Suit Seeks to Block N.C.A.A. Limits on Athletic Donors

The attorneys general of Tennessee and Virginia filed suit on Wednesday against the N.C.A.A., saying the body that regulates college athletics has no right to block the increasingly common practice of wealthy boosters paying to attract top recruits.

The suit was filed a day after the disclosure that the N.C.A.A. was investigating the University of Tennessee’s football program for recruiting violations involving a donor group that arranges to pay athletes. It could set up a broad legal battle over the very nature of college athletics, which is in the middle of a rapid transition from a tightly policed amateur system into an unfettered kind of professional marketplace.

The driving force behind that change has been donor collectives, which are groups of alumni and other boosters who donate money that is used to compensate top athletes, sometimes in amounts approaching professional levels. They do so by exploiting the N.C.A.A.’s new “name-image-likeness” rules, or N.I.L., which were intended to let athletes be paid for endorsements but in practice allow almost anyone to pay them, and for almost any reason.

In effect, the collectives pay salaries disguised as endorsements, and they now play a central role in the process of wooing players in football, basketball and other sports.

The lawsuit seeks to remove one of the few N.C.A.A. rules that limit these collectives — and one of the last vestiges of the amateur model.

That rule is that collectives cannot recruit high schoolers or transfer students to play at their chosen school by offering them money.

The attorneys general, jumping on the issue even before the N.C.A.A. has released specific accusations against the University of Tennessee, said the restriction amounted to an unlawful restraint of trade. They argue that collectives should be free to outbid one another for recruits, the way schools do for top coaches.

“This N.I.L.-recruiting ban limits competition,” the attorneys general said in the suit, asserting that the limit “artificially decreases N.I.L. compensation that college athletes could otherwise obtain in a free market.”

The N.C.A.A. did not immediately respond to a request for comment.

The suit was filed by Tennessee’s attorney general, Jonathan Skrmetti, a Republican appointed official who has often adopted conservative legal positions in his 17 months in office. The reports on Tuesday about the N.C.A.A.’s inquiry into the University of Tennessee brought a blistering response from the school and prompted outrage among its fan base.

The donor collective at the heart of the Tennessee case paid to fly a high school quarterback to campus on a private jet, according to a person familiar with the case. Tennessee’s collective issued a statement saying that it had followed N.C.A.A. rules, and that its contract with the quarterback — which could allow him to earn a reported $8 million — did not require him to attend Tennessee.

Virginia’s participation in the suit raised the possibility that a number of other states with high-profile state-school athletic programs could join the legal action. Virginia’s attorney general, Jason S. Miyares, is an elected Republican.

Collectives first sprang up in 2021, when the N.C.A.A. — having lost a series of court cases that eroded its regulatory authority — declined to challenge a series of state laws that allowed players to profit from their name, image and likeness.

For much of the time since, there was little evidence that the N.C.A.A. was seeking to police these collectives. The New York Times has counted more than 140 collectives now operating at schools around the country, with budgets that can reach $10 million or more.

In just a few years, college coaches and players say, the money offered by collectives has become the dominant factor in recruiting and retaining athletes. Last year, for instance, the starting quarterback at the University of Iowa told The Times that he had transferred from the University of Michigan after Iowa’s collective made him a written offer outlining what he would be paid.

College athletics officials have complained that the N.C.A.A. had allowed the name-image-likeness system to become a pay-for-play system in disguise.

Many state laws, including one enacted nearly two years ago in Tennessee, echo the N.C.A.A.’s ban on pay-for-play payments. Tennessee’s law states that compensation cannot be provided in exchange for athletic performance in order to “maintain a clear separation between amateur intercollegiate athletics and professional sports.”

That contrasted with the argument made by the Tennessee attorney general in Wednesday’s suit, which appeared to accept that collectives were paying players to play for their school. The attorney general said athletes had the right to maximize those payments, by surveying schools to find where they would be paid the most.

“Very few collegiate athletes go ‘pro’ in their sport, and thus their N.I.L. value is at its highest during their short collegiate career,” the lawsuit said. “Their ability to negotiate the best N.I.L. deal is critical.”

The result has been a windfall for many players, but also a chaotic market that lacked the rules, unions and minimum salaries that govern professional sports’ labor markets. In this semi-underground free-agent market, college athletes had little sense of their actual value.

In recent weeks, the N.C.A.A. has also shown some signs that it is seeking to rein in collectives.

The N.C.A.A.’s president, Charlie Baker, has proposed that schools be allowed to enter directly into N.I.L. agreements with athletes — a step that could diminish the impact of collectives and could be codified by the association later this year. A top N.C.A.A. committee proposed other rules this month that would tighten regulation, including requiring athletes to report any deals over $600 and forcing schools to further disassociate themselves from boosters who are found to have been involved in wrongdoing.

The N.C.A.A.’s enforcement wing fined Florida State University after a football coach there brought a potential transfer student to meet with a collective. And it is investigating the University of Florida, where a collective offered a high school quarterback $13.85 million — but then failed to pay.

The lawsuit filed on Wednesday seeks to establish a legal ruling that would allow those kinds of transactions, ushering in an era when college athletes are treated as professionals even before they go to college.