Sports Law 2021

Last Updated March 31, 2021

USA

Law and Practice

Authors



Herrick, Feinstein LLP provides a full range of legal services to its clients worldwide from its offices in New York City, Newark, New Jersey and Istanbul, Turkey. Herrick’s Sports Law Group works in conjunction with the firm’s complementary practice groups on the myriad of corporate, real estate, tax, intellectual property, restructuring, employment, government relations and litigation aspects of sports law for global sports dynasties. Herrick’s Sports Law Group's work spans every aspect of sports law, including league and team formation and operation, arena and stadium-financing and developments, naming rights, sponsorships and media rights transactions, team acquisitions and investments. Herrick’s lawyers provide pragmatic counselling on the day-to-day operations of sports businesses – advising on player and personnel issues, capital arrangements, concession agreements, advertising contracts, and prominent title sponsorships for major stadium and arena events. In addition to the authors referenced above, the firm would like to thank partner and chair of the Insurance and Reinsurance Group, Alan R. Lyons and attorneys Audrey C. Sheetz, Samuel A. Lifton, Daniel A. Field, Stephen DiMaria, Jalise Burt, Silvia Stockman and Adam Unger for their valuable contributions.

Doping is a criminal offence in the USA. On 4 December 2020, the Rodchenkov Act was enacted, which enables US authorities to pursue criminal penalties against those involved in doping conspiracies at international events involving American athletes, sponsors or broadcasters. The Rodchenkov Act gives prosecutors the power to seek fines of up to USD1 million and prison time of up to ten years, as well as restitution to victims.

The World Anti-Doping Agency (WADA) expressed concern that the Rodchenkov Act would destabilise the global anti-doping effort by extending US jurisdiction beyond its own borders. Now, the Department of Justice must develop a robust programme, co-operating with the US Anti-Doping Agency (USADA) and international law enforcement.

WADA

Since 2004, WADA has published an annual list of prohibited substances and methods (the Prohibited List), which is updated at least annually, with the new list taking effect on January 1st of each year. The list identifies the substances and methods prohibited in and out of competition, and for particular sports. The list is divided into two sets of substances and methods.

  • Those that are prohibited at all times (including but not limited to):
    1. substances such as hormones, anabolics, EPO, beta-2 agonists, masking agents and diuretics; and
    2. methods such as blood transfusion or manipulation, or intravenous injections in some situations.
  • Those that are prohibited only in competition (including but not limited to) stimulants, marijuana, narcotics and glucocorticosteriods.

A substance or method can be added to the Prohibited List if it is deemed to meet two of the following three criteria:

  • it has the potential to enhance or enhances sport performance;
  • use of the substance or method represents an actual or potential health risk to the athlete; and
  • use of the substance or method violates the spirit of sport.

Athletes are responsible for knowing what substances and methods are considered banned by the Prohibited List. Under World Athletics Rules, the presence of a prohibited substance in an athlete’s sample, or the use of a prohibited substance or prohibited method, constitutes a doping offence. WADA’s Code provides a global framework for the anti-doping policies, rules, and regulations within sport organisations and among public authorities. USADA, the national anti-doping organisation in the USA for Olympic, Paralympic, Pan American, and Parapan American sports, is a signatory to the Code. USADA is charged with managing the anti-doping programme including testing both in and out of competition. USADA is also the administrator for the Ultimate Fighting Championship (UFC) Anti-Doping Program.

US Professional Sports Leagues

With respect to individual sports leagues in the USA, doping matters are generally handled internally by the leagues. Each league, through collective bargaining with players’ associations, implements procedures and guidelines for the administration of drug testing (see below for information on collective bargaining agreements (CBA)). These procedures usually consist of collecting random blood or urine samples that are tested by an independent laboratory.

In May 2018, in Murphy v NCAA, the US Supreme Court struck down the federal Professional and Amateur Sports Protection Act (PASPA), which had effectively prohibited individual states from legalising sport betting, with a few exemptions. While the ruling did not legalise sports gambling, it provided a pathway for individual states to do so. Following Murphy, nearly 20 states have legalised sports betting, with many others introducing proposed legislation.

With the legalisation of sports betting, there is an increased risk of match-fixing and in-play manipulation. The legislation that has emerged, however, does not include provisions criminalising match-fixing. In large part, states appear to be relying on existing penal code provisions to preserve the integrity of athletic competition.

The Sports Bribery Act is the federal criminal law that targets the manipulation of athletic competition. The act makes it a felony to “…influence, in any way, by bribery any sporting contest, with knowledge that the purpose of such scheme is to influence by bribery that contest.” 

This act does not cover other non-bribery concerns such as extortion, blackmail, tipping of inside information, or betting on games by someone who can affect the outcome. These integrity concerns are exemplified by real-life examples, most notably, perhaps, the Chicago White Sox 1919 World Series scandal.

Private sanctions for misconduct also exist. Major US sports leagues, including Major League Baseball (MLB), the National Football League (NFL) and the National Basketball Association (NBA) have instituted rules or policies to prevent players, coaches and individuals associated with teams and leagues from engaging in sports betting. The NBA constitution grants the commissioner the power to fine, suspend or expel any player or employee who bets on the outcome of any game in any league that the NBA operates. The MLB imposes a one-year ban on players and other personnel who bet on a baseball game where they have “no duty to perform,” and a lifetime ban for betting on a game where they do have a “duty to perform.” The NFL prohibits betting on any NFL game or event, as well as on any other professional, college, or amateur sports competition worldwide.

As stated in 1.2 Integrity, the Supreme Court struck down PASPA in 2018. Across the USA, sports betting is part of popular sports culture and many states have passed, and are continuing to pass, legislation to legalise sports betting in varying forms to capitalise on tax revenues and licensing fees. Such forms include mobile sports betting with multiple sportsbooks options, one mobile betting option, in-person online betting (ie, proximity to brick-and-mortar sportsbooks) and only physical sportsbooks.

Sports Governing Bodies Sharing Information with Betting Operators

US sports leagues license their data to sports betting operators via exclusive or co-exclusive distributors to provide accurate, real-time data for an agreed upon fee. Sportsbooks operate outside of the sports, but often license from the sports organisations, as opposed to a third-party organisation. Sports organisations enjoy the win-win of earning fees for the data collection already underway and protecting the integrity of the sports wagers by ensuring accurate results. Certain states (eg, Illinois and Tennessee) require that operators use official data for certain sports wagers, namely props or in-play betting.

Recent Noteworthy Betting Cases/Disciplinary Actions

There are few examples of disciplinary action for sports betting violations. The most notable actions are the disciplining of Shoeless Joe Jackson and Pete Rose. However, in 2019, for the first time since the 1980s, the NFL disciplined a player for wagering on NFL games. Josh Shaw, an Arizona Cardinals cornerback, was indefinitely suspended for betting on multiple NFL games.

The steps taken by sports governing bodies with respect to doping, integrity, and betting offences vary by sport and violation. For example, pursuant to MLB’s Joint Drug Prevention and Treatment Program (the JDPT Program), a player who tests positive for a performance enhancing substance is subject to an 80-game suspension for a first violation, a 162-game suspension with 183 days of pay suspension for a second violation, and potential permanent suspension from major and minor league baseball for a third violation. This contrasts with other sporting bodies, such as the NFL which, although having a shorter season, appear to have slightly different punishments for similar violations. For example, a player who violates the NFL’s policy on performance enhancing substances can be penalised, depending on the consumed substance, from anywhere between two and eight regular and/or postseason games for a first violation, between five and sixteen regular and/or postseason games for a second violation, and with a multiple-season suspension for a third violation.

With respect to gambling and integrity violations, the MLB has – in effect – clear guidance, through MLB Rule 21, which can provide, depending on the offence, for up to permanent ineligibility based on a single offence. The MLB’s clear guidance on the penalties’ specific offences contrasts with other leagues’ guidelines, such as the NFL’s, in which the Commissioner may analyse violations on a case-by-case basis, with the resulting disciplinary actions including severe penalties, up to and including a fine, termination of employment and/or banishment from the NFL for life.

Aside from sponsorship and broadcasting rights (discussed elsewhere in 2.2 Sponsorship and 2.3 Broadcasting), key sports-related rights include merchandising, hospitality, events and ticketing. While these rights all involve sports teams’ licensing, they primarily relate to the use of a team’s stadium or other facilities.

Commercial rights to merchandising most commonly relate to retail sales of a wide variety of products, including team logos and player references. To make use of these rights, teams will typically enter into agreements with retail goods companies for design and production of team gear. Those contracts often include intellectual property licences of team trade marks and copyrights, in exchange for a fee or percentage of sales. Teams and players may also engage in more specialised merchandising, including sales of memorabilia used in-game at pivotal or record-setting moments, often by way of auction or private sales to collectors.

Use of stadiums and sports facilities can potentially be a significant commercial right that sports organisations monetise, which includes provision of hospitality services and concessions. To provide concessions at their facilities, sports organisations contract with suppliers. Alternatively, some teams form their own hospitality organisations to control both the quality of the concessions available at their events, and the profits to be made therefrom.

Teams also monetise unique offerings in their stadiums and facilities, including specialty seating for games or higher-end restaurants. Sports organisations may even use their facilities for special events such as concerts, either charging a fee for use of the space or including some split of ticketing profits in agreements with event organisers.

Ticketing itself is an important commercial right that sports organisations have monetised. Teams profit from the sales of tickets and the accompanying sales of concessions and merchandise. Increasingly, sports organisations are facilitating secondary ticket sales and combatting illegal sales through e-ticketing and apps dedicated to purchasing, storing and producing tickets for safer access to games.

Sponsors use sport to enhance and promote their brand primarily through advertising and title rights, and as more specifically pertains to food and beverage sponsors, through concessions. Sports organisations attract sponsors through the innovative creation of advertising space and marketing title rights. The primary contract terms often revolve around payment and intellectual property rights.

Sports organisations provide sponsors with a wide variety of opportunities for advertising. Stadiums and other facilities contain large swaths of advertising space for sale to sponsors, including on billboards, on the field or court, or even on the players’ uniforms. Broadcast of events provides an advertising opportunity by promoting different brands through commercial segments between periods of play. Additionally, sports organisations can provide sponsors with title rights as the “official” service provider of the team in the sponsor’s industry, complete with in-game announcements or broadcasting tie-ins. Title rights may even extend all the way up to the large-scale sponsorship right over naming a stadium. For food and drink sponsors, stadium advertisement can be tied to exclusive sales of sponsors’ products in concessions at the team’s stadium or facility.

Contracts between sports organisations and sponsors can be complex, but will inevitably focus on payment and intellectual property rights. For their part, sports organisations will make certain specified advertising locations or materials available to the sponsor for its display of sponsor materials. These requirements may be specific as to the prominence of displaying the advertising materials or the location in the stadium or facility. Sports organisations will often have some input on advertising material that may be displayed by the sponsor, as well as some level of veto or control over the material displayed. Sponsors will tend to look for particularly strict intellectual property rights reservations and controls, to ensure ownership over all trade marks, copyrights, or other intellectual properties of the sponsor displayed by the sports organisation.

Broadcasting rights are a major component of the business of sports. Holders of sports rights will package broadcasting rights for broadcasters, and broadcasters in turn monetise their broadcasts of games and other content. Wrapped up in these arrangements are agreements for broadcasting regionally versus nationally, licensing interactive media, and rights to access venues by broadcasters.

Broadcasters use the broadcasting rights they receive through advertising, subscription services, and licensing previously broadcast games for future programmes. The primary exploitation of broadcast rights comes through advertising. Broadcasters sell airtime to a variety of sponsors for advertising during live sporting events. Increasingly, broadcasters leverage their rights to provide content through streaming platforms, deriving subscription income from viewers. Additionally, subject to compliance with any applicable league copyright regulations, broadcasters can license out their previously recorded broadcasts for use in future programming and content.

Sports rights-holders traditionally package their broadcast rights by the season. Within each season, different broadcasters will pay for the right to broadcast a certain number of games. In many sports, packages are split between regional and national broadcasters. In such a split, regional broadcasters will purchase rights to a larger number of games, with a smaller select number of games going to national broadcasters. Increasingly, sports rights-holders package these television rights while still reserving the right to broadcast games over the internet and through interactive media, to increase both the audience for their games and their ability to profit from selling broadcast rights for different distribution mediums.

Broadcasting arrangements provide not only for fees, but also for certain access rights and intellectual property concerns. Broadcasters need to bargain for the rights to access venues where sports occur, to ensure that their cameras and media equipment are present, alongside their announcers and commentators in commentary booths and on the field or court. Intellectual property rights are a large concern in these arrangements, as broadcasters retain rights over their final broadcasts while using them to showcase trade marks and other intellectual property of the sports rights-holders.

There are multiple proprietary rights in a sports event. These include:

  • copyrights in the actual broadcasts (TV, cable, streaming, download, pay-per-view, etc).;
  • athletes' individual rights of publicity, including sponsorships and depiction of sponsor names/logos in association with individual players; and
  • trade mark rights in teams and leagues’ names, logos and other marks, and trade mark rights in the names of certain sports events themselves.

In addition, any music or other third-party content that will be played at an event must be properly licensed by the team, league and/or venue.

It is important to understand that under US copyright law, sporting events in themselves are deemed to be performances that are not protected by copyright in the absence of such events being “fixed” in some media, including by digital means. Accordingly, US broadcasts of college and professional sporting events are therefore simultaneously recorded. 

Spectator physical access to event venues is controlled by ticketing, which creates a contract with the ticket purchaser. Tickets typically contain printed restrictions on filming and photography. Apart from physical access, an increasing number of US sporting events are broadcast over cable TV channels and through dedicated streaming apps and web channels, where user access is controlled through service subscription and terms of use agreements.

Sporting event organisers/leagues are significantly concerned about illegal streaming/pirating of sporting events. This is addressed through copyright and trade mark enforcement proceedings, including copyright “take down” notices issued to internet service providers under the Digital Millennium Copyright Act. 

Sports events organisers generally owe a duty of care to both participants and spectators to ensure that the stadium and playing field are reasonably safe and to avoid creating dangerous conditions.This duty includes pre-game safety checks of the playing surface and stadium, ensuring that participants are wearing the necessary protective clothing/equipment, ensuring that medical and emergency personnel can respond appropriately if required, and otherwise adopting and implementing training and safety protocols and procedures.

If a person is injured at a sporting event, whether that person has a valid cause of action against the organiser will depend on whether they can prove all of the following three elements:

  • the person was owed a duty of care by the organiser;
  • the organiser breached this duty of care; and
  • the injury resulted from that breach.

To determine whether the event organiser breached its duty of care, a court will apply a test of "reasonableness." This test involves asking "What could the event organiser be reasonably expected to do (or not do) in the circumstances?" In analysing that question, a court may consider whether the organiser implemented risk management policies and procedures to minimise risks and/or maintained its facility at reasonably expected standards.

How Can Liability Be Limited?

Although sports event organisers generally have a duty of care to take reasonable steps to provide safety during an event, courts have repeatedly emphasised that event organisers are not required to guarantee the total safety of guests.

The most common argument used in defending negligence claims involving injuries at sporting events is the “assumption of risk” doctrine. This doctrine can preclude recovery for injuries resulting from an activity in which the plaintiff realised the risks, and nevertheless voluntarily participated in and accepted those risks. Assumption of risk can be express (eg, a waiver signed by the plaintiff), or it can be implied from the voluntary participation in the activity.

To prevail on the assumption of risk defence in a spectator's personal injury action, the defendant is required to demonstrate that the injury-causing events were known, apparent, or reasonably foreseeable consequences of attending the game.

It is not uncommon for event organisers to include disclaimer language in small print on the reverse of the ticket. This is the stadium owner’s attempted disclaimer of legal responsibility for any injuries that might occur to fans at the stadium. Whether these disclaimers are valid is an issue of state law, and states differ as to the enforceability of these waivers.

MLB and its clubs have largely avoided financial responsibility for foul ball accidents, since every MLB ticket contains a disclaimer that fans enter at their own risk. US courts have generally upheld the “Baseball Rule”, which provides that a baseball facility has met its duty of care to spectators by providing seating that is protected from projectiles that leave the field of play (eg, by netting). Thus, fans who choose not to sit in protected seating do so at their own risk.

Another reason why an owner’s liability may be limited is the requirement that the owner’s negligence must be the cause of the injury. For example, some courts have held that where guests have options available to them, some of which would have prevented the injury, the guest, rather than the organiser, may be responsible, at least in part, for the injury.

What Liability Cannot Be Excluded?

While disclaimers and waivers are valid in many states, they do not necessarily protect facility owners from their own negligence. Despite the disclaimers on the reverse of ticket stubs, stadium owners still have an obligation to act reasonably to minimise the risk of injury to spectators. That is why all baseball stadiums have netting behind home plate to protect against foul balls. Waivers are also not effective if the sports organiser is found to be grossly negligent or to have intentionally harmed the claimant.

How Can Athletes Be Liable to Spectators?

Athletes who engage in typical activities associated with a sport will not usually face liability for any resulting injuries that occur during the game. However, in limited cases, an athlete may bear liability for a spectator’s injury where, for example, an athlete behaves aggressively or fails to act according to the rules of the game.

How Are Sporting Events Kept Safe from Violence and Disorder?

Sports organisers have a duty to keep the sporting stadium/facility reasonably safe, which may include a duty to take precautions if it is foreseeable that a third party will commit a criminal or violent act causing injury to a player or spectator. There are certain steps that can be taken to reduce that risk and potential liability:

  • adopt and enforce internal disciplinary policies for players and coaches which set forth standards of conduct and impose penalties for violations which are applied consistently (eg, monetary fines and/or suspensions);
  • review and strengthen, if necessary, policies and local laws on the serving and consumption of alcoholic beverages;
  • work closely with police and security to identify and deter the potential for violence and other unruly behaviour, and to implement a plan to discourage and respond to spectator violence if it occurs including a strong, visible police presence;
  • install video equipment in the seating area to help deter misconduct and identify spectators in the event of fan violence;
  • have a designated area in the stadium for visiting team’s spectators; and
  • make public announcements before and during the game emphasising standards of spectator behaviour.

In sum, each sporting institution should review and examine its culture, prior experiences and resources to prepare for sporting events and to reasonably ensure their safety.

Entity selection is an important concern that must be addressed early in connection with formation of any organisation that will used in the private or public sectors, inclusive of professional and non-professional sports clubs (amateur athletics) and sports governing bodies. In all instances, limiting liability against legal claims will be of paramount importance and in the USA will be provided for by resorting, basically, to use of any of the following entities:

  • limited liability company;
  • limited partnership; and
  • corporation (publicly or privately owned).

Each of these types of entities are presently represented in all areas of professional and non-professional sports.

In the absence of ownership by persons or entities that are non-resident in the USA, the limited liability company form is likely the prevailing form of ownership and operation. These are frequently referred to as “pass-through entities” for purposes of taxation, providing for a single level of income taxation while affording their owners the ability to construct creative and sometimes unusual distribution “waterfalls,” directing how various revenue-steams are distributed. The limited liability company is governed by a limited liability company operating agreement and the state laws where that entity has been formed. Essentially, the operating agreement is a contract that provides for nearly unlimited variations of rights and remedies among its owners, which may consist of traditional common equity investors, those with preferred equity investments, and those holding hybrid securities (which may be combinations of debt and equity securities). The applicable state law statutes are structured to defer to contractual rights of ownership and operation negotiated by the owners.

Governance in sports is a complicated subject and spans many participants, including players, clubs, local, national and international organisations, spectators, the media, commercial (sponsors), non-commercial interests, and educational and training bodies. Confidence in governance is pivotal to securing confidence in any institutions regulating or governing these constituent groups. Enhancing governance in sports has undoubtedly been a priority in response the public scandals at the highest levels and bears similarities to the evolved corporate governance standards and expectations applicable to business corporations in the public capital markets. However, in the USA there is no “one size fits all” approach recommending or prescribing governing principles and, as a result, codes of conduct abound at all levels (eg, professional, collegiate and youth). This stands in contrast to, for example, the UK’s Code for Sports Governance, with broad application to all that seek government and lottery funding.

Ethical issues regulated by governance codes are constantly changing, mostly in response to scandals and perceived deficiencies, and are serious challenges for sports administrators. These codes must also be updated to address ever changing matters such as laws governing online gambling, the ongoing debate over pay for college athletes, and the increasing number of substances banned for use by athletes.

In the USA, sports leagues are most often governed according to rules and internal regulatory procedures set forth in league organising documents. Most typically, these consist of league constitutions and by-laws. In many cases, these documents establish a board of governors comprising team owners or their representatives. These documents provide for establishing and managing league governance and regulatory policies and typically provide for appointing a league commissioner. The league commissioner serves as a chief executive officer and is typically responsible for overseeing the day-to-day league operations. League organisational documents and CBAs set forth player and coach codes of conduct.

It is well recognised that numerous federal agencies and state and local governments often turn to public-private partnerships to structure and execute the development of stadiums and other sports-related facilities. Often this is done in conjunction with redevelopment of real estate located in areas qualifying for tax status as a Qualified Opportunity Business Zone with special tax advantaged attributes.

In connection with professional stadium finance projects, separate private revenue streams are identified and evaluated. They consist of and include the following: ticket sales, personal seat licences, club seats, luxury seats, concessions, merchandise sales, advertising (including signage, virtual advertising, sponsorships, naming rights and pouring rights), parking, and other exclusive arrangements. 

Stable revenue streams are of paramount importance to funding transactions. COVID-19 has negatively and materially impacted these revenue streams by causing shutdowns of sports establishments and venues. Declines in event attendance during COVID-19 were due to capacity and social distance restraints imposed by governments rather than a decline in measured demand for tickets, leaving the industry well-positioned to benefit from a return to live events when the COVID-19 pandemic subsides. While the length and severity of the impact on the business of live events is still uncertain, historically, the market for live events has been non-cyclical.

One major business development in US sports results from recent rule changes in professional sports, making private equity funds a novel investment vehicle for minority ownership of MLB and other professional sports. US leagues have begun to modify ownership regulations to allow new investment opportunities for funds to acquire minority interests in multiple clubs. In 2019, the MLB modified its rules to allow such funds to acquire a passive minority stake in multiple clubs. Similarly, the NBA owner recently approved a plan to allow investment firms to own interests in teams. As many sports properties confront long-term cash flow and capital shortfalls, new variations on investment funds are likely to continue to develop.

In addition, sports and entertainment venues have, in recent years, paired with and become integral components of mixed-use development projects. However, expanding capital budgets surpassing historic norms and demand for technologies have required that these venues capture year-round audiences and utilisation for varied purposes beyond a home schedule. These projects often take the form of public-private partnerships revitalising downtown areas and have resulted in the rehabilitation or creation of entertainment spaces, hospitality ventures, including hotels, bars and restaurants, residential projects, including affordable housing, and office and innovation workplace lab spaces, tailored for changing modern workplace norms. While diminishing as a tax benefit incentive, many urban projects were subject to special federal income tax benefits if the projects were located within qualified opportunity zones, often associated with urban renewal projects. This was particularly useful as direct taxpayer support for new stadiums and arenas has been waning.

Trade mark rights in the US are based on use of a mark (be it text, designs/logo, slogans, or a combination thereof) in US commerce for specific goods/services. US trade mark rights are generally based on use in US commerce, not registration. Thus, unregistered but otherwise protectable marks (ie, common law use) may be enforced against junior users of the same or confusingly similar marks for the same or closely related goods/services. 

Registration is available at the federal level for marks that are used in US interstate commerce. All 50 states also have state trade mark registrations for marks used only within their respective states.

Word marks that are generic can never be registered. Marks that are merely descriptive also cannot be registered on the Principal Register or enforced until, and if, they obtain secondary meaning (also known as acquired distinctiveness). Marks cannot be registered if they are confusingly similar to any prior filed application or issued registration for related goods/services. 

While registration is not necessary to enforce valid trade mark rights, under both federal and state laws, the advantages of registration include:

  • legal presumption of validity of the mark and its ownership;
  • constructive nationwide notice of registration; and
  • potential for enhanced damages in infringement cases.

Changing Controversial Team Names

Of interest is the recent trend for sports teams to change their names where the names reflect historical bias or content that is offensive to one or more societal groups, such as Native Americans. For example, in 2020, the professional NFL Washington Football Team (newly named) dropped its longstanding “Redskins” name and all related marketing and merchandising in deference to Native Americans, who, along with many other groups, for many years had viewed the “Redskins” name as highly offensive. In December 2020, the Cleveland Indians professional baseball team announced they would do the same following decades of opposition to the “Indians” name.

US copyright law is exclusively governed by the 1976 Copyright Act, which is a very lengthy and complex statute with additional enabling regulations. The USA is a member of the Berne Convention. Registration is not required to protect copyright, which exists from the moment of creation of an original work of authorship that is otherwise protectable by copyright.

However, registration is still required as a prerequisite to sue for copyright infringement in the USA. In addition, if a registration is issued within three months of a work’s first publication, in a subsequent infringement action the copyright owner may seek both statutory damages (in lieu of a need to prove actual damages or an infringer’s profits) and legal fees if successful. Although non-US Berne Convention country copyright owners are exempt from the registration requirement as a pre-condition of suing for infringement, they cannot seek statutory damages or legal fees unless a US registration is effective before an act of infringement begins. 

Common defences include lack of personal jurisdiction, statute of limitations, absence of infringement based on non-substantial similarity of copyright-protectible elements, public domain, lack of copyrightable subject matter, scènes à faire, idea-expression merger, and statutory fair use.

Databases, which have become increasingly important in professional sports, can be protected by copyright and/or trade secret laws under both state and federal laws. Trade secrets are typically protected by confidentiality and non-disclosure agreements. Copyright does not protect facts, such that factual data within a database cannot be protected; however, the original structure, sequence and organisation of a database (ie, the schema) can be protected if it is original. 

There is legal recognition for image rights for individual athletes, but generally only at the state level under statutory and common law rights of publicity. Because this is governed by the laws of 50 individual states, it is a complex area of US law. Some states do not recognise a right of publicity, while many others recognise such right by statute and/or common law.

In addition to publicity rights, well-known and famous athletes may develop trade mark rights in their names and persona, providing additional intellectual property protection under federal and state law. The concept of “passing off” is a form of trade mark infringement and unfair competition under the federal Trademark (Lanham) Act and state laws, regardless of whether an athlete’s rights are registered. However, an athlete would only have enforceable trade mark rights in his or her name or other aspects of his or her persona if such persona were in fact used as a brand to market and sell goods/services in the USA.

Licensing is a primary revenue generator of team and league revenues. In the USA, the professional major sports leagues generally control and administer all member team trade mark rights and the licensing thereof (see 2.1 Available Sports-Related Rights). Licensing revenues are shared with teams based on contractual formulas.

Athletes are generally free to enter into direct sponsorship and licensing agreements, typically through their agents, provided such acts do not otherwise violate their team and league policies and any player contract provisions. 

There are no legal restrictions on assigning IP rights to third parties, with the only statutory exception that an “intent to use” federal trade mark application can only be assigned to a successor of the underlying business. Restrictions on assignment of IP rights to third parties is generally a matter of contract. In the absence of any such restriction, contractual rights may generally be assigned except for personal service contracts; however, this is a matter of state law and is therefore subject to specific applicable laws of the 50 states.

Sports data and associated databases have become a sophisticated, critical part of team and athlete management, strategy and training. Sports in the USA are heavily reliant on massive amounts of data and statistics respecting players’ performance and health, training, competitive team positions and information, scouting reports, team competition, and fans. Major sports leagues and their teams employ sophisticated technology to capture real-time game data, such as MLB’s StatCast system, which uses radar and high-speed cameras to record all movements made by players and tracks the flight and velocity of baseballs. Similar systems are installed in NFL and NBA arenas, and are being implemented by the National Hockey League (NHL).

There are many commercial opportunities presented by sports data, particularly for third-party developers who create and license sports-related applications and application programming interfaces (APIs) using data that focus on a myriad of sports-related uses, such as athletes’ health and nutrition, athletes’ performance, training regiments, scouting reports, player-trading decisions, statistics for game broadcasts, fantasy sports, sports betting, video gaming, e-sports competitions, and predictive modelling. 

In the USA, there are no specific data protection laws at the federal level regarding sports. However, various states have enacted data protection and security laws that protect personally identifiable information. The new California Consumer Privacy Act is currently the most extensive such law in the USA and is modelled in part on concepts included in the GDPR. In addition, all 50 states have data breach-reporting laws. 

If personal health-related information of individual athletes is collected, maintained or provided by medical practitioners, healthcare institutions or their business associates, such data is protected under the federal Health Information Portability and Accountability Act (HIPAA).

In one notable example, in 2015–16, the FBI investigated MLB allegations that the St. Louis Cardinals hacked into the internal networks of the Houston Astros, including the baseball club’s proprietary competitive databases of scouting reports, trades and proprietary statistics. A Cardinals’ scouting director ultimately pleaded guilty to unauthorised access to an Astros computer.

Internal Regulation and Arbitration

State and federal governments typically do not regulate the day-to-day operations of professional sports leagues in the USA. US sports leagues are typically governed according to rules and internal regulatory procedures set forth in league constitutions and by-laws. In many cases, a league commissioner serves as a chief executive officer and is responsible for overseeing the day-to-day operation of the league. Although the organisational structure of each league differs, the commissioner generally has plenary authority to enforce league rules.

Jurisdiction over sports-related disputes depends on the nature of the dispute. In professional sports, an arbitration clause is often found in a CBA between a players’ association and the league or team. Under most CBAs, it is common for grievance, salary, and contract disputes to be resolved through binding arbitration. League constitutions and by-laws often require that disputes between the league, players, member teams, officials, or shareholders be resolved through arbitration, with the league commissioner serving as arbitrator. While the agreements differ across the leagues, procedures exist for appealing an internal arbitration decision within the league and beyond that to federal or state courts.

Dispute Resolution before the Courts

It is a common requirement under most governing documents that the internal arbitration process be exhausted before a dispute can be heard in court. While it is unusual for a player to appeal their suspension, the most well-known and highly publicised example of this process is the “Deflategate” scandal. Following the 2015 AFC Championship game, the NFL investigated claims that the New England Patriots and quarterback Tom Brady deflated footballs. Following the investigation, NFL Commissioner, Rodger Goodell suspended Brady for four games. Under the terms of the NFL CBA, before Tom Brady could bring an appeal of his suspension to federal court, he was required to exhaust his internal NFL appeals. After the NFL Commissioner, Rodger Goodell heard Brady’s appeal and upheld his suspension, Brady then appealed to federal court. After a lengthy appeal process at the league level and in federal court, the suspension was upheld, and Brady served the suspension.

There are cases in which disputes involving leagues or teams may be heard initially in state or federal court. This usually occurs when a litigant is not party to the league’s operating agreements and is not bound by an arbitration provision contained in those governing documents.

League constitutions and by-laws typically require that disputes between the league, players, member teams, officials or other internal league stakeholders be resolved through arbitration, in many cases before the league commissioner as arbitrator. As noted in 6.1 National Court System, procedures governing player-team disputes are often agreed upon during collective bargaining negotiations and formalised in the applicable CBA.

MLB

One type of arbitration is the “baseball arbitration,” which originates from a methodology that was used to resolve baseball players’ salary disputes. In this type of arbitration, each party submits to an arbitrator an amount that represents the party’s last, best offer. The arbitrator then must pick one of the submitted figures. The MLB CBA still requires “last, best offer” arbitration. This system usually causes good faith bargaining and results in a high percentage of settlements.

NBA

The NBA utilises arbitration to resolve issues pertaining to the CBA. The CBA provides for arbitration of disputes relating to player grievance and selected articles within the CBA. Issues involving income, salary cap, and minimum team salary are subject to arbitration under the CBA. Some disciplinary determinations issued by the NBA commissioner are binding upon the player. If the disciplinary determination meets certain criteria, it may be appealed to a grievance arbitrator for a final determination.

NFL

The NFL CBA provides for arbitration of what are essentially labour disputes between the team and a player including salaries and whether an injury that precluded a player from performing was sustained as a result of play.

Other Sports

The Ladies Professional Golf Association relies upon AAA arbitration to resolve disputes involving doping violations with its golf members. The arbitration procedures are very similar to the United States Anti-Doping Agency’s arbitration programme. The NHL’s CBA provides for arbitration of grievances, salary, and issues pertaining to findings of prohibited substances. The agreement provides for a comprehensive set of arbitration hearing procedures.

Following a league-issued decision there is typically an internal appeals process that is set forth in league-governing documents. This internal appeals process is typically the final adjudicatory step available at the league level. After an arbitration award is issued, a party seeking to enforce the award must file a petition in federal court to confirm such award within one year of the date the award was issued. As noted in 6.1 National Court System, after exhausting their appeal options at the league level, players or teams may appeal the league’s determination in federal court under a narrow set of circumstances set forth in the Federal Arbitration Act (FAA) or under the Labor Management Relations Act (LMRA). An appeal sought from an arbitration award in the labour and employment context, will result in an appeal under the LMRA. Otherwise, the FAA’s appeal procedures are likely to apply.

The standard for vacating an arbitration decision is high and courts are generally deferential to arbitration decisions since the parties agreed to arbitration in lieu of using a court to settle the dispute. Courts will generally uphold the decision unless the arbitrator acted with bias, corruption or fraud, or exceeded their authority under the terms of the CBA. Similarly, under the FAA, a party may seek to vacate an arbitration award where:

  • the award was procured through corruption or undue means;
  • there was evident partiality or corruption in the arbitrators;
  • the arbitrators were guilty of misconduct and a party was prejudiced; or
  • the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.

Relationships between athletes and sports organisations in football, basketball, baseball, hockey, and soccer are typically handled by employment contracts, commonly referred to as Standard Player Contracts or Uniform Player Contracts (SPK). An SPK is typically a form document, which has been negotiated between the league and the players’ union pursuant to a CBA. Most CBAs require that the league not approve an individual player’s SPK unless it has been negotiated with an agent registered with the player’s union or the player has negotiated the contract him or herself. Generally, the Commissioner of the league has the power to reject an SPK if the agreement violates any provision of the CBA, including its salary cap and registered agent provisions.

Typical Terms of the SPK

The standard SPK typically requires the player to:

  • participate in meetings, training camps, workouts, practice sessions, regular season games, exhibition games, and postseason games;
  • license the player’s name(s), image, likeness, and other identifying information and characteristics to the team for promotion purposes and seek the team’s consent before engaging in any media or public appearances;
  • participate in reasonable activities promoting the team and league as directed;
  • maintain good moral character, good citizenship, good sportsmanship, and integrity, including by not betting on games, accepting anything of value to attempt to fix a game, or using or providing others with prohibited substances;
  • abstain from playing other sports or engage in activities that may involve a substantial risk of personal injury without the consent of the team;
  • maintain good physical condition and notify the team of injuries and illness, including notifying the team of injuries incurred as a result of the player’s employment with the team; and
  • accept an assignment of the SPK in the event the team trades the player to another team, and faithfully perform the duties as required by the SPK for the new team.

While CBAs may restrict the subjects on which teams and individual players may amend an SPK, the parties may negotiate the player’s signing bonuses, a contract buy-out provision, a no-trade clause, or compensation in the event of injury, among other provisions. The SPK may also specify the team’s option to retain a player for another year after the conclusion of the SPK, or the player’s option to become an unrestricted or restricted free agent. As an unrestricted free agent, the player may opt to remain with his or her current team for another year or accept offers from other teams. As a restricted free agent, the player may receive offers from other teams, but must allow his or her original team an opportunity to meet or exceed any offers.

Parties’ negotiations with respect to compensation are typically bound by CBA provisions governing salaries. With the goal of maintaining competitive balance between lucrative and less-lucrative teams, CBAs between players’ unions and sports organisations typically contain provisions capping player compensation in the aggregate, and for some leagues, individually, and/or imposing a tax on aggregate and/or individual player compensation above a specified amount. CBAs between players’ unions and sports organisations also typically require the league and teams to spend a guaranteed amount on player compensation.

Antitrust and Anti-competitive Concerns

Employment contracts between sports teams and players requiring loyalty to the player’s team and league do not unreasonably restrain competition. Indep. Entm’t Grp., Inc. v Nat'l Basketball Ass’n, 853 F. Supp. 333, 338 (C.D. Cal. 1994) (requiring professional athletes to “not work for any competing entity while they remain employed” does not unreasonably restrict competition in violation of Section 1 or Section 2 of the Sherman Act). Additionally, pursuant to the decision in Mackey v Nat'l Football League, 543 F.2d 606, 614 (8th Cir. 1976), the non-statutory labour exemption to antitrust laws insulates agreements in the CBA from antitrust challenges to the extent they are anti-competitive where:

  • “the restraint on trade primarily affects only the parties to the collective bargaining relationship”;
  • “the agreement sought to be exempted concerns a mandatory subject of collective bargaining”; and
  • “the agreement sought to be exempted is the product of bona fide arm’s-length bargaining.” 

Anti-discrimination Protections

Under Title VII of the Civil Rights Act of 1964 (Title VII), Title I of the Americans with Disabilities Act of 1990 “ADA), the Age Discrimination in Employment Act (ADEA), Title II of the Genetic Information Nondiscrimination Act of 2008 (GINA), and analogous state and local laws, sports organisations are prohibited from discriminating against their player-employees on the basis of race, colour, religion, national origin, sex, sexual orientation, disability, age, and genetic information. State and local laws may provide protections based on additional protected characteristics.

Americans with Disabilities Act

Pursuant to Title I of the ADA, and state and local disability laws, employer sports organisations have a duty to not discriminate against player-employees on the basis of disability, to keep player-employees’ medical information confidential, and to provide a reasonable accommodation to player-employees with disabilities absent an undue hardship. The extent to which player-employees may be entitled to reasonable accommodations in a profession based on physical ability and competition has not yet been outlined by the courts. 

Sports organisations may also have a duty to not discriminate against players on the basis of disability if they are public accommodations. PGA Tour, Inc. v Martin, 532 U.S. 661, 681 (2001) (finding that a golf tournament’s tours were a public accommodation and a disabled golfer’s “request for a waiver of the [tournament’s] walking rule should have been granted.”). When considering a request for an accommodation as a public accommodation, sports organisations may evaluate whether the requested modification “might alter such an essential aspect of the game . . . that it would be unacceptable even if it affected all competitors equally” or “give a disabled player . . . an advantage over others and, for that reason, fundamentally alter the character of the competition.” Id. at 682-83.

Age Discrimination

The ADEA and state and local counterparts prohibit discrimination on the basis of age, with the ADEA and most states protecting individuals aged 40 and above. Policies of employer sports organisations setting age restrictions below the protected age do not violate age discrimination laws. Lassiter v Cincinnati Reds, LLC, 447 F. Supp. 3d 462, 465 (M.D.N.C. 2020).

Gender Discrimination

Recently, disparities in pay and working conditions between men and women athletes has become the subject of significant public attention and litigation. See, Morgan v United States Soccer Fed’n, Inc., 445 F. Supp. 3d 635, (C.D. Cal. 2020), cert. denied, No 2:19 Civ. 01717, 2020 WL 4390368 (C.D. Cal. June 23, 2020) (granting soccer federation summary judgment on women soccer players’ discrimination claims as to pay under the Equal Pay Act and Title VII and as to field surfaces under Title VII, and denying summary judgment on their claim of discrimination in the provision of charter flights). However, claims of gender discrimination in employment by athletes are rare because a prima facie case of discrimination requires a showing of different treatment between the sexes by a singular employer, and most sports organisations employ players of the same sex. 

Race, Colour, and National Origin Discrimination

Under Title VII and analogous state and local laws, employer sports teams are prohibited from discriminating against players on the basis of their race, colour, and national origin, among other protected characteristics. However, where a sports organisation acts on the basis of a protected characteristic with the goal of remedying its past discrimination, there is no violation of Title VII. 

Protection of Genetic Information

Oftentimes, and as directed by the terms of a CBA, employer sports organisations have a role in managing player-employees’ health and collecting their medical information. Pursuant to Title II of GINA, employer sports organisations are prohibited from discriminating against player-employees on the basis of their genetic information; requesting, requiring, or purchasing genetic information about player-employees; disclosing genetic information about player-employees, subject to limited exceptions; or retaliating against player-employees for protected conduct under GINA. GINA also requires that employer sports organisations keep player-employees’ genetic information confidential. Employer sports organisations seeking to take advantage of increased accessibility of genetic testing and advancement of wearable technologies may be limited by GINA’s requirements.

Wage and Hour Law

The Fair Labor Standards Act of 1938 (FLSA) and state and local wage and hour laws require that employer sports organisations pay all players the minimum wage and most players overtime premiums for hours worked over 40. Although there is no explicit exemption from the FLSA’s overtime provisions for athletes generally, the FLSA carves out an exemption for baseball players during the regular championship season as long as they are paid at least the minimum wage for 40 hours weekly.

Collective Bargaining

Under the National Labor Relations Act of 1935 (NLRA), player-employees are entitled to unionise, collectively bargain with their employer sports organisations, and participate in protected concerted activity. Under the NLRA, a sports organisation may not take unilateral action on terms affecting “wages, hours, and other terms and conditions of employment,” such as free agency, first refusal provisions, salary arbitration, the college draft, salary caps, minimum individual salaries, and fringe benefits, because these are mandatory subjects of bargaining. See 29 U.S.C. § 158(d).

Unemployment Benefits

The Federal Unemployment Tax Act requires the Secretary of Labor to reject any state’s unemployment programme if it provides unemployment benefits to professional athletes who are not playing between seasons if they are expected to play the next season. See 26 U.S.C. § 3304(a)(13).

Workers Compensation

Whether and the extent to which a professional athlete is entitled to workers’ compensation for injuries sustained while working varies from state to state. 

Worker Adjustment Retraining Notification Act of 1988 (WARN Act)

The WARN Act and its state analogues require employer sports organisations to provide employees, their representatives, and certain governmental officials with advance notice of closings and layoffs affecting a threshold number of employees. Under federal law, and in many states, employers including sports organisations are not required to provide WARN notices for lockouts during labour disputes.

The IRCA

The Immigration Reform and Control Act (IRCA) prohibits employers from discriminating on the basis of an individual's real or perceived citizenship or national origin. These IRCA protections do not apply to employers with three or fewer employees, to claims already under consideration with the Equal Employment Opportunity Commission under Title VII, or to situations where citizenship status is required by law. The IRCA protects citizens and aliens actively pursuing citizenship and prohibits employers from enacting blanket hiring policies restricting employment to US citizens. The IRCA preserves employers’ rights to prefer citizens over equally qualified aliens.

Immigration and Visas

The Immigration and Nationality Act (INA) governs immigration laws as they pertain to professional athletes. There are both immigrant and non-immigrant options for foreign athletes seeking entry to the United States. Some of these are discussed below.

EB-1 – employment-based first preference immigration

A professional athlete who can demonstrate, by extensive documentation, extraordinary ability in athletics through sustained national or international acclaim may apply for an EB-1 Visa. While an employment offer is not required, the athlete must provide evidence showing they seek entry to the USA to continue to work in their field of expertise.

B-1 – temporary business visitor

An athlete visiting for a professional or commercial purpose may apply for a B-1 Visa. This visa generally limits the visitor to a six-month period and prohibits the visitor from engaging in productive labour and employment while in the USA. Types of foreign national athletes that can enter the United States using a B-1 Visa include individual professional athletes who will receive no salary, other than prize money, and athletes of foreign-based teams that belong to international leagues or competitions whose salaries are principally earned in the foreign country.

O-1A – individuals with extraordinary ability or achievement

An athlete who possesses extraordinary ability and has been recognised nationally or internationally for those achievements may be eligible for an O-1A non-immigrant visa. The initial period of stay granted under an O-1A visa is three years.

P-1A – athlete

A foreign athlete seeking temporary entry to the USA for the sole purpose of competing at a specific athletic event may seek entry under the P-1A Visa. To qualify, the individual must be an individual or part of a team at an internationally recognised level of performance or a professional athlete. The INA defines a professional athlete as one employed by a team that belongs to an association of six or more teams whose total combined revenues exceed USD10 million per year, if the association governs the conduct of its members and regulates the contests and exhibitions in which its member teams regularly engage, or any minor league affiliated with such an association.

The esports industry has been growing significantly. Revenues have been steadily increasing, and before the COVID-19 pandemic hit, were expected to exceed USD1 billion in 2020. Despite the pandemic, revenues for 2020 are upwards of UDS900 million and are soon expected to cross the USD1 billion mark. Like all industries, esports was not immune to the deleterious effects of the pandemic. However, the pandemic also benefited esports in many ways and allowed this growing industry to showcase some of its greatest strengths.

When the pandemic hit in 2020, traditional sports were forced to cancel their entire seasons. The NBA, NASCAR and MLB all suspended their seasons and were forced to contemplate how they could maintain fan engagement. As in-person meetings and events shifted online, the esports industry was perfectly positioned to take advantage of the gap in the seasons. For example, the Phoenix Suns decided to continue their regular season schedule by simulated esports games in Take Two Interactive’s NBA2K, and streamed those games live on the social media platform Twitch. Additionally, several motorsports series such as Formula 1, NASCAR and IndyCar established esports racing simulations. Those competitions, which featured many of the series’ real-world drivers, drew record-breaking audiences across online live streaming platforms. In fact, the inaugural NASCAR race earned the highest TV ratings ever for an esports event.

However, the esports industry still faced its fair share of challenges during the COVID-19 pandemic. As a result of the cancellation of live events, the esports industry lost a significant amount of revenue from advertising and sponsorship. This is significant as sponsorships accounted for upwards of USD600 million of esports revenue in 2019. Operational costs were cut and, as in traditional sports competitions, there was a shift away from massive live venues to an online format. Logically, this transition was easier for esports than for other industries. Broadcast technology, studio-oriented cameras, remote production technology and virtual reality were among the investments made to bring the esports industry firmly into the COVID-19 era.

COVID-19 has caused significant disruptions to ordinary US sports industry operations including public attendance at sporting events. Teams in all major professional sports leagues have had to re-examine and adjust business plans and strategies to account for the effects of the COVID-19 pandemic and future “new normal” business practices. Lost revenues in the sports industry from ticket sales, concession sales, media rights and merchandising will total billions of dollars. The major sports leagues have sought to counter the pandemic’s effects upon business operations through the creation of limited access “bubble” venues and shortened and delayed regular seasons coupled with expanded post-seasons.

Once stadiums do reopen, litigation may become much more prevalent and nuanced with the involvement of COVID-19. It will be absolutely critical for all teams to have complex and detailed return-to-action programmes for the health and safety of their fans, employees and contractors.

Once public assembly restrictions are eased to permit significant attendance at live sporting events, teams and stadium operators can be expected to seek waivers of liability relating to COVID-19 exposure from individuals in attendance at such events as a condition to entering the stadium. This waiver would likely be included in the terms of admission applicable to sporting event tickets and suite licences; thereby eliminating the need to obtain signed written waivers of liability.

To what extent these waivers will be enforceable remains to be seen. In general, a liability waiver is enforceable if (i) it does not violate the public interest, (ii) the intention of the parties is expressed in unmistakable language, and (iii) the provisions are clear and coherent. The enforceability of the waiver will also depend upon the scope of the wavier and the conduct of the team and stadium operator. Thus, even if a live sporting event attendee executes (or is deemed to have executed a waiver), which is clear, intelligible and specifies that the risk being waived is COVID-19 exposure, the team and stadium operator may still be susceptible to a future claim if the team and/or stadium operator fail to undertake measures to protect against exposure to the virus in accordance with applicable law and recommended public health guidelines.

There are no relevant issues in US sports law not already covered in this chapter.

Herrick, Feinstein LLP

Two Park Avenue
New York
New York 10016
USA

+212 592 1400

+212 592 1500

ikishner@herrick.com www.herrick.com
Author Business Card

Trends and Developments


Authors



Global Sports Advocates (GSA), based in coastal Portland, Maine, is a sports law firm devoted to the protection of athletes’ rights, the delivery of trusted advice on sports regulation and the management of crisis situations in the sports world. GSA has successfully represented athletes competing in a wide variety of sports from all parts of the world, as well as sport governing bodies both in the USA and abroad. As a firm solely devoted to sports law matters, GSA routinely handles cases of import involving anti-doping, team selection, NCAA eligibility, governance, intellectual property (including name, image and likeness), SafeSport and breach of contract. GSA recently represented UFC world champion Jon Jones in his successful eligibility hearing before the Nevada State Athletic Commission and prevailed on behalf of Olympian Jarrion Lawson in a landmark case where it established that meat contamination was the source of a banned substance.

Introduction

The sports industry in the USA was devastated and completely upended by the COVID-19 pandemic throughout 2020 and into 2021. While the legal fallout from the pandemic has dominated headlines, this article focuses instead on two other areas of sports law trending in 2021 that are poised to have significant political and socio-economic ramifications:

  • the consensus movement toward rehabilitation, and away from punishment, reflected in the recent policies that have been adopted at all levels of professional and Olympic sports to regulate players who use marijuana and other recreational drugs; and
  • the rapidly shifting world of collegiate athletics, where the longstanding edict that athletes are “amateurs” could soon be replaced with a new order where athletes secure endorsement deals, get paid a portion of revenue generated by the NCAA and earn education-related benefits.

New Approach to the Use of Recreational Drugs

The US professional sports leagues

Fuelled by a wave of change in the USA that has led to the legalisation of cannabinoids in nearly one third of the states, the major US professional sports leagues have taken a new course of action in 2021 opting for treatment over sanction for players who use recreational drugs. In a revolutionary step, starting this year, the use of marijuana and other cannabinoids no longer leads to a ban from competition in any of the major US professional sports leagues. Instead, a player who tests positive for marijuana is sent for evaluation and treatment in a rehabilitation programme.

The use of other recreational drugs, such as cocaine, also now leads to a treatment programme instead of a sanction in most leagues, with the exception of the NBA and WNBA where cocaine use can still lead to a ban from play.

Below is a rundown of how the use of recreational drugs is currently being handled within each major US professional sports league.

Major League Baseball (MLB)

Under the current MLB Joint Drug Prevention and Treatment Program, a player will be referred to a treatment programme as a result of the use, or suspected use, of cannabinoids or another recreational drug.

Major League Soccer (MLS)

Under the current MLS programme, a player who uses cannabinoids or another substance designated as a “drug of abuse” is subject to a behavioural health and treatment programme.

National Basketball Association (NBA)

Under the NBA’s newly adopted policy, players are no longer tested for marijuana. However, the NBA can still sanction a player who tests positive for cocaine and other drugs of abuse.

National Football League (NFL)

Under the NFL’s new policy, the goal is to help players who use substances of abuse. Resources are now directed toward evaluation and treatment rather than the punishment of players.

National Hockey League (NHL)

Under the NHL’s current substances of abuse programme, a player who uses a drug of abuse is sent to a treatment programme where they are subject to evaluation by a specially trained doctor rather than a ban from play.

National Women’s Soccer League (NWSL)

Under the current NWSL policy, the use of marijuana is not banned. The NWSL even permits teams and players to be sponsored by CBD brands.

Women’s National Basketball Association (WNBA)

Under the WNBA’s new marijuana policy, a player who tests positive for marijuana enters a treatment programme; however, the use of other drugs of abuse, such as cocaine, can still lead to a sanction under certain circumstances.

UFC

The new UFC Anti-Doping Policy, which went into effect on 1 January 2021, distinguishes the use of substances of abuse from the use of other banned substances. As a result, when a UFC fighter tests positive for cannabinoids and other substances of abuse, including cocaine and narcotics, the focus of the UFC Anti-Doping Policy is on rehabilitation rather than ineligibility from competition. If a fighter can establish that they used a substance of abuse without intending to enhance their performance in a bout, then their period of ineligibility can be eliminated if they satisfactorily complete a certified, accredited treatment programme.

The Olympic Movement (governed by the 2021 World Anti-Doping Code)

Like the new UFC Anti-Doping Policy, the fourth edition of the World Anti-Doping Code, which went into effect on 1 January 2021, treats the use of substances of abuse differently than the use of other banned substances. Unlike the UFC Anti-Doping Policy, however, the use of substances of abuse, even cannabinoids, will still lead to an automatic ban from competition under the 2021 World Anti-Doping Code. The length of the ban will differ drastically depending on when the usage occurred and whether it was related to sport performance.

Scenario 1: Out-of-competition use that is unrelated to sport performance

An athlete whose use of a substance of abuse occurred out of competition and was unrelated to sport performance will automatically receive a three-month period of ineligibility. The three-month sanction could be reduced to a one-month sanction if the athlete completes an approved treatment programme. 

Scenario 2: In-competition use that is unrelated to sport performance

An athlete whose use of a substance of abuse occurred in competition (typically defined as the period commencing at 11.59pm on the day before a competition in which the athlete competes through to the end of that competition) does not get an automatic reduction to three months or less under the 2021 World Anti-Doping Code. Rather, athletes in this position only get a reduction if they show that their use was unrelated to sporting performance. Even then, the reduced period of ineligibility is likely to be somewhere in the 12–24-month range (depending on the athlete’s degree of fault), which is far longer than the automatic three-month ban an athlete receives for out-of-competition use.

Scenario 3: In-competition use that is related to sport performance

An athlete whose use of a substance of abuse is both in competition and related to sport performance is treated the same as an athlete who uses a performance-enhancing substance. Athletes in this position face a two-year ban for the use of cannabinoids, heroin or ecstasy or a four-year ban for the use of cocaine.

The March Toward Compensation for College Athletes

The NCAA, which governs intercollegiate sports in the USA, is made up of over 1,000 member colleges and universities divided across three divisions (Division I, Division II and Division III). Under NCAA rules, student-athletes are considered “amateurs” and are not paid to compete. This treatment of student-athletes has been increasingly criticised over recent years since the NCAA generates billions of dollars in revenue by promoting and broadcasting “amateur” intercollegiate sports.

Pressure on the NCAA by state and federal lawmakers to compensate college athletes has grown to a fever pitch within the past year. Currently:

  • there are laws at the state level waiting to take effect that could permit college athletes to monetise their name, image and likeness (NIL) beginning as early as 1 July 2021;
  • there are multiple bills pending in Congress that could allow college athletes to receive compensation for the first time; and
  • there is a case pending before the Supreme Court of the United States (SCOTUS) that could enable college athletes to earn long-prohibited education-related benefits. 

The name, image and likeness revolution

The call for college athletes to profit from their NIL through individual endorsement deals began in earnest more than five years ago after the landmark O’Bannon v NCAA decision. In the aftermath of the O’Bannon case, multiple states tried to pass legislation to enable college athletes to monetise their NIL right. Fuelled by a fear that the states would pass a patchwork of NIL laws and undermine its uniform approach to “amateur” intercollegiate sports, the NCAA convened a working group to recommend potential solutions to the NIL issue for its three divisions to consider. The NCAA working group presented its recommendations in late 2019, but its divisions have yet to vote on whether to implement them. It appeared that a vote on the proposed set of NIL regulations would take place at the annual NCAA Convention in January 2021, but the vote was delayed after the US Department of Justice stepped in over potential antitrust implications and concerns that the NCAA had not properly assessed the disparate socio-economic impact the new rules could have on student-athletes.

In the meantime, state legislatures have pushed forward to fill the vacuum created by the NCAA’s failure to act and redoubled their efforts to pass NIL laws. Florida’s NIL law, the Intercollegiate Athlete Compensation and Rights Bill, which will allow college athletes in the State of Florida to profit from their NIL, is slated to take effect on 1 July 2021. Other states, including Iowa, New Mexico, and Maryland, are all racing to keep pace with Florida and have bills pending that could also take effect on 1 July 2021 if passed in time. California, Nebraska and Colorado have pending NIL laws that could go into effect in 2023, while New Jersey has a pending NIL law that could take effect in 2025. As the calendar rapidly moves toward potential bedlam, the NCAA is seeking a solution that will allow it to maintain control over the NIL issue.

The college athletes’ bill of rights

Several bills have been introduced in Congress that seek to provide a federal uniform solution to the chaos looming on the horizon over the NCAA “amateurism” issue. The leading bill, called The College Athletes’ Bill of Rights, was introduced by Senator Cory Booker, a former American football player at Stanford University.

The College Athletes’ Bill of Rights has the potential to drastically alter the current intercollegiate sports landscape since it would grant college athletes a federal right to monetise their NIL rights and mandate that “fair and equitable compensation” be paid to college athletes. The compensation would take the form of revenue shared with the athletes, calculated on a sport-by-sport basis. The College Athletes’ Bill of Rights would also increase access to healthcare for college athletes, expand rights to scholarship money, and eliminate penalties that exist for athletes who transfer schools.

NCAA rules limiting benefits are under threat

The NCAA is fearful that NCAA v Alston, a case currently pending before the SCOTUS, poses a potent threat to its longstanding treatment of student-athletes on another front. Shawne Alston, a former American football player at West Virginia University, filed a class-action lawsuit against the NCAA challenging longstanding NCAA rules that limit the amount of scholarship money and benefits that student-athletes can receive from schools. The challenged NCAA rules:

  • cap the amount of athletic scholarship money (called “grant-in-aid”) college athletes are entitled to receive at the “cost of attendance”, defined as the total cost of tuition/fees, room/board, books/supplies, transportation, and other expenses related to attendance;
  • limit education-related benefits such as reimbursement for tutoring, study-abroad expenses, and post-eligibility financial aid; and
  • limit non-education-related benefits such as travel reimbursement for an athlete’s family to attend athletic competitions.

The NCAA appealed to the SCOTUS after the US Court of Appeals for the 9th Circuit upheld the District Court’s finding that certain NCAA education-related benefits could not be capped by the NCAA. If the 9th Circuit’s decision is upheld by the SCOTUS, student-athletes would be entitled for the first time to receive:

  • the cost of computers, science equipment, musical instruments and other education-related equipment;
  • post-eligibility financial aid to complete undergraduate or graduate degrees;
  • scholarships to attend vocational school;
  • expenses for tutoring;
  • study-abroad expenses; and
  • paid internships, among other benefits.

In its appeal, the NCAA is challenging the 9th Circuit’s application of antitrust laws and claiming that, if permitted, these education-related benefits will “blur the line” between student-athletes and professional athletes. Depending on how Alston is decided by the SCOTUS, college athletes could gain access to a historic set of new benefits.

Conclusion

This article provides an overview of two important trends and developments in US sports law that are poised to drastically alter longstanding status quos: (i) the new approach adopted by the major US professional sports leagues, UFC and the Olympic Movement to an athlete’s use of marijuana and other recreational drugs; and (ii) the seemingly inevitable march toward compensation for college athletes who stand on the precipice of gaining long-sought rights to monetise their collegiate athletic careers. Both trends bear watching in the coming year.

Global Sports Advocates

One Monument Way
Suite 426
Portland, Maine
USA
04101

+1 207 747 5899

+1 207 773 8832

pgreene@globalsportsadvocates.com www.globalsportsadvocates.com
Author Business Card

Law and Practice

Authors



Herrick, Feinstein LLP provides a full range of legal services to its clients worldwide from its offices in New York City, Newark, New Jersey and Istanbul, Turkey. Herrick’s Sports Law Group works in conjunction with the firm’s complementary practice groups on the myriad of corporate, real estate, tax, intellectual property, restructuring, employment, government relations and litigation aspects of sports law for global sports dynasties. Herrick’s Sports Law Group's work spans every aspect of sports law, including league and team formation and operation, arena and stadium-financing and developments, naming rights, sponsorships and media rights transactions, team acquisitions and investments. Herrick’s lawyers provide pragmatic counselling on the day-to-day operations of sports businesses – advising on player and personnel issues, capital arrangements, concession agreements, advertising contracts, and prominent title sponsorships for major stadium and arena events. In addition to the authors referenced above, the firm would like to thank partner and chair of the Insurance and Reinsurance Group, Alan R. Lyons and attorneys Audrey C. Sheetz, Samuel A. Lifton, Daniel A. Field, Stephen DiMaria, Jalise Burt, Silvia Stockman and Adam Unger for their valuable contributions.

Trends and Development

Authors



Global Sports Advocates (GSA), based in coastal Portland, Maine, is a sports law firm devoted to the protection of athletes’ rights, the delivery of trusted advice on sports regulation and the management of crisis situations in the sports world. GSA has successfully represented athletes competing in a wide variety of sports from all parts of the world, as well as sport governing bodies both in the USA and abroad. As a firm solely devoted to sports law matters, GSA routinely handles cases of import involving anti-doping, team selection, NCAA eligibility, governance, intellectual property (including name, image and likeness), SafeSport and breach of contract. GSA recently represented UFC world champion Jon Jones in his successful eligibility hearing before the Nevada State Athletic Commission and prevailed on behalf of Olympian Jarrion Lawson in a landmark case where it established that meat contamination was the source of a banned substance.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.