A lawsuit by former student athletes over lost earnings potential could trigger a “cascade effect” that bankrupts the National Collegiate Athletics Association (NCAA), it has been warned.
Previous lawsuits against the US organisation have opened the door to students finally being able to profit off their own name, image and likeness, and to be paid directly by their colleges.
The NCAA’s substantial revenue, generated through lucrative television deals, means that it should be able to withstand a new $50 million (£38 million) case brought by former University of Michigan American football players over lost earnings, according to Thilo Kunkel, professor of sport, tourism and hospitality management at Temple University.
However, he continued, large payouts could put the organisation in a “precarious position”, while further legal challenges could significantly affect its operations and finances.
“If more former athletes or programmes file similar lawsuits, especially with rulings that favour players, it could trigger a cascade effect,” he added.
“The biggest risk lies in the NCAA being deemed responsible for back pay or retroactive compensation. This could create a financial liability the organisation isn’t prepared for, increasing pressure to either radically restructure or even dissolve.”
It has already been warned that the landmark revenue-sharing agreement could cause “enormous problems” for the pipeline of US college students competing at the Olympic Games, and trigger revenue declines at hundreds of institutions.
Further cases are inevitable and will result in more of the NCAA’s time and money being spent on legal battles, according to Kate Buck, a sports and entertainment lawyer at McCarter & English.
“Eventually, the NCAA will not have the resources to fight battles on so many fronts, and they may choose or be forced to file bankruptcy,” she said.
This might not necessarily be bad news, because bankruptcy can often help to sort out complex situations involving damages claims from multiple parties, said Ms Buck, and would give the NCAA time to “plot a path forward in an orderly manner”.
However, Dr Kunkel said bankruptcy would create “immediate chaos” in the short term – colleges would have to rapidly create new governance and compensation models, which could vary widely and create inequities.
And in the long term, he said, a dissolution or bankruptcy of the NCAA could “reshape the college sports landscape” and shift the power to regional conferences as the primary governing bodies for university athletics.
Such disruption could also result in some universities embracing professionalised models while others maintain a more traditional amateur approach, and could increase colleges’ legal and financial exposure, said Dr Kunkel.
“Without the NCAA, individual institutions and conferences might be more directly exposed to legal liability, creating an environment where schools are under more pressure to ensure the welfare and compensation of athletes,” he said.
