The Athletes Win: Jeffrey Kessler on the Supreme Court’s Unanimous Ruling on NCAA Benefits

00:09 - 00:33

Hi, everyone, and welcome to The Big Stage podcast, where we talk to athletes, artists and entertainers about their legacy and impact. I'm your host, Adam Sansiveri, Managing Director and Co-lead of sports and entertainment at Bernstein. Joining me today is my colleague and friend, Stacie Jacobsen, senior vice president and also Co-lead of our sports and entertainment group, as well as a director in Bernstein's Wealth Strategies Group. Stacie, thanks so much for being here.

00:33 - 00:35

Hi, Adam. Great to be with you today.

00:39 - 01:01

The sports world is still abuzz over the Supreme Court's unanimous ruling against the NCAA’s restriction on education-related perks to college athletes and the long awaited implementation of name, image, and likeness legislation across the country. The outcome of this ruling will hugely affect wealth for student athletes and undoubtedly change the landscape of college sports.

01:01 - 01:46

Jeffrey Kessler is here with us today and is the man behind this big win. Jeffrey is a partner and co-executive chairman of Winston & Strawn and is one of the world's leading antitrust law and trial lawyers. He has litigated some of the most famous sports antitrust cases in history, including the NFL's free agency case and Brady versus the NFL, which led to the end of the 2011 NFL lockout. Jeffrey represents the US WMT and its equal pay lawsuit against the US Soccer Federation and the NFLPA and National Basketball Players Association in labor negotiations. Other clients have included the National Hockey League Players Association and the Major League Baseball Players Association, among so many others.

01:46 - 02:10

Jeffrey recently advocated for runner Blake Leeper in his quest to compete in the Tokyo Olympics. Jeffrey, when asked if you can rank your cases, you are quoted as saying that it's hard to compare different levels of exploitation. But you highlight the NCAA case before the Supreme Court as one of the most important that you've been involved in. We can't wait to talk about it. Thank you so much for joining us today. My pleasure.

02:10 - 02:36

Well, so first, congratulations on this landmark ruling that we're all hearing and reading about. What an achievement! And this comes for our listeners after both decades of legal and public pressure on the NCAA to allow student athletes a bigger slice of the billions of dollars generated by college sports each year. But what does this ruling actually mean for college athletes? Can you break it down for us?

02:36 - 03:26

So the significance of this ruling goes far beyond what was actually decided. What was decided was that the NCAA could no longer restrict education-related benefits. So those are things like graduate school tuition, study abroad, internships, computer equipment, tutoring, things to enhance the ability of the athletes to succeed in their education and even to give some cash prizes for educational achievement like they do for athletic achievement. Those are all very important things. It'll be life changing for those athletes. And that's great.

03:27 - 03:53

But that is not the only significance of this decision, the Supreme Court used the case to declare that all NCAA restrictions are subject to the same antitrust rules that other businesses would face when they're dealing with workers in effect.

03:53 - 04:36

Right. Because in this context, the athletes are workers, it's labor markets, and there's nothing special about the NCAA system that entitles it to different rules. The reason that's so important that we're seeing it already. On things like rules regulating third-party endorsements, where the athletes could do sponsorships or can do social media influencing or could do group licensing, those rules are now coming tumbling down and have come down to a very significant extent.

04:36 - 05:31

And why is that? Is because the NCAA looked at this decision, this knowing nothing decision, and said, gee, we're going to be committing more antitrust violations and a damages bill is just going to keep going up. We have to do something to try to not have that happen. So they have cut back many of their restrictions on that type of third-party endorsement activity and compensation activity for names, images of likenesses. So we've already seen impacts there. And I just think this is just going to keep going to where the NCAA finally realizes that it shouldn't be regulating economic issues for athletes at all, it should leave that to the individual conferences. That's where I think it's going, and that's where I hope it will go. That's very helpful.

05:31 - 05:49

And we do want to get a little bit more granular on a couple of things you said. But before we continue on, I'm really interested in hearing what the other side of the argument was. Such great changes are in effect, and it was a unanimous nine to zero vote in the Supreme Court. What was the other side's argument? Why didn't they want this to pass?

05:50 - 06:38

I'll try to do justice to their argument. I obviously don't agree with it, but I think I could articulate it. Their argument is that fans of college sports are different from fans of professional sports and that there are unique aspects of college sports, which define the college sport product. And if they don't have rules limiting that product in a certain way, then it will just ruin demand for college sports because people then would rather watch NBA basketball instead of college basketball if they look exactly the same.

06:38 - 07:11

And therefore they said, we should not be subject to normal antitrust review because we need this special ability to define our products in this way. What it means is the athletes could get no money or compensation or additional benefits. That's what they said was a distinction. So they would articulate it maybe in other words. But that is, I think, the essence of their argument.

07:11 - 07:13

That's really helpful. Thank you.

07:13 - 07:25

So for those NCAA athletes, you mentioned this, that you think it's going to evolve quite a bit further. But what ways 10 years down the road, do you envision NCAA sports because of this ruling?

07:25 - 08:08

Well, I think, one, there will be no limits on names, images and likenesses going forward. So what you're already seeing this month, which is that athletes of all sports are getting opportunities. And it's not just football and basketball. You know, it's rowers. It's tennis players, it's swimmers, it's gymnasts. This is going to be great for women athletes because many of them don't even have professional sports alternatives to go to after school. And now they're going to be able to realize a lot of these opportunities. They are some of the most powerful social influencers in the country, and they're now going to get those benefits to be realized.

08:08 - 08:48

So I think you're going to see all that. I also think you're going to see eventually that each conference is going to be given autonomy, which is not all that different than some things we have now. So, for example, the Ivy League has its own rules. It doesn't give out sports scholarships. It doesn't really have big revenue driven sports. It does its own thing. I think you'll see that the rules in the SCC are not going to look the same as the rules in the Ivy League. And that's appropriate because they have, frankly, not engaged in exactly the same set of commercial activities. So I think that's one of the things that's going to emerge in this.

08:49 - 09:23

And I think you're going to see even greater interest in college sports because all of these deals and social media and sponsorships are going to create even more interest in the sports and the athletes and to sort of go back to their justification, what I think is the problem with their justification and the reason why I think ultimately the courts don't accept it is because what's really unique about college sports is not that the athletes don't get paid, it's that they are students.

09:24 - 09:58

And nobody is challenging the right of the NCAA or the schools to say you still have to be students. I mean, that's really what makes college sports different. I don't think anyone will like it less if the athletes would get this compensation and benefits. But, yes, if they were not affiliated with the school, they were just people hired, then it looks a lot and maybe indistinguishable from just having a minor league, you know, professional sports league. So it's the student aspect.

09:58 - 10:21

The reason people like the Olympics is because you compete for your country just like a student athlete competes for their school. But no one really cares that the athletes can get endorsements or the athletes could otherwise be professionals when they're not in the Olympics, like NBA players or NHL players or whatever they are in terms of that.

10:21 - 10:22

That's a great point.

10:23 - 10:37

Hey, Jeff, I'd like to go back to the name, image, and Likeness, or NIL, as NCAA athletes can now take advantage of this. You had mentioned that not all the restrictions were lifted. Can you dive a little bit deeper there? What are some of the limitations still?

10:37 - 11:20

So there are two big categories of restrictions that are still there. Now, I'm involved now in a class action lawsuit called the House Litigation, which is seeking both past damages and injunctive relief against NIL restraints. And two of the categories that continue as follows. One, they don't allow sponsorships to make any of the payments contingent on the athlete being on the team or how the athlete performs. So why is that important? Well, you could think of the fact, for example, a sponsor might want to say, if your team wins the national championship, it makes a ball game, I want to give you a bonus for that.

11:20 - 11:44

Right. Why shouldn’t they be able to do that? They're going to have more attention. They can have more eyeballs, if you win the national trophy or whatever it's going to be, why shouldn’t you be able to get sponsorships and opportunities for that? So I think that's an important restriction that's going to be the subject of continued legal scrutiny.

11:44 - 12:27

The second thing is they said, schools cannot be involved in NIL compensation. Now, why is that important? Well, for example, let's say you're a school that wants to take your school rights and match it with the group license rights of the athletes in your team and sell it in a package to a jersey company or a video game. Why shouldn't the schools be able to do that? What's the distinction there if it's a commercial activity for those rights? Why can't the schools be in that business, if you will, and in fact, you already see them creeping into that business.

12:27 - 13:08

You know, I saw that North Carolina just announced they have a program to do the group license to help their athletes to group licensing. They won't combine it with their rights. They will pay for it, but they’ll help them market it to third parties. Well, why couldn't they also just say, hey, we'll take your group license rights for these things and we'll package that with ours and sell them, we will compensate you. Right. So that's another restriction that I still think needs to go. And it's one that would be directly a product of the competitive marketplace, because, again, North Carolina's going to do that, you can be sure that Duke's going to do that. And you want to see those competitive market outcomes.

13:09 - 13:28

So the individual athletes now can earn money by signing endorsements. They can appear in advertisements, they can host their own camps and clinics, and a lot more. You know, the impact of social media cannot be underplayed here in brand partnerships. This could really be a huge deal. And we've talked about compensation. But how high can it go? Is there a cap?

13:28 - 13:58

Well, there is no cap. It'll go as high as the market will take it. Nick Saban, I think, in the last two days made an announcement that the starting quarterback for Alabama already has almost one million dollars in endorsement deals before he has played his first game as quarterback for Alabama. And Saban uses to show what great opportunities and values there are for the athletes and their brands.

13:58 - 14:43

Well, hello. Yes, that's exactly what we thought would happen. But frankly, I'm more excited about the gymnast who is going to get fifty thousand dollars for social media now than I am about starting quarterback from Alabama who might have a career in the NFL as well. Right. It's all those other athletes. I'm even excited for the local rower who will get an ability to offer rowing training to high school kids and make an extra couple thousand dollars. I mean, these are opportunities that everyone else has. Why shouldn’t these athletes have those opportunities? It's not just about those who are going to make a million. It's about those who will make a few thousand.

14:43 - 14:53

Jeff, do you think it changes the sport at all or changes the athlete at all, that they may be significantly wealthy before they even become a professional?

14:53 - 15:21

I think it helps at every level. If they have more compensation, then they're better able to have the tools and facilities to manage their very complex schedule of doing both athletics and school, which actually requires lots of work and resources and being able to have family members come visit them and attend their games and travel with them and help them out. I think it's all positive.

15:21 - 16:21

And if they get more promotion, that's going to be more promotion for the school too. A lot of the schools do recognize this, that when their athletes go out there and are selling, they are selling, not their brand, they're selling also the association to the school. It's going to help the school's image, the value of their mark, it's going to help their recruiting. So I can't think of a way that it will be negative. Could the athletes sign a bad deal? Yeah, that could happen. And hopefully they're going to get good advice. One of the things the NCAA now allows is they allow them to get agents or lawyers or others to advise them without losing their eligibility on their marketing deals. So that's really important to get those advisors, get financial advisors to help them. What to do with this money? I mean, there's still potential for bad things to happen, but there are always potential for bad things to happen in life. But there's going to be a lot more good coming out of this than the negatives.

16:21 - 16:28

Well, that's a great piece of advice you just said right there. So I hope our listeners take that, and that is get your advisers lined up earlier with things like this.

16:28 - 16:38

Jeffrey, I want to ask you, a lot of advocates have painted this decision as a victory for both racial and gender equality. Can you elaborate on why that might be?

16:38 - 17:13

So, couple of reasons. One is at least in the big revenue sports of FBS football and division one basketball, both men and women, the majority of athletes are people of color, and therefore the deprivation of the economic benefits disproportionately fall on those communities. And a lot of those communities could really use the additional economic support that these type of efforts would have. So in that sense, it's going to have positive social effects. In terms of gender equality,

17:13 - 18:07

so many of the most valuable candidates for sponsorships or brand connection or social media are in fact women athletes, even though their sports don't themselves necessarily generate great revenues in broadcasting or in ticket sales. In fact, many of them are immensely popular and that popularity can be marketed. So it's going to bring, I think, good revenues and by the way, further promote those sports, which will help gender equality as well. And then finally, any type of financial independence is liberating for these athletes. The more they have means, the more they can support themselves and assert themselves and stand up for themselves, that I also think as important social justice effects for these athletes.

18:07 - 18:11

Absolutely. Do you think some schools will benefit more than others?

18:11 - 19:02

Some schools will get better at helping their athletes with this first. Right. So, as I said, North Carolina is like a market leader in saying we're going to help you do group licensing. So I think that's going to be an advantage for North Carolina with their athletes. But what I think will happen is that the other schools will emulate that. So while there may be some market movers, in the end, all the schools that have the resources to do this and now are competing with each other, will come up with new kind of best practices and that'll become the market standard. Now, I don't know that anyone will get a real advantage over the others, but there's always first-mover advantage. The ones who are more creative and more devoted to their athletes I think will do better.

19:02 - 19:06

I guess it's like any other business retaining and getting talent.

19:06 - 19:09

There's always been tremendous competition for this talent.

19:10 - 19:23

You know, Jeff, with financial independence comes financial responsibility as well. And I'm curious to know if and how financial literacy was factored into any of the discussions leading up to the potential changes.

19:23 - 19:56

This is something I think the schools should focus on, and I think some of them are. I think they're talking about providing financial education to their athletes. I know that the professional unions are urging their contract advisers and agents that if they're going to represent the athletes in marketing, to provide them with education, just as they would provide it to professional athletes. So I think you're going to see groups formed to really try to do this and educate them.

19:56 - 20:28

There's lots of interesting efforts out there going forward of organizations who want to be involved in helping the athletes have platforms to reach sponsors who want to help the athletes with their group licensing and the schools themselves, I think, are going to do this. I think part of that will hopefully be some financial literacy and education in this. That's going to be important because of the athletes who do generate some material money, actually learn how to take care of it wisely.

20:29 - 20:37

Jeffrey, do you envision a day when a student athlete could ever be paid by the institution to play? It's possible.

20:37 - 21:09

I think it's going to go eventually to individual conference rules. Might some conferences decide that they would allow that under different rules or structures? Maybe they'd have a rule, you can pay your athletes, but the whole team has to be paid the same or something like that. Yes, I could see things evolving where more and more competition comes in because it's generally a good thing. So I don't know exactly what the end point is, but I know it involves more competition being introduced.

21:09 - 21:21

Today we see a lot of athletes across a couple of the sports playing in college for a year and then going pro. Do you think these rulings cause student athletes to stay in college longer or no?

21:21 - 22:06

I think that there are some athletes who need money. You know, they come from families that very limited resources and they want to go out and help support those families. Then if you could not earn anything in college, then obviously there's a greater incentive to turn professional earlier. So, yeah, I think this can make a difference. Take that quarterback in Alabama. If he's now going to make a million dollars or more a year from his sponsorships, then he may not feel any pressure to go through his whole career in Alabama to get his degree before considering turning pro if he has a pro opportunity, while perhaps if he couldn't do any of that, then after three years of eligibility, you might say, you know what, I got to take money. So I think we'll see some of that.

22:07 - 22:27

Now, of course, in some sports, there aren't a lot of revenue opportunities after college. For those athletes, there's another reason they may stay in school, because they're developing their brand and opportunities and maybe some of that will last even after they're done with school just based on their notoriety or a brand connection.

22:27 - 22:40

It seems that there will be a big learning curve as all interested parties navigate their way through the new landscape. What kind of enforcement will be in place? Will there be any penalties? What would that look like for any violations, intentional or not?

22:40 - 23:09

So there are different things, and the NCAA is only enforcing for names, images, and likenesses. The two categories of restrictions I mentioned, which is that sponsorships based on team or player performance, being on the school, achieving something, or payments by the schools themselves. I'm sure the entire NCAA enforcement mechanism will enforce those rules and there will be penalties just as there are for their other rules.

23:09 - 24:05

But all other aspects of NIL is not regulated by the NCAA right now. They've suspended it, they said. They won't say they won't ever do it, but they said it's an interim basis, they've suspended it. But schools may have their own rules and policies. So athletes have to be aware of that. I know some schools, for example, have put in play, and this doesn't surprise me, we don't want you to take sponsorships from a gambler, or for drugs that are illegal in our state, or pornography. So schools may have certain rules and restrictions that the athletes have to abide by. If they don't, I assume they could lose their place on the team or even possibly their scholarships, depending on what the rules and policies are. But that'll be at the school level, I think, of enforcement. I don't know if any colleges will have rules about this. It's possible they might. And that would then be enforced by the conference.

24:05 - 24:16

You know, I actually have a personal question for you. Can you tell us a little bit about the experience of litigating in the Supreme Court? It was your third appearance at the High Court, but the first time you argued, what was that like?

24:16 - 25:07

So it was a great career milestone for me. I've always wanted to have the opportunity to argue in the Supreme Court. Unless you're one of the very few lawyers whose practice is specializing in Supreme Court argument, and there are very few lawyers to do that but there are some, it’s chance. Right. Supreme Court, I think, took sixty-five cases this year, something like that. You don't know if it's going to be one of your cases. And a lot of the cases they take are cases and issues that most lawyers are not involved in, you know. Challenges about religious discrimination, First Amendment rights, things that again, the cases there are usually the government versus a public service organization, not lawyers who do commercial practice like I do. But there are some cases each year. So this is one of them.

25:07 - 25:39

I was very excited to do this. The experience was totally unusual because of Covid. So it was not live in the courtroom, It was by telephone. No video. So you didn't actually get to see the justices. And it also was a special format. Normally, in a Supreme Court argument, justices may ask as many questions as they want or no questions, so frequently in an argument, many justices might not say anything and some may say many, many questions. So you hear from a few, not others.

25:39 - 26:38

You know, it changes the whole character of the argument. Here, the format was, I started out with two minutes of uninterrupted time and then every justice had three minutes to ask me questions, starting with the chief judge and going in seniority. So the entire argument after my opening was essentially answering questions. I had to prepare for that. I did a lot of practice, what we call moot courts, practicing with people, just asking me endless questions and responding to them and also learning how to not interrupt the justice who might have another question, because since they're on a clock, they would have like three minutes to ask questions. They may want to interrupt you and they're allowed to interrupt you because they are the judge. Right. You are not allowed to interrupt them because you are not. And so we really had to practice that. And in the end, Michael, was a great experience. And obviously I was very satisfied with the result. You can’t do better than nine out of nine.

26:38 - 26:42

Yeah, that's got to be very rewarding. And that's so fascinating. Thank you for sharing.

26:42 - 26:52

Jeffrey, before we let you go, we always ask every single one of our guests this final question. What is the best piece of financial advice that you've ever received?

26:52 - 27:22

Don't make your own financial decisions. Get experts who actually could make those decisions for you, just like I would tell a financial advisor, don't make your own legal decisions. Get a lawyer to advise you about that. So essentially, I listen to people who actually know what they are doing in the financial advisory world. And that way I think I keep myself out of trouble and actually get positive results.

27:23 - 27:33

Great advice. Great stuff. You're a master. Well, Jeffrey, thank you so much for taking the time today and for all your amazing insights. Congrats again. Thank you. And thanks again, Stacie, for being here.

27:33 - 27:34

My pleasure. Thanks for having me, Adam.

27:35 - 27:37

Thank you all for listening.

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This has been The Big Stage. If you enjoyed this episode and you'd like to subscribe, please go to Apple podcasts, Spotify, or wherever you listen to podcasts. Also, please e-mail us with your thoughts, questions and feedback to insights@Bernstein.com and be sure to find us on Twitter and Instagram at BernsteinPWM.