How the NCAA has Created Criminality

Ori Oren

On September 29th, 2017, the sports world was shocked by the arrests of several basketball coaches at high-profile universities in connection with a scheme of fraud and bribery. James Gatto, a global marketing director for Adidas, designed the game plan: pay coaches and families to convince high school players to choose Adidas-sponsored universities and then sign with sports agents who would continue the players’ relationships with Adidas through their professional career. All of these payments were conducted in violation of federal wire fraud and bribery laws for one, silly, outdated, fabricated reason: NCAA amateurism rules.

As the complaints state, here, here, and here, the actions of Gatto and the coaches violate federal wire fraud and bribery rules because they involve federally-funded institutions which grant scholarships “to student-athletes who, in truth and in fact, were ineligible to compete as a result of these payments” (quoted from Count Two of the Gatto complaint, emphasis added). To restate, paying players to play basketball for Louisville is wire fraud because the players will be ineligible to play if the NCAA finds out about the payments. The complaint should not say, “in truth and in fact.” It should say the players might be ineligible to compete because the NCAA might say so. Take only this one fact out, change the NCAA rules to say that the players could have still played on scholarship for the university even with their own sponsorships, and there is no longer fraud.

To follow the reasoning of the claim, the NCAA—a private, non-profit association—has turned into a federal regulatory agency. To break NCAA amateurism rules is now a federal offense. The NCAA made rules. The FBI is now enforcing them. If these charges had not been brought, then maybe the NCAA would still find out and the universities would face repercussions for their sports department. That is about the extent of the damage done. With the rules being enforced at a federal level, now who is hurt? Individuals who are powerless to change the rules, young, often extremely impoverished, mostly black athletes (it’s not like “the people” can vote in a new NCAA administration; it is a private, non-profit organization).

With these FBI arrests, the NCAA is federally granted the authority to restrain trade, labor, self-expression, and freedom of contract. The headlines sound insidious and foul (Fraud! Bribes!), unless you take a step back and look at the transactions from a simple market perspective. A brand pays agents to engage social media influencers to use and promote their products. This is not a novel or dangerous model, even if it involves impoverished 18-year-old boys. Brand ambassador is a relatively common campus job. For example, law school students, even if they have academic scholarships, get paid to sit at tables promoting Kaplan Bar Review courses for fellow students. In spite of how good athletes are at this type of work, NCAA athletes are not allowed to do it if they want to maintain their eligibility to play. They can’t be paid for their autographs (though other people can be). They can’t be paid to wear shoes to class (though the school can be paid to decide what they wear to practice). They can’t be paid to say anything about Adidas on their Facebook pages (but don’t worry Adidas, you can pay the schools to make the athletes wear only your shoes on the court). This isn’t federal regulation, this is “amateurism,” according to the NCAA. And yet, now the FBI seeks to enforce NCAA amateurism by arresting marketing managers who pay student-athletes to attend schools (that are legally sponsored) that wear the marketer’s brand. Because this act supposedly defrauds the federally-sponsored university.

Not only is this a restraint on freedom to contract, or the right to work, but it is now a federally enforced market inefficiency. The goals of the NCAA in protecting teenagers from entering damaging relationships with predatory agents are admirable, but would better served by regulating the market rather than attempting to eliminate the market. Allowing student-athletes to monetize their social media and promote brands is different from the original amateurism risks of sports agents paying student-athletes to sign with them before college and contractually forcing them to go pro. For one, brand endorsements still allow the student the freedom to decide to stay in school or forego a professional career. If a student decides on a higher-profile school because that helps his endorsement deals, that is no different than a typical student choosing a university that receives more research grants because of the opportunities that offers them. For the schools, this offers more flexibility in how they operate—maybe one student-athlete who can support him or herself on endorsements can free up scholarship money for another student or student-athlete (If NBA star Kevin Durant will give up $7 million to help field a better team, then maybe an alternatively-compensated student-athlete would forego a scholarship for a better team and more national attention)—perhaps scholarships could be concentrated on students who will matriculate through graduation instead of over-investing in the few “one-and-done” stars who leave school after a year. Additionally, the student-athlete will learn valuable business management skills and gain supplementary income that helps low-income student-athletes avoid crimes or afford to stay in school through graduation. The NCAA could allow all of the actions conducted by Gatto to be done transparently, and then there would be no need for bribing coaches. Everyone would be better off—the schools, the players, the families, the marketing partners, and the NCAA.

Marketing basketball shoes is not a crime. The NCAA has criminalized it by coopting the FBI to enforce their amateurism regulations. No one is hurt by the underlying activities. But everyone is hurt by their criminalization. The biggest shame, is that until the NCAA falls under the dominion of the White House, or even the National Labor Relations Board, “amateurism” laws are controlled by an unelected oligarchy, and only private concerted action by helpless athletes has any hoping of making changes.