How California’s Fair Pay to Play Act Could Drastically Impact Sneaker Endorsement Deals

The college sports endorsement game could soon be drastically changed.

In February, California state Sen. Nancy Skinner introduced California Senate Bill 206, widely known as the Fair Pay to Play Act. It says a school may not “uphold any rule, requirement, standard or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image or likeness.”

On Wednesday, the California Senate voted 39–0 in favor of the act, which passed the state Assembly 72–0 on Monday. California Gov. Gavin Newsom now has 30 days to either sign or veto the bill.

If signed, it would take effect Jan. 1, 2023.

Industry insiders — including famed sports marketing executive Sonny Vaccaro — believe bills such as SB 206 could be the answer to one of college sports’ biggest problems: the exchange of money under the table.

The highest profile recent example of this broke in September 2017 when court documents revealed Adidas’ director of global sports, Jim Gatto, was allegedly involved in helping the family of Brian Bowen II, a top high school basketball recruit, receive up to $100,000 for his commitment to play for Adidas-backed University of Louisville. In October 2018, Gatto — along with former brand consultant Merl Code and sports business manager Christian Dawkins — were found guilty of several fraud charges related to the case. In March, Gatto received a nine-month sentence, while Dawkins and Code each received a six-month sentence.

“This will help the NCAA and their sports. Because no one will do anything undercover, you won’t have another [situation] between Louisville and Adidas,” Vaccaro said. “[Brands are] not going to be a sinful partner; they won’t be violating anybody. It just makes life fair.”

James Gatto Adidas NCAA
James Gatto, former director of global sports marketing at Adidas.
CREDIT: Mark Lennihan/Shutterstock

But Marc Beckman, CEO of business development agency DMA United, believes that, if passed, brands will look to develop more restrictive deals with schools. He said he wouldn’t be surprised if brands investing in college athletics will attempt to lock athletes down off the court as well, similarly to how certain contracts with pro athletes are structured.

“It’s not uncommon for companies to negotiate with us to make sure that these brands are worn exclusively on and off the court,” Beckman said. “Now, we’re watching athletic brands take a bigger land grab to apply not just performance-oriented positioning but fashion-oriented as well.

“The way that Russell Westbrook is locked into certain performance obligations with Jordan Brand or the way Kawhi Leonard is locked into certain performance obligations with New Balance,” Beckman said, “those types of contractual terms will dictate what these student athletes are wearing both on and off the court.”

Even if brands try their best to lock in athletes beyond team or school obligations, the language of SB 206 allows for student-athletes to work with competing brands if there is no conflict of interest. The bill says, “A student athlete shall not enter into a contract providing compensation to the athlete for use of the athlete’s name, image or likeness if a provision of the contract is in conflict with a provision of the athlete’s team contract.”

Despite athletes having personal access to brands that may compete with their school, Syracuse University sport law professor John Wolohan believes it is still in the best interest of the giants to align with higher education institutions.

“If I’m Nike, Adidas or Under Armour, [it may still be] worth it for me to pay tens of millions of dollars [for team rights] because the players on the court are still going to wear the licensed branded uniforms. They’re going to still wear the warm-ups and the shoes,” Wolohan said.

Although there’s still plenty of time before a decision to sign or veto SB 206, it’s gaining momentum thanks to high-profile supporters, such as NBA star LeBron James. The Los Angeles Laker baller, who was executive producer of the 2018 HBO documentary “Student Athlete” that covered this topic, spoke out about the bill on Twitter. On Sept. 5, he tweeted: “Everyone is California- call your politicians and tell them to support SB 206! This law is a GAME CHANGER. College athletes can responsibly get paid for what they do and the billions they create.”

James’ support, insiders say, will encourage others to back the bill as well.

“LeBron is a pillar in society and a cultural icon. He has the ability to sway public perception and there’s no doubt that college institutions have as of late been criticized for being wrapped in certain archaic principals,” Beckman said.

State Sen. Nancy Skinner, D-Berkeley and state Sen. Steven Glazer, D-Orinda slap palms in celebration after her measure to let athletes at California colleges hire agents and sign endorsement deals was approved by the Senate in Sacramento, Calif., on . The bill now goes to Gov. Gavin Newsom how has not said whether he will sign itNCAA College Athletes Scholarships, Sacramento, USA - 11 Sep 2019
California state Sen. Nancy Skinner after SB 206 was approved by the Senate in Sacramento, Calif., on Sept. 11.
CREDIT: Rich Pedroncelli/AP/Shutterstock

Vaccaro added, “He is a successful athlete that’s navigated through society without the use of the NCAA and became one of the leading spokespeople for causes in America at 35 years old. When he, and other athletes, speak up — particularly the ones who hadn’t even gone to college and are fighting for something they have nothing to do with — it shows me that there’s a revolution here.”

Although experts believe the bill will be passed, they’re divided on how it will impact the other 49 states.

Vaccaro is confident that once passed in California, other states will soon follow. “If this bill passes, there will be a two and a three and a four [states to follow],” he said.

Wolohan, however, thinks others will assess the NCAA’s reaction before making any decisions.

“This doesn’t take effect [until] into 2023, so I think other states are going to sit back and say, ‘What’s the NCAA going to do?’ The NCAA is on the clock,” Wolohan said. “They can’t just ignore it. They’re going to have to do something. The NCAA is faced with two things: They either have to allow California schools to do this, and ignore the fact that California is violating NCAA rules, or they have to punish them and kick them out of the NCAA. I can’t see them [doing that].”

In the meantime, Beckman is more concerned that being the first state to pass a bill of this nature may cause an unfair advantage within the college sports landscape — and provide a financial advantage for California.

“What happens when California’s law passes first? Does that mean that you’re going to start to see a lot of talent going toward UCLA and USC coming out of the gate, automatically generating a lot more revenue for those state-run schools or state-oriented schools? What happens to the Midwestern or East Coast schools that haven’t passed that law yet? It could change the competitive landscape at the school level,” Beckman said.

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