel Abruzzo’s 2021 memo, student-athletes are attempting to unionize. This makes for the fourth legal dispute where student-athlete employment status is at issue.2 With each dispute and the noise that comes with it, makes it more and more likely for governing bodies to have to address the issue. These governing bodies consist of conferences, the NCAA, the NLRB, state and federal courts, state governments, and the federal government. Regardless of if the Dartmouth basketball team is successful in this unionization attempt, they have created another steppingstone for student- athletes to gain employment status. It appears that we are just getting closer and closer to the inevitable. __________________________________________________________________________________ 2 The other three are: (1) Third Circuit Johnson v. NCAA case; (2) NLRB complaint against USC, Pac-12, and NCAA; and (3) a recent complaint filed by the College Basketball Players Association against Northwestern (the NLRB has yet to determine if it will validate the complaint). Logan Hughes is a third-year law student at Ohio Northern University. You can follow him on Twitter @loganchughes23 and on LinkedIn (Logan Hughes)

Just a few weeks ago on August 24th, reports surfaced that Washington Nationals pitcher Stephen Strasburg was retiring from baseball. While the news didn’t catch anyone by surprise as the 35-year-old has dealt with significant injuries over the past few years, it was still extremely sad for baseball fans across the country to hear. Coming out of San Diego State, Strasburg entered the big leagues as one of the most hyped prospects of all time. But unlike some of his fellow #1 overall picks, he more than lived up to the hype. After he led the Nationals to their first and only World Series title in 2019, it appeared Strasburg was potentially on track wear the “Curly W” Nats hat into the Hall of Fame. Unfortunately, injuries got in the way, which leads us to an interesting, yet disheartening development going on in our nation’s capital. After the Strasburg retirement news in late August, there appeared to be a retirement news conference planned for September 9th at Nationals Park where the team would retire his number and honor his career. However, in the time between August 24th and this past weekend, those plans changed. Mark Lerner, the owner of the Nationals, recently released the following statement: “While we have been following the process required by the collective bargaining agreement, behind-the-scenes preparations for a press conference had begun internally," Lerner said in a statement. "However, no such event was ever confirmed by the team or promoted publicly” and that reports had “mischaracterized” the situation. More interestingly than stating there wouldn’t be a retirement press conference for Strasburg, Lerner also said the team “looks forward to seeing Stephen when we (the Nationals) report to Spring Training” in 2024. After he won World Series MVP honors in 2019, Strasburg signed a 7-year contract worth $245 million to remain in DC. It was at the time and remains the second largest free agent contract ever given to a starting pitcher. Unfortunately, the contract has been a complete disaster for all parties involved as Strasburg only made 8 starts since beginning of the 2020 season. And relevant to the retirement news, there’s still 3 years and $105 million left on the contract that runs through 2026. While neither the Nationals nor Strasburg’s camp has confirmed the source of the disagreement publicly, it’s not hard to comprehend why the retirement news conference was cancelled. There is a disagreement between the two sides on how his contract will be handled. According to Britt Ghiroli of The Athletic, the Nationals initially proposed that Strasburg would be paid in full before backtracking and seeking to change the terms of his retirement. Strasburg, represented by Scott Boras, understandably aren’t going to take too kind to the Nats sudden change of plans. When a player formally retires, they give up the remaining money left on their salary. Buster Posey, for example, walked away from $22 million when he stepped away following the 2021 season. However, if a player suffers a career ending injury, they don’t have to “formally” retire and collect what’s left on their contract. Prince Fielder, who suffered a neck injury in 2016 that ended his career, collected the remaining money owed to him from his $214 million deal signed before the 2012 season. There is some precedent, however, of players reaching settlements with their respective teams (David Wright with the Mets) or in some cases, giving money back. When Gil Mesch retired in 2011, he gave back the remaining $12 million left on his contract to the Kansas City Royals. Are the Nationals expecting Strasburg to voluntarily give up his future earnings? Absolutely not. But did they hope they could potentially work out a deal where they can pay less than the $105 million plus deferred money? Probably so. Where things go from here will be worth watching. In addition, the Lerner family has looked into the possibility of selling the franchise recently, but disputes involving the team’s television deal with the Orioles and MASN have gotten in the way. Could Lerner be attempting to minimize the “liability” of Strasburg’s contract to make it a more attractive purchase? Potentially. In addition to cancelling the retirement press conference, the team has also cut some of their scouting staff and their GM, Mike Rizzo remains without a contract beyond 2023. Long story short, there is a lot of uncertainty with the Nationals at the moment. It’s understandable that the Nationals want to avoid paying the full sum of Strasburg’s contract. It’s also understandable that Strasburg, his agent Scott Boras, and the MLBPA don’t want to walk away from a significant amount of money. Will the Nationals relinquish their position? Will Strasburg be willing to work out a settlement? That’s to be determined. But regardless, it would be a shame if the relationship between the two parties is ruined over this unfortunate situation.

In the weeks leading up to MLB’s August 1st trade deadline, there was much intrigue as to whether the Los Angeles Angels would trade pending free agent Shohei Ohtani. Instead of selling and potentially netting a significant prospect return from the two-way superstar, the Angels went “all in” and make one last push at a postseason run before Ohtani hits free agency. The team traded some of their best prospects for a handful of players including Lucas Giolito, Reynaldo Lopez, Randall Grichuk, and Dominic Leone. By doing so, the team exceeded MLB’s Competitive Balance Tax, commonly referred to as the “Luxury Tax.” Long story short, the Angels all in effort came up well short. The club struggled heavily in the month of August, losing 18 of the 26 games and falling completely out of both AL West and AL Wild Card contention in the process. In addition, Mike Trout returned to the injured list after only returning for one game and Ohtani suffered a torn UCL, ending his season on the mound. So what did the Angels front office do in response to their disastrous August? Well, they basically “undid” most of their trade deadline moves by placing nearly a quarter of their roster on waivers, including the four aforementioned players listed above. What was the incentive for the team do this? How will this affect the pennant race this season? Are there any big picture ramifications the league might want to look into regarding waiver moves? Let’s dive in. By placing Giolito, Lopez, Grichuk, Leone, and reliever Matt Moore on waivers, the Angels now appear to have gotten their payroll under the $233 million luxury tax. Although the tax calculations are not official until December, all signs are pointing towards the team being shy of the threshold. This is important for a couple of reasons. The first one being it will save Angels owner Arte Moreno some money, which isn’t a reason many fans will want to hear. However, the other reason is a little more notable. Now, if the Angels lose Shohei Ohtani as a free agent after making him a qualifying offer this winter, they will receive a compensation pick after the second round. It would have been after the fourth round if they were over the threshold. While the MLB Draft is largely considered somewhat of a crapshoot where first round picks fail to reach the majors and tenth round picks can become all-stars, getting an additional second rounder instead of a fourth rounder is still significant. While Angels management has certainly dropped the ball over the years by failing to field a .500 team with two generational players on their roster, it’s hard to criticize them for this move because it both falls within the rules and provides the franchise a benefit. However, just because it falls within the rules doesn’t mean it doesn’t bring up competitive integrity issues. First of all, by cutting ties with nearly a quarter of their roster, the Angels will undoubtedly be a far worse team on paper in the month of September than they otherwise would’ve been. Therefore, anyone who has the Angels on their schedule this month will likely benefit. Teams like the Orioles, Guardians, Mariners, Rays, Twins, and Rangers, who are all fighting for division championships or wild card berths, will face the Halos in the coming weeks and could bank some much-needed wins to get themselves into a better postseason position. But teams trade away some of their best players and weaken themselves at the trade deadline every season, so the Angels shedding some of their contributing players isn’t unprecedented by any means. How they went about shedding them is though. When “sellers” trade away players at the deadline, they don’t just give them up for salary relief. They give them up for prospects that will help them in the future. In order to acquire players that play key roles in a pennant race, “buyers” have to outbid other suitors with prospect capital to do so. The consideration of acquiring players for the future offsets the downside of trading away from the present roster. But what the Angels did doesn’t fall into that category. They essentially let the Cleveland Guardians take Gioltio, Lopez, and Moore for essentially nothing. The Guardians, who for all intents and purposes sold at the deadline in trading Aaron Civale to the Tampa Bay Rays, benefitted from being in an advantageous waiver position. Instead of being required to shell out any of their top prospects like their contending counterparts did at the deadline, the Guardians walked away with players that could help them push the Minnesota Twins for the AL Central crown for pennies on the dollar. While it’s unknown if MLB or the MLBPA will do anything drastic to stop a team like the Angels from putting a significant number of players on waivers in the future, I bet it will be a talking point at this offseason’s Owners and GM meetings. The Twins front office can’t be happy that a team chasing them for the division got to pick up a collection of players for essentially nothing. Buyers like the Rangers or Astros can’t be happy that a team didn’t have to give up any of their top prospects to acquire talent when they had to just weeks earlier at the deadline. What the Angels did was largely viewed as unprecedented and surprising in the baseball industry. Whether or not they were technically allowed by the CBA to place five players on waivers to avoid luxury tax penalties is one thing. But preserving the competitive integrity of postseason races is another and should at least cross the minds of the league’s executives in New York. A potential solution could be pushing back the trade deadline to mid-August or bringing back the waiver trade system that allowed trades up until the end of August where teams would have a little more clarity on their postseason prospects before making drastic moves. But regardless, it’s not the best look when a team potentially shakes up the playoff race to get under the luxury tax.

After 654 National Hockey League (NHL) games split among the Montreal Canadiens, Arizona Coyotes, Pittsburgh Penguins, Minnesota Wild, Ottawa Senators, Toronto Maple Leafs, and Colorado Avalanche,[1] three days in jail, one terminated contract from July 2023,[2] and approximately 40 days in the NHL Player Assistance Program,[3] American-born forward Alex Galchenyuk has signed a two-year contract with SKA St. Petersburg of the Kontinental Hockey League (KHL).[4] With his move to Europe, a unique chapter of sports law (as applied to hockey) appears to have concluded. Regardless as to whether or not this represents “game over,” let’s take a Conduct Detrimental-style skate through the last two months of Galchenyuk’s NHL tenure, some past examples of NHL jurisprudence, and what might happen going forward. On July 1, 2023, Galchenyuk became an unrestricted free agent.[5] He signed a one-year, $775,000 (seven hundred seventy-five thousand dollars) contract with the Arizona Coyotes, with whom he was projected to play for the third separate time in his career.[6] On July 9, Galchenyuk was arrested for a drunken hit-and-run causing property damage in Scottsdale, Arizona. At that stop, Galchenyuk invoked racial slurs towards one Black police officer on the scene, and threatened another police officer by stating that “One phone call and you’re all dead, your whole family, your bloodline is dead.”[7] On July 14 (approximately two weeks after signing), the Coyotes announced that they placed Galchenyuk on unconditional waivers for terminating his contract.[8] On July 18, Galchenyuk published an open letter on social media, apologizing for his behavior and announcing his enrollment in the NHL Player Assistance Program.[9] On August 12, Galchenyuk pled guilty to one misdemeanor charge of threatening a police officer, but the other charges against him (private property hit-and-run, disorderly conduct, failure to obey, resisting arrest) were dropped.[10] Pursuant to the guilty plea, Galchenyuk was sentenced to 30 days in jail–3 days of time served, and the remainder suspended on the condition of successfully completing an alcohol recovery program, as well as one year with neither consuming nor possessing alcohol.[11] Finally, on August 25, Galchenyuk signed his current contract in the KHL.[12] As a preliminary matter, when the Coyotes terminated Galchenyuk’s NHL contract, there were some rumblings that the NHLPA planned to investigate this maneuver.[13] Even though teams have previously placed players on unconditional waivers for terminating contracts on numerous other occasions, contracts are usually terminated upon mutual agreement. A small minority of contracts have been terminated due to heinous off-ice conduct (and presumably without the player’s consent), but this Galchenyuk situation appears to be the first time that a NHL team terminated a contract before the player played any games under that contract. Under similar circumstances, in May 2020 (during the indefinite suspension of the season due to the COVID-19 pandemic), the Washington Capitals terminated the contract of Brendan Leipsic.[14] He had played 61 games for the Capitals during the 2019-20 season, pursuant to his one-year contract that he had signed with the Capitals. Like Galchenyuk, Leipsic’s contract was terminated for off-ice behavior (for Leipsic, when social media direct messages were leaked, revealing disparaging comments towards women), but unlike Galchenyuk, Leipsic had played some games during the course of the contract. By contrast, in October 2015, Montreal Canadiens forward Zack Kassian was hospitalized for nose and foot fractures obtained while riding as a passenger in his own truck, crashed by another person driving the truck.[15] Kassian later admitted that he was intoxicated with alcohol and cocaine prior to the car crash.[16] As of Kassian’s car crash, he had participated in preseason games with the Montreal Canadiens, but the regular season had not yet started. Under terms of the NHL Collective Bargaining Agreement, Kassian would not have been eligible to have been placed on waivers while injured; instead, Kassian immediately enrolled in the NHL Player Assistance Program.[17] Upon Kassian’s completion of criteria and his getting cleared to play, he was traded to the Edmonton Oilers. Like Galchenyuk, Kassian entered the NHL Player Assistance Program shortly after infamous conduct, but unlike Galchenyuk, Kassian never had his contract terminated due to that specific conduct. Assuming Alex Galchenyuk has any remaining future in the NHL, what might it look like? One fair analogy might be of former Los Angeles Kings defenseman Vyacheslav “Slava” Voynov. On October 20, 2014, he was arrested for domestic violence against his wife, Marta Varlamova.[18] He was immediately placed on indefinite suspension with pay while his case developed. In July 2015, Voynov pled no lo contendere a reduced misdemeanor charge, for which he was sentenced to 90 days in jail and three years of probation.[19] In September 2015, Voynov was transferred to a U.S. Immigration and Customs Enforcement detention center. Instead of undergoing deportation proceedings, Voynov elected to return to his home country of Russia, where he continues to play in the KHL.[20] The remainder of his NHL contract was terminated due to the impossibility of Voynov being able to secure a work visa. Meanwhile, the NHL determined that Voynov was unable to play for Team Russia in their international tournament, the 2016 World Cup of Hockey.[21] After an arbitrator’s final decision in 2019, Voynov became eligible to play in the NHL in 2020,[22] but there has been no indication that Voynov will attempt to return to the NHL. Between Voynov and Galchenyuk, one crucial difference is that because Galchenyuk is a natural-born citizen of the United States, he cannot be deported from the United States. As such, it is not “impossible” for Galchenyuk to perform services under a NHL contract, in the way that it was impossible for Voynov to do the same. That being said, it is fair to assume that if Galchenyuk should attempt to rejoin the NHL, he would have to (1) sign a standard player contract, (2) serve an unpaid suspension while undergoing treatment in the NHL Player Assistance Program, which he entered on July 18, 2023, but which he has presumably not completed since accepting employment in the KHL, and (3) undergo NHL discipline once cleared to play after completing the Player Assistance Program. Similarly, assuming that a WCOH takes place in 2024 as planned,[23] Galchenyuk (who would be under contract for SKA St. Petersburg by that time) would likely be deemed ineligible for Team USA in that tournament. Mike Engle is an associate attorney for the United States federal government. During his time at Hofstra Law School in New York, his articles were published in the Hofstra Labor & Employment Law Journal and the DePaul Journal of Sports Law & Contemporary Problems. He was also an invited guest on the now-defunct vlog Law and Batting Order. Mike resides in Upstate New York with his wife, Gillian, and their daughter, Esther. Interact with him on Twitter @EngleLaw29, but only during off-duty hours and preferably not during Montreal Canadiens games! Sources: [1] Alex Galchenyuk, HOCKEY REFERENCE, https://www.hockey-reference.com/players/g/galchal01.html (last accessed Aug. 27, 2023). [2] Galchenyuk has contract terminated by Coyotes, NHL.com (July 14, 2023), https://www.nhl.com/news/alex-galchenyuk-contract-status/c-345331164. [3] Galchenyuk, Alex, X (formerly TWITTER) (@AGally94) (July 18, 2023, 17:50), https://twitter.com/AGally94/status/1681421247400345601?s=20. [4] Alex Galchenyuk signs two-year deal with SKA Saint Petersburg in KHL, SPORTSNET (Aug. 25, 2023, 17:33), https://www.sportsnet.ca/nhl/article/alex-galchenyuk-signs-two-year-deal-with-ska-saint-petersburg-in-khl/. [5] HOCKEY REFERENCE, supra at Note 1. [6] Alex Galchenyuk, CAPFRIENDLY, https://www.capfriendly.com/players/alex-galchenyuk (last accessed Aug. 27, 2023). [7] Gonzalez, Isabel, CBS SPORTS (July 14, 2023, 20:44), https://www.cbssports.com/nhl/news/former-coyotes-forward-alex-galchenyuk-threatened-to-kill-police-officers-after-hit-and-run-arrest-per-report/. [8] NHL.com, supra at Note 2. [9] Galchenyuk, Twitter, supra at Note 3. [10] Cantlon, Kyle, Report: NHL free agent Alex Galchenyuk has 5 of 6 charges dropped after July arrest, YAHOO SPORTS (Aug. 21, 2023, 15:59), https://ca.sports.yahoo.com/news/nhl-free-agent-alex-galchenyuk-has-5-of-6-charges-dropped-after-july-arrest-195903549.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAED8YfQrF1O6tA4lsP5Fh7mIIcc1VGM9MchVbGSzcrdBU79v1_b_0ICI3U-Ho9cPjyhpJmPwD7-KZTDYEFLXFZk-lYtxIOI1zaH0q6ajE_AxY1f4QI1FxpWwAi7fSRvB4JGaFdP0BWnGhIuTAuvmJtegFYEPqHsXSSP8W1DOkXNa [11] Id.; see also Strang, Katie, X (formerly TWITTER) (@KatieJStrang) (Aug. 21, 2023, 12:46), https://twitter.com/KatieJStrang/status/1693665830792315235?s=20. [12] Sportsnet, supra at Note 4. [13] Morgan, Craig, X (formerly TWITTER) (@CraigSMorgan) (July 13, 2023, 12:19), ​​https://twitter.com/CraigSMorgan/status/1679525972926930945?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1679525972926930945%7Ctwgr%5E2d0a9b88cb0f3f5ec69206d19820f6bf0c3081a0%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fwww.hockeyfeed.com%2Fnhl-news%2Falex-galchenyuk-under-investigation-by-the-nhlpa; Wyshynski, Greg, X (formerly TWITTER) (@wyshynski) (July 13, 2023, 18:06), https://twitter.com/wyshynski/status/1679613251183583232?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1679613251183583232%7Ctwgr%5E2d0a9b88cb0f3f5ec69206d19820f6bf0c3081a0%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fwww.hockeyfeed.com%2Fnhl-news%2Falex-galchenyuk-under-investigation-by-the-nhlpa. [14] Washington Capitals Public Relations, X (formerly TWITTER) (@CapitalsPR) (May 8, 2020, 10:58), https://twitter.com/CapitalsPR/status/1258773185966850054?s=20; NHL Public Relations, NHL statement on Leipsic, Rodewald, NHL.com (May 6, 2020), https://www.nhl.com/news/nhl-statement-on-brendan-leipsic-and-jack-rodewald/c-316845084. [15] Canadiens winger Zack Kassian involved in traffic accident, MONTREAL GAZETTE (Oct. 5, 2015, updated July 12, 2020), https://montrealgazette.com/news/local-news/truck-runs-off-road-in-cote-des-neiges-notre-dame-de-grace. [16] Cherry, Paul, Woman charged with crashing ex-Canadien Kassian's truck to learn fate May 3, MONTREAL GAZETTE (Feb. 7, 2019), https://montrealgazette.com/news/local-news/woman-charged-with-crashing-ex-canadien-kassians-truck-to-learn-fate-may-3. [17] NHL Public Relations, Canadiens' Kassian placed in Stage Two of NHL/NHLPA Substance Abuse and Behavioral Health Program, NHL.com (Oct. 5, 2015, 18:30), https://www.nhl.com/ice/news.htm?id=781824. [18] Mike Halford, Updated: Kings’ Voynov Arrested for Domestic Assault, Suspended Indefinitely, NBC SPORTS (Oct. 20, 2014, 10:37), http://prohockeytalk.nbcsports.com/2014/10/20/breaking­kings­voynov­arrested­for­domestic­as sault­suspended­indefinitely/; Rich Hammond, Redondo Beach Police Discuss the Kings’ Slava Voynov’s Arrest, ORANGE COUNTY REGISTER (Oct. 20, 2014, 20:05), http://www.ocregister.com/articles/beach­639060­redondo­police.html. [19] Halford, Mike, Voynov takes plea, gets 90 days in jail plus probation, NBC SPORTS (July 2, 2015, 10:52), https://www.nbcsports.com/nhl/news/breaking-voynov-takes-plea-gets-90-days-in-jail-plus-probation. [20] Fenno, Nathan, Ex-Kings player Slava Voynov spent two months in jail for domestic abuse, but is at Olympics representing Russia, LOS ANGELES TIMES (Feb. 19, 2018, 17:04), https://www.latimes.com/sports/olympics/la-sp-olympics-voynov-assault-20180219-story.html. [21] Slava Voynov removed from Team Russia roster, NHL.com (July 18, 2016), https://www.nhl.com/news/slava-voynov-will-not-play-at-world-cup-of-hockey/c-281183668. [22] NHL and NHLPA Statement on Vyacheslav Voynov’s Suspension, NHL Public Relations (May 23, 2019), https://media.nhl.com/public/news/13271?sf103188791=1. [23] Rosen, Dan, World Cup of Hockey expected to return in 2024, NHL.com (Aug. 24, 2022), https://www.nhl.com/news/world-cup-of-hockey-return-status/c-335370560.

Earlier this year, NBA Center Nerlens Noel and his former agent, Rich Paul of Klutch Sports, settled their ongoing misrepresentation dispute that came to fruition in the summer of 2021.[1] In 2017, Noel, an established veteran and former sixth overall pick, considered signing a four-year, $70 million contract extension with the Dallas Mavericks. At the time, Noel was represented by Happy Walters.[2] However, Rich Paul told Noel to terminate his relationship with Walters, reject the deal, and instead seek a max contract the following season.[3] Noel took Paul’s advice and moved on from Walters, accepting a single-year qualifying offer in order to be in a position to sign a better contract the following offseason.[4] The following season, Noel only played 30 games as he had surgery to repair a torn ligament in his left thumb. This injury, along with Noel’s play, impacted his value around the league. The subsequent offseason, he was only able to land a two-year, $3.75 million deal with the Oklahoma City Thunder, which included a second-year player option.[5] Noel then sued Paul and Klutch Sports for misrepresentation, seeking $58 million in damages as well as a declaratory judgment and monetary damages.[6] Noel argued that Paul breached obligations and duties owed to Noel that are explicit through the player-agent relationship created by the Standard Player Agent Contract (SPAC).[7] Specifically, Noel claimed breach of contract, breach of fiduciary duty, negligence, and breach of the duties of good faith and fair dealing.[8] This type of dispute may seem rare to the public, but poaching players and making promises to them in the agency world is quite common.[9] More uncommon, however, is filing a complaint and attempting to bring it to a courtroom.[10] The National Basketball Players Association (NBPA) does not prohibit agents from contacting other agents’ clients.[11] Unlike the prohibition on tampering by league executives, agents can talk to players and attempt to sign them to their agency.[12] Unfortunately, the ability to do so can lead to situations where advice given by agents recruiting players does not come to fruition, resulting in players signing for less than what their value was the following season. Switching agents and receiving less money than expected has happened to several players over the years, with Victor Oladipo being the most prominent example.[13] Noel attempted to bring the dispute into the courtroom but ultimately failed as the judge dismissed the case because of an arbitration clause in his contract with Klutch Sports.[14] This clause is part of the SPAC and is common in player-agent relationships.[15] Arbitration provisions are customary in many employee-employer relationships as these provisions are alternatives to litigation. The Federal Arbitration Act was established in 1925 to make arbitration agreements valid as contracts.[16] This is because arbitration is generally seen as more efficient, less complicated, and more private, making it appealing in disputes involving well-known figures like professional athletes. The SPAC’s arbitration clause has been a crucial part of contracts between players and agents as a way to strengthen the role of the player’s association in disputes of this matter.[17] That said, employment arbitration clauses do not come without scrutiny. The arguments against arbitration are often that there is an inherent bias by the arbitrator depending on the relationship with both parties, limited discovery in the process, and unequal bargaining power between the parties.[18] That said, these arguments do not seem to apply to the arbitration clause in the SPAC. The SPAC is a standard contract that players and agents agree to which is “entered into pursuant to and in accordance with the NBPA Regulation’s Governing Player Agents.”[19] The NBPA maximizes player protection by giving players a voice in their contracts.[20] Both parties in the dispute are sophisticated, and they negotiate within the exact contract boundaries as do hundreds of players and agents throughout the NBA. Furthermore, this is a unique situation where Noel is the one employing Paul but is bringing suit. Usually, employers have more protections than employees; it is rare for the employer to sue the employee.[21] However, this nuance is of little significance because both parties act within the confines of the NBA – a more powerful entity. Even though individual contract deals have been under greater scrutiny than collective bargaining deals because of the unequal bargaining power, there is so much influence in this contract by the NBA and NBPA that the bargaining power seems equal.[22] Due to the settlement, Noel is responsible for paying Rich Paul full commission for the Knicks deal he signed in 2021 – which he refused to pay during the ongoing legal dispute – and must withdraw all legal proceedings.[23] Noel lost $57.3 million in potential earnings by rejecting the deal with the Mavericks.[24] He was bought out by the Detroit Pistons last season and recently signed a one-year, $3.1 million deal with the Sacramento Kings. Ben Ruvo is a 2L at Penn Carey Law and the Vice President of the Penn Entertainment and Sports Law Society. He can be reached on Twitter @RuvoBen and by email at [email protected]. You can also find this article here: https://upennesls.com/blog/nerlensnoelrichpaul. Sources: [1] Nerlens Noel, Rich Paul, Klutch Sports Group Settle Pistons Center’s Legal Case, The Athletic, Shams Charania [2] CEO of Catalyst Sports & Media, LLC and representative of current NBA players such as Marcus Smart, Jerami Grant, Landry Shamet, and R.J. Hampton. [3] Nerlens Noel’s $58M Lawsuit Against Former Agent Rich Paul Dismissed by Judge, Bleacher Report, Timothy Rapp [4] Id. [5] $58M Lawsuit Against Former Agent Rich Paul, Rapp [6] Id. [7] Nerlens Noel’s Case Against Rich Paul Pushed To Arbitration, Sports Agent Blog, Darren Heitner [8] Id. [9] How Nerlens Noel-Rich Paul Lawsuit Could Change NBA Agent Landscape, Bleacher Report, Jake Fischer [10] Id. [11] Id. [12] Id. [13] Id. [14] Noel’s Case Against Rich Paul, Heitner [15] Id. [16] Mandatory Arbitration Clauses in Employement Contracts and the Need for Meaningful Judicial Review, Journal of Gender, Social Policy & The Law, Elizabeth Roma, 522 [17] Noel’s Case Against Rich Paul, Heitner [18] Mandatory Arbitration Clauses in Employement Contracts, Roma, 526 [19] Standard Player Agent Contract [20] What is the NBPA, Overview [21] Mandatory Arbitration Clauses in Employement Contracts, Roma, 529 [22]Id. [23] Settle Pistons Center’s Legal Case, Charania [24] $58M Lawsuit Against Former Agent Rich Paul, Rapp

You buy a pack of sports cards. Let’s say, a 2020 Panini Prizm NFL Football pack, which retails for about $40. You open your pack of four cards (yes, just four cards) and you end up with three players you have never heard of and a Joe Burrow rookie card. You’re elated! No, you’re a Los Angeles Chargers fan and hoped for a Justin Herbert rookie instead. You’re distraught. Your friend buys an identical pack of sports cards. He knows you’re a Chargers fan and makes you an offer. He says, “If you give me $10, in return I’ll give you every player in a Chargers uniform that I pull from this pack. Deal?” You don’t consider yourself a gambler, but you take a chance. Welcome to the business of sports card “breaking.” Breaking has been a major driver in the Hobby for decades. Breakers will mix and match different sports card products creating multi-year or multi-sport breaks in which randomized spots are auctioned off to participants. Fixed price pick-your-team (PYT) or pick-your-player (PYP) breaks are also offered, where teams with superior draft classes or a proven rookie are priced accordingly. The participant pays a fraction of the total cost of the product in the break with a chance at seeing an outsized return. The packaging includes odds that show the likelihood of pulling certain rare variations of cards (e.g., 1:25, 1:100, etc.). Like any savvy investor up against the odds, hedging is always an option by purchasing several teams within the same break. When participants in the break receive cards in return for their payment, it can easily be characterized as a sale from a legal perspective, even if the cards’ value does not total the price paid. However, if a breaker fails to pull a single card from a participant’s selected team or player, it looks less like a sale and more like a losing bet. Gambling is comprised of three elements: (1) a prize, (2) some degree of chance, and (3) consideration, often a type of payment or activity required to participate. Most folks in and around sports card collecting would agree that it is not at all controversial to characterize one’s participation in breaking as gambling. It is an accepted and necessary evil of the Hobby. Live streaming platforms like Drip, Whatnot, or Twitch and auction sites like eBay provide breakers a platform to peddle their wares. The legal issue is whether these platforms are effectively functioning as unregulated gaming sites when selling spots in sports card product breaks. Last week, eBay released revised guidance regarding who is and is not allowed to sell break spots on their auction site.[1] In a short email sent to select account owners, eBay stated, “Effective July 18, 2023 case, box, and pack breaks may only be sold by pre-approved sellers. Any live auctions underway can be completed but after July 18 you’ll no longer be able to start new break listings.”[2] The auction house cited an effort to support sellers as the reason for the culling of approved breakers. By limiting sellers’ ability to offer break spots, it seems as though eBay is attempting to clean up the space. These changes are the first made by any auction house or streaming site to tamp down on unscrupulous actors in the breaking community. When applying to sell on Whatnot, dealers must agree not to offer any razzes (a single card raffle or lottery) or duck races (literal simulated duck races used to determine random outcomes). Each is a game of chance that produces absolute winners and losers. Despite the platform highlighting and outlawing these two forms of gambling, breaking continues to be among the site's primary uses. Mobile sports wagering is currently disallowed in Florida, while Backyard Breaks (a massively popular group of professional breakers located in south Florida) have found great success running near 24/7 breaks using the Whatnot app. This is not an indictment of breakers. They provide a valuable service for those that cannot afford inflated product prices but still want to meaningfully participate in the Hobby. This is an indictment of streaming platforms that fail to do due diligence. Participating in breaks is gambling. There is a prize, there is a degree of chance, and the consideration paid by participants is sometimes more than they are willing to lose. Auctioning off spots in a sports card break is likely a fraction of the selling done on eBay. However, seeing a leader in the space electing to sacrifice profits to curtail gambling tendencies is good business. Your friend opens his single pack of 2020 Panini Prizm NFL Football. To your chagrin, the first three cards are duds. Then he pulls a green prizm Herbert rookie, which retails for about $85. JACKPOT! What a return on your investment! You’re hooked. Nate Otto is a rising 3L at the University of Florida Levin College of Law and the Executive Articles Editor for the Florida Entertainment and Sports Law Review. Find his store on eBay @BlueWhippetSportsCards. Sources: [1] Rick Mueller, eBay to Limit Break Listing to Pre-Approved Accounts (visited June 15, 2023) https://www.sportscollectorsdaily.com/ebay-to-limit-break-listings-to-pre-approved-accounts/. [2] NEO Cards & Comics, eBay cracking down on sports card breaking, must be pre-approved (viewed June 19, 2023) https://www.youtube.com/watch?v=ZG4-mrCVfQc.

Fanatics, Inc., is nearing its final form as a fully armed and operational battle station within the sports card hobby. It took the sports merchandising giant only two years to go from zero involvement to complete domination of the Hobby in areas of licensing, manufacturing, distribution, and, most recently, resale: Aug. 19, 2021: Fanatics strikes a deal with MLB and MLBPA to replace Topps as the league's official trading card partner in a deal set to begin in 2023. Aug. 23-25, 2021: Fanatics replaces Panini, the company’s main competitor, as the official trading card partner of NBA, NBAPA, and NFLPA in a deal set to start in 2026. Sept. 29, 2021: Fanatics Trading Cards are valued at $10.4 billion, over half of the company's overall valuation of $18 billion following a $350 million funding round from Silver Lake, Insight Partners, and Endeavor, the owner of the UFC. (Panini maintains licensing rights to the UFC) Jan. 3, 2022: Fanatics, not content with waiting for its MLB and MLBPA deals to go into effect, agrees to purchase historic trading card manufacturer Topps in an acquisition worth approximately $500 million. Feb. 2, 2023: Fanatics announces its plans to create a live streaming platform for shopping trading cards and collectibles to rival platforms like Whatnot, TikTok, and Instagram Live. June 21, 2023: Fanatics sends local card shop (LCS) owners a contract with terms and conditions outlining requirements and restrictions regarding the resale of Topps products. Over that same two-year period, Fanatics' memorabilia arm, Fanatics Authentic, penned exclusive licensing agreements with superstars across professional sports including Tom Brady, Jayson Tatum, Auston Matthews, Shohei Ohtani, and several others. Under the Sherman Antitrust Act, “an unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct." [1] Recent lawsuits citing Sherman Act violations have been leveled against large corporations involving mergers and acquisitions in both the airline industry and social media space. [2] The allegations center around anti-competitive behaviors including price-fixing, artificial price inflation, and lopsided exclusivity agreements. In the case concerning domestic airline travel, the court focused on the roughly 80% controlling interest that the defendants would have over the entirety of the $513.5 billion airline industry should proposed mergers be allowed. [3] Make no mistake, the sports collectibles business (valued around $35 billion in 2023) is several tiers below the airline industry, but the principles combatting anticompetitive behavior in both should be recognized and acted upon by the Department of Justice and/or corporations in the space. Surprisingly, the Hobby’s reaction to Fanatics slowly gobbling up competitors has been generally positive. The sentiment is that Fanatics brings more investment and marketing dollars into the business, drawing more eyeballs and interest to the space, and in turn, growing the Hobby to the benefit of both dealers and collectors alike. However, that continued growth now comes with demands and stipulations for sellers of Fanatics products that, by 2026, will include exclusive rights to three of the four major U.S. sports. In the terms and conditions contract sent to LCS owners earlier this week, Fanatics included its ability to issue “suggested” minimum price policies for certain products sold in the future. Should a dealer fail to comply with the “suggested” price policies, Fanatics reserved the right to suspend individual accounts, likely halting all distribution to the offending dealer. In the same subsection, Fanatics qualifies the demand by claiming that the “retailer shall, at all times and in its sole discretion, determine and control the price at which Topps products are sold by the retailer to its customers.” Despite the qualification, these “suggestions” feel a lot like Fanatics strong arming LCS owners into submission for fear of losing access to football, baseball, and basketball product which likely makes up nearly 95% of total in-store sales. The merchandising mogul also requires certain signage posted in-store, resale/breaking restrictions, hours of operation parameters, and quarterly sales reporting metrics. If Fanatics cannot currently be considered a monopoly, by 2026 there will be no doubt. Other rising concerns amongst Hobbyists include several what-if’s. Specifically, concerns that further demands made by Fanatics could require live streaming sales done exclusively on their coming Fanatics Live platform. Where an LCS owner may not have the deep pockets to combat Fanatics regarding the above contract conditions or future harms, platforms like Whatnot and Twitch are better positioned to challenge Fanatics on Sherman Act antitrust grounds—citing an illegal restraint on trade—should this additional step towards the suppression of competition come to pass. There should also be forthcoming discussions about whether the above terms bring Fanatics into an agency relationship with LCS owners and/or whether resale restrictions are barred by something akin to patent exhaustion for sports card products. Nate Otto is a rising 3L at the University of Florida Levin College of Law and the Executive Articles Editor for the Florida Entertainment and Sports Law Review. Find his store on eBay @BlueWhippetSportsCards. Sources: [1]Antitrust Laws and You, The United States Department of Justice (visited June 23, 2023) https://www.justice.gov/atr/antitrust-laws-and-you#:~:text=The%20Sherman%20Antitrust%20Act,-This%20Act%20outlaws&text=An%20unlawful%20monopoly%20exists%20when,suppressing%20competition%20with%20anticompetitive%20conduct. [2]See Mulvey v. American Airlines Inc., 2019 U.S. Dist. LEXIS 35824 (D.D.C. 2019), In re Domestic Airline Travel Antitrust Litigation, 221 F. Supp. 3d 46 (D.D.C. 2016); See also FTC v. Meta Platforms, 2022 U.S. Dist. LEXIS 199854 (N.D. Cal. 2022). [3]Airline Industry Market to be Worth $635.8 Billion by 2030, Yahoo Finance (visited June 25, 2023) https://finance.yahoo.com/news/airline-industry-market-worth-635-143000729.html#:~:text=Through% 20primary%20research%2C%20it%20was,passenger%20aircraft%20and%20freight%20aircraft.

On June 27, 2023, Panini America—a subsidiary of The Panini Group, the world leader in licensed collectibles—inked an exclusive trading card deal with Tre Johnson, arguably the best basketball player in the 2024 high school class and a projected top NBA draft choice in 2025. The agreement between Panini and the high school prospect is the first of its kind and likely the catalyst for Johnson transferring from Lake Highlands High School in Dallas, Texas, to the basketball powerhouse, Link Academy, in Branson, Missouri. Worthy of note is the fact that Johnson announced his intent to transfer on June 16, less than two weeks before Panini published the press release that made the multi-year trading card deal public. Johnson is now the most recent example of a top-tier high school talent fleeing Texas for states with favorable Name, Image, and Likeness (NIL) laws regarding high schoolers’ ability to receive compensation. “Prospecting” is an investing method regularly employed by collectors and dealers in the sports card hobby. The idea is that the savvy dealer or collector can get in early on the unproven athlete’s career, providing an opportunity to buy low and, maybe, just maybe, sell high. Oftentimes, this means making investments in athletes’ sports cards and memorabilia while the “prospect” is still in the minor leagues or—following the release of new products like 2022 Bowman University—still in college. Unsurprisingly, prospecting is most common among baseball card dealers and investors due to both, the massive pool of potential talent that gets drafted every season, and the depth of MLB’s minor league system. The practice of prospecting is far less routine in a sport like basketball where (1) the NBA’s one-and-done rule creates a truncated window of amateurism (for those who observe) and (2) a smaller draft class presents relatively known commodities. As state NIL laws allow companies like Panini and Fanatics to dip into the high school talent pool, sports card investors may widen their apertures regarding which sports make for viable prospecting markets. State NIL legislation has trickled down to the high school ranks less than two years after its implementation on June 30, 2021. However, not all state-sponsored bills regarding high schoolers’ ability to profit from their publicity rights are created equal. In Texas, Senate Bill 1385 prohibits individuals, corporations, and other organizations from entering arrangements with prospective athletes, regarding the use of the prospect’s NIL, prior to the athlete’s enrollment in an institution of high education.[1] Conversely, under Section 16 of Missouri’s House Bill 417, high school athletes may “earn or attempt to earn compensation from the use of such athlete’s name, image, likeness rights, or athletic reputation” under two conditions: (1) the prospective athlete is in discussions about enrollment with an in-state postsecondary institution, or (2) the prospective athlete has signed a letter of intent to enroll in an in-state postsecondary institution.[2] Now, it’s not that St. Louis University or Mizzou couldn’t make a late recruiting push for Tre Johnson, it’s just that on May 15, On3 reported that Johnson’s top school choices were narrowed to six: Kansas, Texas, Baylor, Kentucky, Arkansas, and Alabama.[3] There are a few potential issues regarding Johnson’s deal with Panini including the timing of his transfer in relation to the announcement of the trading card deal, and Missouri state NIL law allowances for high schoolers. While the NCAA remains committed to the avoidance of pay-for-play models and improper inducements tied to choosing a particular school, it has no jurisdiction over a high school athlete. However, Johnson would likely have to report the deal—which looks a lot like an inducement based on the timing—to the NCAA Eligibility Center should he elect to participate in college athletics for a season. Alternatively, Johnson could choose to join a minor league system like the Overtime Elite League (OTE) following his senior season. Twin brothers Amen and Ausar Thompson—selected 4th and 5th overall in the 2023 NBA draft—both played for Overtime Elite after their high school careers and, earlier this year, signed a similar exclusive trading card deal with Panini.[4] The more pressing matter for Johnson is the Missouri law requirement regarding in-state institutions. This may be as simple as Johnson making a statement that he is “reconsidering” Mizzou or any other basketball program within the state as a possible suitor. The Missouri House Bill only requires that high school athletes are “having discussions about potential enrollment with a postsecondary educational institution,”[5] which is a low bar. If we had access to the contract signed by and between Panini and Johnson, the multi-year aspect of the deal would be interesting to analyze. Without it, we can only assume that the scope of the deal covers just those years that Johnson remains a student-athlete and is in connection with his participation in high school and/or college athletics. Ultimately, the more opportunities for young athletes to monetarily benefit from their athletic prowess the merrier. And as state NIL laws continue to skew basketball “prospecting” younger, sports card investors, dealers, and collectors would be wise to keep an eye on this emerging market. Nate Otto is a rising 3L at the University of Florida Levin College of Law and the Executive Articles Editor for the Florida Entertainment and Sports Law Review. Find his store on eBay @BlueWhippetSportsCards. Sources: [1] 2021 Tex. SB 1385(j)(1). [2] 2023 MO H.B. 417(16)(1)(A)-(B) (emphasis added). [3]No. 1 overall recruit Tre Johnson names top 6 schools, On3 (visited July 1, 2023) https://www.on3.com/news/tre-johnson-names-top-6-schools-alabama-arkansas-baylor-kansas-kentucky-texas/. [4]Panini America Signs NBA Draft Twins Amen And Ausar Thompson To Exclusive Multi-Year Autograph Trading Card and Memorabilia Agreements, Panini America (visited July 1, 2023) https://blog.paniniamerica.net/panini-america-signs-nba-draft-twins-amen-and-ausar-thompson-to-exclusive-multi-year-autograph-trading-card-and-memorabilia-agreements/. [5] 2023 MO H.B. 417(16)(1)(A).