A recent executive order on college sports frames eligibility violations, improper NIL arrangements and transfer-related conduct as potential federal funding compliance issues — not just athletic department governance problems. Baker Donelson attorneys Kordell Caldwell, Benjamin West Janke and Lesli Harris explain what covered institutions and third-party market participants need to understand before an August deadline.
In April, President Donald Trump issued an executive order designed to promote a uniform national approach to core college-sports rules — especially athlete eligibility, transfers, revenue-sharing and pay-for-play activity — by leveraging federal grants and contracts and by pressing the NCAA to update or clarify its rules by August.
The order’s operative provisions apply to “higher education institutions” as defined in the Higher Education Act but only if an institution reported at least $20 million in intercollegiate athletics revenue in the preceding academic year (adjusted annually by the consumer price index). In practice, this threshold is aimed at larger athletics programs, although there is speculation that, to the extent they are upheld, smaller programs will likely adhere to the regulations as well.
For covered institutions, agency heads that provide grants or contracts must (as appropriate) evaluate violations of the applicable, lawful and operative governing-body rules in effect as of Aug. 1 concerning: (A) eligibility limits; (B) transfers; (C) revenue-sharing between institutions and student-athletes; and (D) permissible vs. improper financial activities. The order also directs the Office of Management and Budget in consultation with US General Services Administration (GSA) to issue guidance to reinforce suspension and debarment policy relating to such violations.
Urged rule updates by Aug. 1:
- Eligibility limits: Age-based limits and a five-year participation window (with limited exceptions such as military service, missionary service and other absences in the public interest), plus a restriction on professional athletes returning to college sports.
- Transfer rules: One transfer with immediate eligibility during the five-year period, plus one additional transfer with immediate eligibility after earning a four-year degree; transfer windows should support academic continuity and avoid disrupting athletic seasons or academic calendars.
- Medical care: Treatment for athletics-related injuries during enrollment and for a reasonable period thereafter.
- Revenue-sharing: Implementation in a manner that preserves or expands scholarships and opportunities in women’s and Olympic sports.
- Federal funds: A prohibition on using federal funds for NIL or revenue-sharing payments, or for coaching compensation, consistent with applicable federal law.
- Name, image and likeness (NIL) collectives: A prohibition on improper financial activities, including collectives or other entities facilitating third-party pay-for-play arrangements.
- Agents: A national student-athlete agent registry and reasonable protections against excessive agent commissions.
Data collection and reporting:
- The GSA is tasked with proposing regular information collection from institutions to evaluate compliance with the covered rule areas.
- The Department of Education is directed to consider action (including rulemaking) to require reporting on (A) roster spots by varsity teams and (B) total spending on athletically related student aid and other payments, reported separately for men’s and women’s teams overall.
- The FTC chair is directed to take appropriate action to enforce the FTC Act and the Sports Agent Responsibility and Trust Act (SPARTA) with respect to student-athlete agents and related entities.
Finally, the order directs the attorney general to take appropriate measures to pursue actions to invalidate state laws that conflict with NCAA rules and that (A) discriminate against or unduly burden interstate commerce, (B) impair contractual relationships or (C) are otherwise invalid under federal law.
NIL-specific provisions
The order’s NIL aspects are among its most operationally significant for institutions and third-party market participants. It defines a “fraudulent NIL scheme” as paying above the actual fair-market value for goods or services (including NIL services) in connection with a student-athlete’s participation in intercollegiate athletics, including payments routed through collectives or similar entities. At the same time, it recognizes two key safe harbors: (1) revenue-sharing that is consistent with governing-body rules; and (2) fair-market value compensation paid by a third party not affiliated with the institution’s athletic department for a valid business purpose, such as promoting goods or services to the general public for profit, that is not tied to participation in a particular institution’s athletics program and is comparable to rates paid to non-student-athletes with similarly valued NIL rights.
The order also defines “improper financial activities” for covered institutions and their officers, agents, affiliates and representatives to include:
- Intentionally devising or participating in a fraudulent NIL scheme.
- Knowingly accepting contributions (financial or otherwise) from persons who intentionally devise or participate in a fraudulent NIL scheme.
- Using federal funds for NIL or revenue-sharing payments, or for certain payments or benefits to coaches, recruiters or other team-management personnel.
- Tortiously interfering with a contract between a student-athlete and another covered institution, including a scholarship agreement.
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Read moreDetailsWhat this could mean for colleges & universities
Scrutiny over federal funding eligibility increases
The order is designed to link compliance with certain governing-body rules to the “present responsibility” analysis used in federal procurement and grant administration. Covered institutions should anticipate more questions — internally and from sponsors and grant administrators — about how athletics compliance is monitored, documented and escalated.
NIL and collective oversight will likely intensify
Athletic departments may need stronger controls around donor and booster involvement, collective relationships and the internal review of NIL deals for fair-market value and business purpose. The “knowingly accepting contributions” concept may drive additional diligence on major donors and third-party funding flows.
Transfer/eligibility compliance may become a procurement risk issue
If governing-body rules change (and survive legal challenges), athletics eligibility and transfer compliance could become a cross-functional issue involving athletics, compliance, financial aid, procurement, grants management and university leadership.
Women’s and Olympic sports considerations
The order frames revenue-sharing implementation and reporting in a way that seeks to preserve or expand opportunities in women’s and Olympic sports. Institutions evaluating roster management, scholarship allocation or program changes should consider the interplay with existing federal requirements and evolving reporting expectations.
What this could mean for NIL collectives, brands, sponsors, platforms & agents
Emphasis on fair-market value and business purpose
Third-party NIL deals that are demonstrably tied to a legitimate marketing or endorsement purpose and priced at fair-market value consistent with comparable non-athlete endorsers are expressly recognized by the order. Barring forecast litigation to determine whether “fair market value” is a legally sound metric by which to judge business activity, businesses should, in the interim, strengthen valuation methodologies and maintain documentation of deliverables, campaign metrics and payment rationale.
Independence from athletics departments is a key theme
The safe harbor is framed around third parties not affiliated with an athletic department and payments not tied to participation at a particular institution. Businesses should review governance, communications and contracting practices to reduce the appearance of institutional control or recruiting inducement.
Agent and athlete-representation compliance
The order anticipates a national agent registry and directs FTC enforcement activity under the SPARTA and the FTC Act. Agents and platforms should review disclosure practices, contract terms, commission structures and state law compliance to prepare for increased scrutiny.
Contract interference and transfer-era conduct
The order’s “tortious interference” concept may increase risk around inducements to transfer schools or communications that could be construed as tampering. Businesses working with athletes should adopt clear protocols to avoid conduct that could be alleged to intentionally interfere with existing scholarship or NIL contracts.
Key open questions and litigation risk
The order expressly states it must be implemented consistent with applicable law and does not create privately enforceable rights. Its practical impact will therefore depend on (i) how the NCAA and the College Sports Commission update their rules by Aug. 1; (ii) how federal agencies operationalize “present responsibility” evaluations; and (iii) whether courts uphold or enjoin particular provisions. Commentators have noted that many provisions could be challenged as inconsistent with existing case law or as exceeding the practical reach of executive action absent congressional legislation.
Kordell Caldwell
Benjamin West Janke
Lesli Harris
