As the Protect College Sports Act nears passage in the Senate, conference leaders are working on a ‘Plan B’

WASHINGTON — On Monday in the United States Senate, history will be made.

Lawmakers are poised to pass a college sports bill intended to regulate an unruly industry — a historic moment in the NCAA’s more than century-long existence that brings the federal government closer to its most significant involvement ever in college sports.

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At least two-thirds of the chamber’s 100 members are expected to support the bill, according to votes on procedural motions last week. The legislation would grant the NCAA an antitrust exemption to limit athlete transfer moves (a penalty-free transfer); standardize a five-year eligibility policy; more strictly regulate a new increased player revenue sharing cap; create an agent registry with a maximum fee of 5%, and much more.

The bill also paves the way for the pooling of media rights of the Football Bowl Subdivision conferences; features an anti-conference expansion section; and prevents coaches who left before the end of a team’s season from holding office at another university (the so-called Lane Kiffin rule).

But with the bill poised to pass the Senate — the vote is expected Monday night — conference leaders and top school administrators are busy crafting what is often called “Plan B”: a conference-based athlete governance and compensation framework that reflects many of the bill’s concepts.

Power Conference leaders are seriously discussing adopting the bill’s new revenue sharing cap, increased by $48.8 million, and stricter enforcement of that cap through the College Athletic Commission by limiting void deals with school-affiliated entities, according to messages and memos sent to school staff over the past two weeks. The goal is to establish a stricter cap than the soft cap, now allowing programs to spend well above the current limit of $21.3 million per school.

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Conference officials are also discussing the possibility of independently establishing league-only governance policies, such as a registry of agents, a fee cap and limiting transfers. At the very least, they are preparing to operationalize the provisions of the bill – whether it passes or not.

“The agents are already calling”

There is an urgent need to put such a structure in place. Time is running out, say college stakeholders.

Most college coaches, staff members and athletic directors will soon, if not already, find themselves attempting to renegotiate contracts with football players before the January transfer portal. They make offers without knowing the details of a future compensation framework.

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In fact, a Power Conference athletic director said last week, “each of our players is currently negotiating their deals.”

“The agents are already calling,” says another.

One thing is becoming clearer: The compensation system for college sports athletes is changing.

The question is how?

There are three mechanisms most likely to change the revenue sharing cap, which was established as part of the NCAA’s settlement of three antitrust cases, often referred to as the House:

(1) within the settlement itself, which is complicated by several issues, including the fact that it requires approval from the House plaintiffs’ lawyers and the judge herself, Claudia Wilken, and that might not even be possible as the case remains on appeal.

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(2) at the conference level, which is a murkier option, as league executives must be careful not to violate the settlement agreement.

(3) through the Protect College Sports Act, which as federal law would codify the regulation but still faces a significant obstacle to passage in the House of Representatives.

Some level of doubt remains regarding all three options, particularly changing the terms of the settlement — a process that could take several months, or even six months, says Jeffrey Kessler, one of the plaintiffs’ two lead attorneys. That would beat what college leaders see as a sort of deadline for a new compensation structure: the football transfer portal.

“We have to get something by January,” says a sporting director of the third Power League.

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Plaintiffs’ lawyers push back

In interviews this week, Kessler’s co-lead attorney in the case, Steve Berman, expressed willingness to increase the cap as part of the settlement — as long as it remains a “soft cap,” he said.

“There is no cap on the amount of NIL transactions. We would not agree to change that,” he told Yahoo Sports. “That would be an attempt to restrict competition. We would not be in favor of that.”

But what if leagues developed their own cap in a self-governance model?

Berman warns that this is “not possible without our permission.”

“They have to come to the table,” he insisted. “(Wilken) would be very wary of conference-generated changes, particularly around the cap.”

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As part of the industry’s athlete compensation system, there is a soft cap, much like in Major League Baseball. Each school is allowed to pay athletes $21.3 million directly this school year (the cap increases by 4% per year). The cap amount is for athletes across an entire athletic department, not just football.

However, NIL transactions with third parties are not included in the limit. This paves the way for universities to exploit a loophole in the system and exceed the cap by entering into NIL deals for their athletes with school-affiliated corporate sponsors, clothing brands, etc. disguised as business and sponsorship deals – a practice that has resulted in the majority of power conference programs spending well over $30 million in total athlete compensation.

Schools redirect sponsorship funds to the list and cleverly arrange the deals so that many of them pass through the College Sports Commission, the law enforcement entity responsible for rejecting bogus NIL deals.

However, in recent months, CSC scrutiny of school-affiliated NIL agreements has increased, say those with knowledge of the latest submissions. It’s a point of contention with the plaintiffs’ attorneys, Kessler and Berman, who have requested documents from the organization. They believe that the CSC is being too restrictive by refusing agreements that should be approved. In its latest report released on September 9, the CSC revealed that it had refused nearly 500 transactions between July 1 and August. 31 worth $67 million, which dwarfs the combined declined value of all deals over the previous four months. In the two-month period beginning July 1, it closed more than 12,000 deals worth more than $225 million.

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“We are very skeptical of anything that restricts the number of legitimate NIL transactions,” Kessler said. “We’ve had disputes with them about blocking deals like Panini (the trading card company).”

Conference rules only

That’s right: As college leaders push to establish a stricter cap, House lawyers plan to fight the effort. But that’s not necessarily the case for other potential conference-wide restrictions. For example, Berman acknowledges that if individual leagues independently establish a transfer policy limiting conference athletes to a free transfer, “they might have a good argument that there is no fixed price,” he told Yahoo Sports.

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The SEC has been the most aggressive in its discussions in favor of a self-governing model, in which leagues establish and enforce their own rules, as opposed to the NCAA model, which is more prone to litigation because the association has “market power.” In theory, the SEC’s decision is intended to limit legal challenges by governing a smaller cohort.

Something similar happened last month, when the four power conferences, one by one, created sanctioning structures to ban players who had already signed professional contracts. Can conferences separately establish a single transfer rule?

“This will be subject to ‘rule of reason’ review,” Kessler said. “It would be necessary to examine what the market power of the conference is and the justification for the restriction.”

Meanwhile, on Capitol Hill, senators are preparing to pass legislation intended to regulate the industry. However, critics say the Protect College Sports Act unfairly restricts athletes without adequately considering their voices in crafting the text.

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In fact, even some Republicans oppose government involvement, including Kentucky Sen. Rand Paul.

For these reasons – and more – the bill’s chances of passing the House remain uncertain and, some say, doubtful.

“This bill is the culmination of a slow march toward federal control of college sports that began nearly one hundred and forty years ago in the courts,” Paul wrote in a recent op-ed. “The government has shied away from its true duties – deciding matters of national importance – to focus on something it knows nothing about.”