The NCAA’s Psychotic Quest to Shut Down a Charity

A website wants to reward college athletes for graduating, but the NCAA won't stand for such generosity.

Oct 23 2014, 12:55pm

Photo by Robert Deutsch-USA TODAY Sports

FanPay has a plan to fix college sports. Using its crowdfunding platform, anyone can donate money to an athlete of any sport. The player can claim the money only after graduating. If they don't graduate, the money gets returned to the donors.

On September 20, the first cease and desist letter arrived in FanPay's inbox courtesy of the University of Florida. Quickly, word spread through the "athletics compliance community," as Shoshanna Engel at Georgia Tech's athletic compliance office put it. As of this writing, FanPay has been on the business end of 48 similar letters from other universities and athletic conferences. When I spoke to co-founder Tony Klausing over the phone, they had received five letters that day alone.

What exactly should they be ceasing and desisting? As the name alludes to, FanPay wants to commit the heinous crime of rewarding college athletes for graduating. But the NCAA won't let them.

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As the FanPay co-founders see it, the NCAA and its archaic amateurism rules are on the wrong side of history. But, as is often the case, this reversal of history is taking a while. The O'Bannon ruling—which laid the groundwork for college athletes to be paid—is currently under appeal and may take years to implement. Klausing doesn't want to wait. FanPay seeks an immediate compromise between the black market of college boosterism and the corrupt notion of the student-athlete.

"We think there's a basic philosophical problem with the current approach to reform," Klausing remarked. "The current reform is legalistic, it's antagonistic, it's bureaucratic, it's taken forever." As it happens, Klausing had been developing a goal-oriented crowdfunding platform when the O'Bannon ruling was handed down. The ruling called for money to be put into trust funds that could be accessed after college, a similar structure to the software Klausing was designing.

"I think it's a great idea," said University of Central Florida graduate and former Atlanta Falcon Theo Goins. "I think it would be a great opportunity for athletes to have a little money in their pocket and be able to get a college education at the same time." Because scholarships cover only the most basic expenses and NCAA rules prevent athletes from having a job or making money, too many athletes leave school with extremely limited resources upon entering the workforce. Even a few thousand dollars would go a long way in helping them develop stability and find a job.

Because FanPay encourages athletes to remain students and won't pay them while still enrolled, the founders hoped this would skirt the draconian NCAA bylaws. Although Klausing is the first to admit it's not a perfect solution—athletes who come from impoverished backgrounds still wouldn't get any immediate help no matter how badly they need it—he views it as "steps in the right direction." But the constant flow of cease and desist letters demonstrate the NCAA doesn't share their perspective.

Unlike student-athletes, the FanPay co-founders are fully within their right to profit from their labor. Similar to Kickstarter and other crowdfunding platforms, FanPay will take a small cut from each donation, which will be used to pay its employees. But as a result of this basic desire to reap the fruits of their work, FanPay enters a tricky legal realm. As a for-profit enterprise, FanPay can't use athletes' "name and likeness" for profit (not even the players get to do that—only the NCAA and its business partners can). Every cease and desist cites NCAA Bylaw 12.5.2, which combats the scourge of unlicensed serving trays, among other things:

If a student-athlete's name or picture appears on commercial items (e.g., T-shirts, sweatshirts, serving trays, playing cards, posters, photographs) or is used to promote a commercial product sold by an individual or agency without the student-athlete's knowledge or permission, the student-athlete (or the institution acting on behalf of the student-athlete) is required to take steps to stop such an activity in order to retain his or her eligibility for intercollegiate athletics.

Sports lawyer Darren Heitner told me that FanPay is "treading on unchartered territory." He believes universities are sending cease and desists "because they do not want to take the risk of the NCAA responding in an adverse fashion," suspending star players who have received donations on FanPay. Michael McCann, director of the University of New Hampshire's Sports and Entertainment Law Institute and legal analyst for Sports Illustrated, offered a similar opinion. "Under current NCAA rules it would seem that these universities have a reasonable argument, especially given that 12.5.2 has been broadly interpreted." Although crowdsourcing has not been specifically addressed under NCAA rulings, McCann sounded skeptical on whether that would open a large enough legal loophole through which FanPay could squeeze.

While FanPay's legal standing may be limited, common sense is on their side. As Heitner pointed out, the company's premise is similar in principle to Johnny Manziel's trademarking of "Johnny Football" while still a student at Texas A&M. The university actively aided the process, although Manziel wasn't able to collect on royalties until after he left the university. A&M's permissiveness—and assistance—was an interesting choice given that, according to Heitner, "trademarks don't receive federal registration until and unless they are used in commerce." In essence, A&M was implicitly condoning Manziel's attempt to profit from his A&M performance, although Manziel couldn't make claims on the trademark until he was no longer a student-athlete.

Still, there's a critical difference between Manziel's trademark claim and FanPay that may negate the similarities. "I believe with Manziel the NCAA permitted it because he was enforcing a legal right through a lawsuit," McCann told me, "which is different here given that with crowdscourcing it's third party." (Receiving a portion of the revenue you generate is not yet a legal right for student-athletes.) So FanPay is back to being in the murky—but probably foul—territory of NCAA bylaws.

Manziel referencing the money college athletes can't have. Mark J. Rebilas-USA TODAY Sports

Despite five years of dealing with the NCAA's rules, Goins still doesn't fully understand why FanPay would be a problem for compliance departments. "I'm not understanding why your scholarship is in jeopardy if you don't receive the money until after you're done with the program." In his view, it's no different than when coaches recruit athletes with promises of future professional contracts or when the NCAA, clinging to the final remnants of the student-athlete ideal, promotes the value of a college education. In a recruiting letter, Stanford University brags that the average earnings of a Stanford graduate is higher than those of other Top 25 football programs.

As each cease and desist letter comes, FanPay removes that university's or conference's athletes from its site, which undermines their quasi-utopian vision of a compromise. "We have a little bit of discovery to do whether the collaborative route is possible with these athletic departments," Klausing optimistically offered.

With compliance departments thus far unwilling to meet them halfway, Klausing and his two co-founders are in a bind. "We don't have the resources to take on a huge legal burden even if we wanted to. By the same token, we want to push the envelope because it's clear that the NCAA is going to take way, way too long. We want to see more innovation, more ideas. We don't see any institutional innovation right now from anyone."

For the time being, none of these arguments matter. FanPay's three co-founders are stuck. The site, although active with pretend money at the moment, isn't accepting donations for fear of legal reprisals, and therefore generating no revenue.

For most of the interview, Klausing was upbeat, positive, and motivated by the possibility of doing something about the unjust nature of amateur athletics. His passion broke only when contemplating the NCAA's stubbornness. "If all of those [cease and desist letters] turn into lawsuits, I don't know what the heck we'd do, man." His voice got uncharacteristically quiet as he pondered "three guys with a laptop" taking on the entire legal force of the NCAA. "I'll be honest, man. We're scared."

In an effort to understand the NCAA's reasoning, I reached out to nine of the compliances offices that issued cease and desists. Only one provided a comment. I asked Shoshanna Engel at the Georgia Tech compliance office if the university would consider granting FanPay permission to use its athletes' name and likeness. She replied, "at this juncture we're not in position to grant that permission nor are student athletes." Even if individual schools were willing to meet them halfway, FanPay has reason to believe that, if they were to accept donations, the NCAA would "sue the hell out of us."

It takes only a slightly calibrated moral compass to detect the NCAA's injustice, but it takes a special kind of haughty greed to rob athletes of a chance to make money that would not jeopardize the spirited bullshit of the student-athlete ideal. What Goins calls a "win-win" for student-athletes and fans isn't good enough because the NCAA wouldn't be winning, too.

All of this has left FanPay with only one option, a nuclear option of sorts, the kind that defeats the very inspiration of the website but allows them to bide their time until, perhaps, circumstances change. It's a long shot, but it's all they have. The plan is to open up FanPay to all students except college athletes. That is, any college student in America can get a reward for graduating except athletes, shoveling dirt on the grave of the notion that the NCAA cares about its athletes or their education. "That's really unfair," Klausing lamented. "We know it's unfair, but that's the way the NCAA has made it."