New arms race: How to circumvent the $22 million salary cap?

The NCAA and power conferences approved the House settlement last week. A judge won’t certify the agreement for a few months. And the new revenue-sharing model won’t take hold until at least fall 2025.

And yet, the focus has already shifted to one critical, forward-looking question: How can schools circumvent the $22 million salary cap?

“The commercial NIL ecosystem is going to be an arms race,” Tommy Gray, chief operating officer for Altius Sports Partners, told On3. “Providing athletes with an infrastructure and real tangible dollars that they can count on, on top of the cap, outside of the cap, is going to be very important to remain competitive at the highest levels of sports.”

Expect three compensation avenues for athletes:

Schools, at their discretion, can share as much as $22 million annually with athletes. It remains to be seen how many schools will be willing and able to reach the salary ceiling and how exactly they will divvy up those dollars among athletes.

Second, athletes can unlock organic commercial NIL opportunities with brands and companies. These can be facilitated either under a school’s umbrella or by a third-party entity such as Altius.

“When you combine in a more organized fashion athlete NIL with school IP and assets, and you take it to market in new and better ways that already exist in the professional ranks, there is opportunity here,” Gray said. “Schools will have an ability to go faster and do better there than their peers if they’re sophisticated about it.”

NIL collectives should still exist

Third, donor-driven collectives will still exist, largely outside the university’s umbrella, to add additional compensation in the pockets of marquee athletes for recruitment and retention efforts. Operating outside the parameters of the school, some legal experts say, enables collectives to avoid Title IX scrutiny.

The House settlement includes plans for the creation of an enforcement arm, perhaps separate from the NCAA, to better regulate the polarizing collective space. The agreement also entails plans for athletes to report third-party NIL deals.

Several industry leaders expressed skepticism to On3 that an enforcement mechanism could effectively police collectives.

“The NCAA and conferences think this new enforcement arm structure will be able to stop [collectives],” Mit Winter, a college sports attorney with Kennyhertz Perry, told On3. “But I don’t see how. It’s going to be interesting to see how schools try to circumvent the cap. Because that will definitely happen – whether it’s through collectives or some other way.”

Title IX compliance remains key question

Industry sources expect the Title IX question to hover over the coming revenue-sharing model until or unless there is guidance from the courts or from the U.S. Department of Education. There is no consensus stance among legal experts or campus leaders.

Some athletic directors believe revenue needs to be shared proportionally between female and male athletes. Others believe the majority of dollars can go to those who generate that revenue, largely football and men’s basketball players.

Revenue outside salary cap creates advantages

Nevertheless, finding ways to put additional dollars into athletes’ pockets outside of the salary cap will be paramount for schools in an ultra-competitive landscape.

“When there is a cap in place, and if there are more robust enforcement mechanisms in and around synthetic NIL [collective dollars], commercial NIL dollars for athletes are going to be really important,” Gray said. “That is the new arms race.”