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Supreme Court Shreds Compensation Cap for Student-Athletes

The National Collegiate Athletic Association violated federal antitrust law by capping how much schools can pay their athletes, the Supreme Court ruled Monday.

WASHINGTON (CN) — Removing the limit on how much cash colleges can pay student-athletes to play, the Supreme Court ruled Monday that the National Collegiate Athletic Association imposed rules that ran afoul of federal antitrust law.

The NCAA did not see the unanimous court defeat as a total loss, however, emphasizing that the justices still upheld its "authority to adopt reasonable rules ... [and] to articulate what are and are not truly educational benefits." 

Former Division I athlete Shawne Alston brought the case here on behalf of thousands of other players whom the NCAA blocked from negotiating much more than full tuition, room, board and books as part of their recruitment. Following a landmark decision by the Ninth Circuit in another case led by former UCLA basketball star Ed O’Bannon, the NCAA said students could get some cash for other education-related expenses — for example, buying a laptop they could use for class — but daily expenses like utility bills were not covered.

The NCAA calls such rules necessary to preserve amateurism in college sports. If deep-pocketed schools can offer unlimited amounts of cash payments to students they are recruiting, it said the stronger athletes will simply enroll with whatever school offers the most money.

A federal judge sided with Alston, issuing an injunction against rules that she said restrained trade in the market for higher education combined with the players’ athletic services. The NCAA petitioned for certiorari before the high court after the Ninth Circuit affirmed, but it was dealt unanimous defeat Monday — three months after oral arguments.

“This historic 9-0 decision is about the athletes, especially those who will never join the pros. It is a chance to make a meaningful difference in their lives and their communities,” said Alston's attorney Jeffrey Kessler with Winston & Strawn. “Hopefully, it will also swing the doors open to further change, so that we can finally see a fair and competitive compensation system in which these incredible players get to benefit from the economic fruits of their labors and pursue their educational objectives."

Justice Neil Gorsuch wrote the lead opinion, which opens with a look back at the first intercollegiate competition in U.S. history: a Harvard-Yale boat race at Lake Winnipesaukee in 1852. The match was sponsored by a railroad executive who offered the athletes an all-expenses paid trip with unlimited alcohol. From then on, Gorsuch wrote, college athletics became highly competitive and more akin to an "organized commercial enterprise" than an extracurricular.

"Schools across the country sought to leverage sports to bring in revenue, attract attention, boost enrollment, and raise money from alumni," the 36-page opinion continues.

The NCAA established what was known as the "Sanity Code" in 1948, prohibiting "promised pay in any form." Though the rules have evolved somewhat amid the industry's explosive growth, Gorsuch notes that the bottom line has meant massive profits for entities like the NCAA, whose broadcast contract for the March Madness basketball tournament alone is worth $1.1 billion annually.

"Those who run this enterprise profit in a different way than the student-athletes whose activities they oversee," he wrote.

Justice Brett Kavanaugh underscored this chasm in a 5-page concurring opinion. "The bottom line," he wrote, "is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year."

Kavanaugh called it untenable for the NCAA to wield storied traditions as the sole basis "to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated."

"Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate," Kavanaugh wrote. "And under ordinary principles of antitrust law, it is not evident why college sports should be any different."

While the decision does bar the NCAA from capping payments to student-athletes for expenses related to education, it does not bar the organization from making rules regarding other expenses, which is partially what the organization aimed for to protect the integrity of the franchise.

NCAA President Mark Emmert spoke Monday about the organization's commitment to supporting NIL benefits — an abbreviation of name, image and likeness — for student-athletes."

“Additionally, we remain committed to working with Congress to chart a path forward, which is a point the Supreme Court expressly stated in its ruling," Emmert said in a statement.

Before the high court, WilmerHale attorney Seth Waxman represented the NCAA, and Mayer Brown attorney Andrew John Pincus represented the Big Ten Conference. They did not return requests for comment.

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