Jason Kurtyka and Meg Lane attended the Penn Law Sports Law Symposium on February 19 in Philadelphia. They sum up the content of several dynamic panel discussions here:

The Anticipated Growth in International Markets and Publicly Funded Stadiums

International Growth

American sports leagues have been expanding their horizons into the international market, and the trend looks to continue in coming years. Improving US relations with Cuba will present new expansion opportunities for Major League Baseball, but the lack of stable economic infrastructure there will perhaps slow the process.

Panelist Andrew Brandt, who is Director of the Jeffrey S. Moorad Center for the Study of Sports Law at Villanova Law School, predicted a full NFL home schedule in London in the near future – with 16 teams traveling there for 8 games a year, played at several different London venues. An issue for American pro sports expansion in Europe is a lack of public subsidies for stadiums there, which makes it difficult for leagues like the NFL to build their own. Traditional American business models to build stadiums and house teams there permanently will likely fail, so leagues must instead find creative ways to fund their efforts through the private sector.

In discussing Asian expansion, the panelists agreed that a barrier to entry is a lack of critical mass around particular sports there. Perhaps soccer has the best chance of success, as there are large European FC fan bases in Asia already. Basketball has made progress as well, as NBA China remained persistent through the early struggles of building facilities and is starting to reap the benefits of its efforts. While hockey in China has been slow to take off, baseball could be next, if the MLB takes the league-wide approach that the NBA has in recent years.

Publicly Funded Stadiums

The discussion then moved to the controversial issue of using public funding for stadiums. Cities like Detroit and Atlanta have been in the news for spending public dollars on new stadiums in the midst of economic crises, and the debate rages on. A key question to ask when evaluating whether to publicly fund a stadium is: what is the risk allocation on each side? For example, the risk of spending money on a stadium only to have the team go under several years later is real, and could result in major reputational damage and a detrimental financial impact on the city. However, if everything around the stadium gets rebuilt, the public funding is essentially creating a new property tax base, which would be extremely beneficial for municipal governments and ultimately, the general population.

Part of what drives this debate, according to Brandt, is the fact that people “lose their minds” when it comes to sports. Sports teams are sources of emotion and civic pride, so business operations and planning regarding sports facilities are not the same as with traditional business ventures. The view that a stadium can “save our city” proves dangerous for those that believe it, according to panelist Andrew Altman who worked on the 2012 London Olympics Planning Committee. Expectations become inflated, and the reality is that stadiums cannot play the fantasy role of solving every problem in a city. Still, they are viewed as “anchor tenants” that can justify additional investments in the surrounding area, and sometimes really can turn a city around.

The panel closed by looking at Olympic stadium funding issues. A huge part of planning single-sport Olympic venues is legacy planning – what will the facilities be used for after the Games are over? Altman stated that London did a good job of looking beyond just the 2012 Games and structuring facilities so they could be used by the surrounding community for specified purposes after their completion. In the case of a US Olympic host city like Los Angeles or Boston, the US would likely have to take a regional approach and spread facilities throughout a surrounding area in order to satisfy logistical and financial concerns, including the legacy piece. While Olympic planning is incredibly expensive, it can also prove to be a vehicle for cities, bringing additional opportunities for funding and expansion right to their own backyards.
The Future of Amateurism and NCAA Compliance

First Amendment Rights

The role of student-athletes on their campuses has changed with the advent of social media. As the Missouri football team demonstrated last season, student-athletes have the ability to effectuate change. Panelist Oliver Luck noted that the protest represented one of the core objectives of the NCAA – integrating student-athletes into the general student body on each campus. To him, this was a positive indication that athletics were apart of campus life.

Panelist Dan Werly brought up the fact that Missouri was scheduled to play BYU week of the protest and if they had protested the game, Missouri would have had to pay a $1 million penalty. If the protest had escalated to this point, he questioned whether the protest would have caused a “substantial disruption” to the school, one of the Tinker v. Des Moines factors.

This point brought the panelists to social media bans implemented by coaches. Although this has not been challenged in court, the potential is there under a free speech claim. Overall, the panelist agreed that coaches are more willing to put their support behind a social cause a team chooses to adopt, citing Bob Stoops endorsement of the Oklahoma football team speaking out over an incident of racism on its campus.

NCAA Compliance

Amateurism is the buzzword that is constantly debated among critics of the NCAA model. Luck defined the term as a “social construct,” meaning essentially whatever the NCAA and its member institutions say it means. Education is at the crux of amateurism the way it currently is defined and the college athletics industry is built on education and amateurism. Luck then noted how what each school has been able to provide to student-athletes has expanded immensely, but they still retain the term “amateur.”

Panelist Warren Zola countered this point by questioning whether receiving money would make a student-athlete any less of a student. He argued that student-athletes are the only population of the student body held to this standard, giving the example of John Mayer making money as a musician but still attending Berkley music school.

Conversation then moved to the legal challenges to the NCAA, particularly O’Bannon and Jenkins. The panelists were in agreement that it should be the member institutions to make reforms to the current model and that waiting for the courts to impose changes on schools could have a devastating effect. Zola explained that if the Jenkins suit achieves its ultimate aim, college athletics as we know it will implode, because a free-market system will be instituted. If this suit were to be successful, the best athletes in football and men’s basketball would benefit the most, but the panelists were concerned about all the other athletes who would not reap the rewards of such a system.

Panelist and Heisman trustee, Jim Corcoran, brought up the idea of a “scholarship for life,” where universities would guarantee to high schoolers that they would cover their education beyond just undergraduate tuition, but including professional degrees. If such a plan were to work, Luck explained, the increase in benefits would have to be “tethered to education,” because most student-athletes will not make money from playing their sport.

The criticism of such a model is that most college athletic departments could not afford to do this. However, Zola rebutted by pointing to inflated coach’s salaries and buyout clauses. The money is there, he said, but the way it is spent is a choice by the university.

The discussion then shifted to the academic fraud scandal at University of North Carolina. Zola argued that there are majoring clustering issues, where student-athletes are herded into certain majors because the workload complies with their athletic schedules. This, he explained, limits student-athletes in what they can study, because athletics is treated as primary importance. However, this is the individual institution’s choice to prioritize athletics over education.

The panel concluded with Werly explaining the impact of the dismissal of a suit by former Penn track athletes under the Fair Labor Standards Act. The plaintiffs alleged that they should be classified as employees and receive work-study funds for their participation in athletics, similar to students on campus. He noted that the outcome might have been different if they received athletics scholarships.

Daily Fantasy Sports

This panel featured personalities who fell on all sides of the daily fantasy sports debate. Panelist Darren Heitner got the discussion started by making a key distinction between gambling and illegal gambling. To him, this is where DraftKings and FanDuel first away astray, because they misinterpreted the Unlawful Internet Gambling Enforcement Act (“UIGEA”).

Thus, both sides have violated the law, because they tried to advertise their games as “fantasy games” in order to fit into the UIGEA’s exception. Heitner then argued that DraftKings adopted a contradictory position when it applied for a gambling license in the United Kingdom.

Panelist Marc Edelman then turned to the ongoing criminal prosecution in New York against the two daily fantasy sites, arguing that the “material element of chance” will be the critical issue. If the daily fantasy games were clearly games of “skill” as both sites popularly advertise, then why would New York Attorney General Eric Schniederman prosecute them? Edelman’s answer was because the standard is ambiguous.

Edelman then addressed the major professional sports league’s involvement with DraftKings and FanDuel and explained the dichotomy between the MLB and NBA’s approach to daily fantasy sports. He argued that the NBA comes out looking better because Commissioner Adam Silver has been transparent on his position, noting Silver’s New York Times op-ed.

The panelists largely agreed that both companies overspent on advertising and neglected the potential legal implications of their operations. Heitner highlighted the fact that each site made the claim that their games were “100% legal,” when there was obvious uncertainty regarding their legality.

 

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