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Over the last few years, particularly after the Supreme Court decision in NCAA v. Alston opened the door for student-athletes to enter into name, image, and likeness (NIL) deals, the National Collegiate Athletics Association (NCAA) has been relaxing its transfer rules. For example, in 2024 the NCAA changed its transfer portal rules to allow athletes to transfer multiple times without penalty, provided they are in good academic standing.
The NCAA and college athletic conferences designed transfer portals to regulate the transfer process for student-athletes, college coaches, and compliance officers. These regulations restrict where, when, and how often players can change schools during their collegiate careers. With the ever-increasing dollars flowing to NCAA student-athletes in a manner that looks a lot like employment, it raises the question of how transfer portal restrictions interact with state laws governing non-competition restrictions.
But the NCAA has not relaxed all of its transfer portal rules. The organization still requires student-athletes to notify their current school, in writing, before communicating with other schools and limits a student-athlete's opportunity to transfer from one school to another to a sport-specific transfer window of time each year.
Conference Rules and NIL Disputes
Conferences have additional restrictions as well. For example, certain conferences prevent inter-conference transfers for all but a few days in the calendar year, such as the SEC, which provides football players only 20 days after the season ends to transfer to another school within the conference.
Student-athletes change schools for many reasons: scholarship opportunities, coaching changes, eligibility constraints, or to attend graduate school. Increasingly, NIL deals are driving student transfer decisions. In April, University of Tennessee quarterback Nico Iamaleava left the Volunteers after an NIL renegotiation with Tennessee's NIL collective fell through. The league's spring transfer portal rules prevented Iamaleava from transferring to another SEC school, so he left the conference to play for UCLA.
The Role of State Law in Player Mobility
Like non-compete covenants in employment, NCAA transfer rules limit an athlete's choice of where to play. If college athletes are eventually recognized as employees, it's likely that transfer portal rules will run afoul of certain state laws protecting employee mobility.
Assuming that day comes, a player in California, for example, might invoke the state's Business and Professions Code Section 16600 in a dispute over a denied transfer attempt, particularly if the transfer opportunity comes with significantly better financial benefits for the player.
By its statutory language, California Business and Professions Code Section 16600 voids "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind," and this law is interpreted broadly by the California courts. While there is a legitimate question as to whether transfer portal rules amount to a "contract" under the language of the statute, there is no doubt that they restrain player mobility.
California's Section 16600 is the broadest and most well-established restrictive covenant statute in the country, but many other states limit an employer's ability to restrain employee mobility. North Dakota, Minnesota, and Oklahoma have statutes on the books that broadly ban non-competes, with limited exceptions.
As more NIL disputes make headlines and the courts continue to issue decisions inching toward player employment, and as institutions and athletic conferences craft legal agreements subject to potential NIL and quasi-employment disputes with players, universities and their athletic conferences should consider whether transfer rules and practices may run afoul of state laws banning or limiting non-competition covenants.
A Shifting Legal Landscape
Litigation over player transfers is increasing, including the recent example of the dispute between the NIL collective Arkansas Edge and a former player over a buyout clause in his NIL agreement arising from the player's transfer to another school. But the notion that a collegiate student-athlete could be sued for $200,000 due to a breach of contract related to his NCAA football play was inconceivable 10 years ago.
Similarly, the idea that student-athletes might be classified as employees under the NLRA and FLSA also seemed inconceivable not so long ago, but now such classification is largely expected in the coming years. It naturally follows that players embroiled in quasi-employment disputes with schools over their NIL contracts will look to restrictive covenant statutes to advance their interests in such suits.
There will continue to be an increase in disputes between athletes, schools, and collectives under the transfer portals rules, especially as these NIL deals continue to increase in value. While these disputes are currently mostly focused on antitrust and contract rules, it seems inevitable that a set of facts and creative lawyering will raise the question of how state law restrictions on restrictive covenants interact with player transfer rules.
The Venable Sports Law Group will continue to track this issue and others related to NCAA transfer portal rules, non-compete agreements in sports, and college athletics. Please reach out to the authors or members of this group if you need legal support.