Athletic Departments as a Business: Antitrust Concerns Surrounding Private Equity in Collegiate Sports

By: Zen Rizzuto-Flancbaum*                                                           Posted: 12/04/2024

Due Diligence: Birth of the NCAA

Due to increasing football deaths and injuries in 1905, President Theodore Roosevelt directed the nation’s top football schools to clean up the game and make it safer.[1]  As a result, sixty-two colleges and universities banded together to charter the Intercollegiate Athletic Association of the United States (the “IAAUS”).[2]  The IAAUS’s purpose was to reform and create rules to govern intercollegiate football.[3]  Due to the organization’s success, other intercollegiate sports followed football programs’ steps in being regulated by the IAAUS’s successor, the National Collegiate Athletic Association (the “NCAA”).[4]

Investment Philosophy: The Amateurism Principle

Among the NCAA’s core principles is that of “amateurism.”[5]  The principle of amateurism, provides that intercollegiate athletes engage in sporting activities for their physical, educational, mental, and social benefit, but not monetary benefit.[6]  However, as collegiate sports became a forefront of mainstream media in the 1920s, lucrative opportunities for financial gain derived from sporting success presented themselves to athletes.[7]  Because there was no meaningful enforcement vehicle to combat this threat to the amateurism principle, the NCAA sought to adopt the “Sanity Code” in 1948.[8]  The Sanity Code prohibited academic institutions from giving student-athletes scholarships based purely on athletic ability in an effort to curtail the professionalization of intercollegiate sports.[9]  However, the Sanity Code failed to serve as a safeguard in 1950 when NCAA members could not reach the requisite two-thirds vote to expel colleges who violated the code provisions.[10]  Then, in 1956, the NCAA voted to explicitly allow “grants-in-aid.”[11]  These grants were functionally identical to scholarships based purely on athletic services rendered to the institution.[12]  Thus, the athletic skill based scholarship era of intercollegiate sports was born–one that would raise student-employee implications for decades to come.[13]

Market Practice: The NCAA’s Anticompetitive Tactics

Today, the NCAA comprises around 1,100 institutions and half a million intercollegiate athletes across the United States.[14]  In 2021 alone, the NCAA grossed about $1.6 billion from their athletes’ performance.[15]  That same year, the Supreme Court decided NCAA v. Alston,[16] where the Court held that the NCAA violated the Sherman Antitrust Act by limiting athletes’ compensation only to educational benefits.[17]  In Alston, student-athletes successfully survived the “rule of reason” antitrust analysis, and could therefore receive compensation for academic-related activities.[18]  Justice Kavanaugh, during oral argument for the case, nicely summed up the matter: “schools are conspiring with competitors . . . to pay no salaries to the workers [student-athletes] who are making the schools billions of dollars on the theory that consumers want the schools to pay the workers nothing.”[19]

Notwithstanding Alston, student-athletes later argued that the NCAA and Power Five conferences violated the Sherman Antitrust Act once again by denying them a share in broadcasting revenues derived from their sporting games.[20]  Ultimately, the plaintiff student-athletes in House v. NCAA[21] seek to realize their true market value by capitalizing on their name, image, and likeness (“NIL”).[22]  As of October 7, 2024, Judge Claudia Wilken approved the NCAA’s $2.8 billion revised antitrust settlement agreement for the case.[23]

Market Forces: PE Firms Fill Athletic Departments’ Capital Needs

If the House settlement is approved on April 7, 2025, the NCAA and its member institutions will owe current and previous division one student-athletes nearly $3 billion, which has already caught the eyes of opportunistic private equity firms.[24]  Two private equity (PE) firms, RedBird Capital and Weatherford Capital, created Collegiate Athletic Solutions (CAS) to bankroll this venture with $50 million to $200 million spread across top-tier collegiate programs.[25]  CAS would then be paid back through a revenue sharing program with the institution’s athletic program.[26]  Typically, PE firms charge a “two and twenty” management fee, meaning that two percent of the fund’s value is carved out for the fund managers no matter how the fund performs.[27]  Then, investors are paid back up to a predetermined percentage of profits.[28]  Once that threshold is met, the fund managers share twenty percent of the remaining profit with the investors.[29]  However, CAS intends to charge less than the typical “two and twenty.”[30]

The deal would be structured with a university-controlled special purpose vehicle (SPV), tentatively referred to as “NewCo.”[31]  NewCo would manage CAS’s initial capital, athletic department income, capital support from the institutions, and revenue generated from the sporting events.[32]  Cash flow from NewCo would then be shared between CAS and the institutions, but, importantly, “CAS would not have any board control of the NewCo.”[33]  Moreover, the value-add for institutions is CAS’s operational expertise, derived from Gerry Cardinale of RedBird Capital and Drew Weatherford of Weatherford Capital, who have already implemented a similar model in other professional sports leagues, media distribution, ticketing, and live events, among other sectors.[34]

Some commentators are skeptical of PE’s role in intercollegiate sports.[35]  The primary concerns are that PE may disrupt NCAA control, potentially resulting in monopolistic control over cohorts of NCAA institutions in how they operate their athletic departments, and further blur the line between amateur and professional status.[36]  But perhaps the day is gone where courts accept that the amateurism principle truly functions within the current model of NCAA.[37]   Moreover, treating athletic departments as a business is the most likely scenario given the NCAA’s insistence on a multi-billion-dollar settlement agreement with affected student-athletes.[38]

While the deal is good for PE firms and NCAA member institutions, it does raise concerns about a “super conference” composed of well-funded, PE-backed Power Five programs.[39]  But even if that happened, it would be due to natural market forces already in place, rather than PE.[40]  For example, fifty-eight percent of college football playoff media revenue is already derived from SEC and Big Ten schools alone.[41]  More telling is that seven of the last nine college football championships were won by schools whose annual athletic budgets rank within the top ten largest athletic budgets.[42]  The only difference if the settlement goes through is that student-athletes will be able to receive compensation for their performance.[43]

Closing the Deal: Synergy Between PE and Collegiate Realities

The economics of the deal make sense: colleges and universities will need to pay out billions of dollars if the settlement goes through and PE investors are willing to provide capital support for it.[44]  Beyond the financial support that PE could provide to athletic departments, it will also introduce valuable operational expertise.[45]  So while the school is required to share revenue with the PE firm, the school will benefit from the firm’s guidance, access to capital for facility improvements, and further support for student-athlete compensation.[46]

Inherent in human nature is the tendency to exchange goods and services, and this is a good example of synergetic trade.[47]  As Adam Smith famously said: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”[48]  So, while humans are motivated by self-interest, the act of appealing to others’ self-interest facilitates cooperation and economic prosperity.[49]  Because athletic departments have an interest in winning, yet require a lot of capital to do so, and because PE firms have an interest in investing in enterprise to create value, striking a deal not only benefits both parties, but also the students and surrounding community at large.[50]

* Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2026, Villanova Charles Widger School of Law.

[1] See History, NCAA [hereinafter NCAA History], https://www.ncaa.org/sports/2021/5/4/history.aspx (last visited Nov. 18, 2024) (chronicling how President Theodore Roosevelt directed leaders from collegiate athletics programs to establish rules to make Football safer for students to compete in).  “As football deaths and injuries continued to mount during the 1905 season, New York University Chancellor Henry M. MacCracken convened a meeting of 13 schools in December to reform football playing rules.”  See id. (discussing specific actions taken to improve safety measures for collegiate football); see also Nineteen Killed on Gridiron: Football Claims a Heavy Toll in Lives, S.F. Call (Nov. 27, 1905), https://chroniclingamerica.loc.gov/lccn/sn85066387/1905-11-27/ed-1/seq-1/#words=NINETEEN+football (relaying telegram from Chicago Tribune to President Roosevelt stating that “[t]he 1905 football season practically closed today [sic] with two dead on the field of battle. Today’s [sic] fatalities bring the total of slain to nineteen and the injured . . . to 137.”).  As an illustration to the severity of the issue, Columbia University suspended its entire football program on November 15, 1906, because of football related deaths and injuries.  See NCAA and the Movement to Reform College Football: Topics in Chronicling America, Libr. of Cong. [hereinafter Chronicling America], https://guides.loc.gov/chronicling-america-ncaa-college-football-reform (last visited Nov. 9, 2024) (stating that many Columbia University football players died or were severely injured in 1906, leading to team’s suspension).

[2] See NCAA History, supra note 1 (“[O]n Dec. 28 in New York, 62 colleges and universities became charter members of the Intercollegiate Athletic Association of the United States, the precursor to the NCAA.”)

[3] See id. (explaining that IIAUS was primary “rules-making body” in charge of collegiate athletics prior to the formation of NCAA).

[4] See Chronicling America, supra note 1 (noting that in 1910 the IAAUS was “renamed to the National Collegiate Athletic Association (NCAA)” because of its nation-wide influence on collegiate sports).

[5] See Justice v. NCAA, 577 F. Supp. 356, 361 (D. Ariz. 1983) (quoting 1983-84 NCAA Manual, NCAA Constitution, Art. 5, § 1) (“A basic purpose of the Association is to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by so doing, retain a clear line of demarcation between college athletics and professional sports.”) (emphasis added); see also Daniel E. Lazaroff, The NCAA in Its Second Century: Defender of Amateurism or Antitrust Recidivist?, 86 Or. L. Rev. 329, 331 (2007) (providing that while football violence initiated NCAA’s formation, its first annual meeting in 1906 devoted as much or even more attention to issues of amateurism).

[6] See Justice, 577 F. Supp. at 361 (quoting 1983-84 NCAA Manual, NCAA Constitution, Art. 3, §§ 1–3) (defining amateur student-athletes as individuals who play sports for “educational, physical, mental and social benefits” and prohibiting student-athletes from competition if athletes are compensated for their participation in sport).

[7] See Lazaroff, supra note 5, at 332 (“Increasingly, it had become evident that reliance upon voluntary compliance by NCAA member institutions would not solve the myriad problems created by the dramatic expansion of intercollegiate athletics and the financial opportunities such growth presented.”).  

[8] See id. at 332–33 (explaining that NCAA promulgated Sanity Code in 1948 to ensure compliance with NCAA rules).

[9] See Robert A. McCormick & Amy Christian McCormick, The Myth of the Student-Athlete: The College Athlete as Employee, 81 Wash. L. Rev. 71, 111 (2006) (providing that NCAA governing body’s adoption of Sanity Code prevented member schools from providing purely athletic-skill based scholarships to students); see also Walter Byers & Charles Hammer, Unsportsmanlike Conduct: Exploiting College Athletes 69–70 (1995) (explaining how “pay for play” contradicted amateurism model of NCAA).  At least one commentator who lived during that period suggested that the country would be better off if college students played sports for the pride and pleasure of it.  See id.  (“[C]ollege students playing solely for the honor and joy of it would be good for the country’s future.”).

[10] See Byers & Hammer, supra note 9, at 67 (recalling that Sanity Code enforcement was unsuccessful because NCAA members could not get requisite two-thirds vote to expel rule-breaking members).

[11] See id. at 65 (“[I]n 1956 the colleges, acting through the NCAA in the name of ‘amateurism,’ installed their own pay system called the athletics grant-in-aid or athletics ‘scholarship.’”); see also McCormick, supra note 9, at 111 (stating that NCAA amended its constitution to allow schools to pay all standard educational expenses for student-athletes, regardless of financial need or academic ability).

[12] See McCormick, supra note 9, at 111 (stating, in regard to NCAA sanctioning grant-in-aid system, that it “explicitly authorized, formalized, and legitimized the practice of using scholarships to compensate college athletes for their athletic services alone.”).

[13] See id. at 112 (“Once universities began compensating students solely for their athletic services, they fulfilled the compensation requirement of the common law test, thereby propagating the employment relation with their athletes.”).

[14] See Ashtyn Pike, Antitrust Law-A New Era in College Athletics: Is Arkansas the Best State to Play in?, 46 U. Ark. Little Rock L. Rev. 559, 559 (2024) (explaining that NCAA is sole governing body in charge of promulgating rules and regulations for 1,100 academic institutions and their student-athletes nation-wide).

[15] See Pike, supra note 14, at 559–60 (“These athletes and games generated $1.6 billion dollars in revenue for the NCAA in 2021, including over $800 million in media rights fees with broadcasters such as CBS.”).

[16] NCAA v. Alston, 594 U.S. 69 (2021).

[17] See Pike, supra note 14, at 560 (stating that NCAA violated antitrust laws by limiting student-athletes only to education-related benefits, thereby wrongfully disallowing collegiate athletes to profit off of their name, image, and likeness).

[18] See id. at 107 (holding that decision not only allows enhanced education-related benefits, but it also provides student-athletes with compensation proportional to value they contribute to their schools while encouraging them to excel academically).  Courts deploy the rule of reason analysis in antitrust cases to assess whether certain activity has an “actual effect” on market competition.  See Ohio v. Am. Express Co., 585 U.S. 529, 541 (2018) (“The rule of reason requires courts to conduct a fact-specific assessment of ‘market power and market structure . . . to assess the [restraint]' s actual effect’ on competition.”).  The analysis aims to delineate between truly anticompetitive behavior that stifles competition and other retraining acts that are actually best for the consumer.  See id.  (stating that goal of rule of reason test is to distinguish behaviors that promote anticompetitive results with behaviors that limit conduct but do not stifle competition).  Part one of the analysis puts the burden on the plaintiff to show that the alleged activity has a “substantial anticompetitive effect.”  See Pike, supra note 14, at 567 (explaining that first element that plaintiff must prove is that “restraint has a substantial anticompetitive effect.”).  If successful, the defendant can defend their actions by providing a sufficient justification.  See id. (stating that once first element is satisfied, burden shifts to defendant to prove they had “procompetitive rationale for its restrictions.”).  If the defendant makes a sufficient argument, the plaintiff can then argue that there were other, less anticompetitive actions the defendant could have taken to achieve the same result.  See id. at 567–68 (explaining that if defendant meets their burden, burden shifts back to plaintiff to demonstrate “that the procompetitive effects could be achieved through alternative, less anticompetitive ways.”).

[19] See Michael A. McCann, New Amateurism, 11 Tex. A&M L. Rev. 869, 889 (2024) (recounting Justice Kavanaugh’s concerns iterated in Alston opinion).

[20] See id. at 887 (“The NCAA and Power Five conferences unlawfully conspired under . . . the Sherman Act to deny athletes of NIL opportunities until 2021 and continue to unlawfully deny them of broadcast NIL, which reflects the billions of dollars in broadcast revenue”); see also House v. NCAA, 545 F. Supp. 3d 804, 808–09 (N.D. Cal. 2021) (alleging that NCAA amateurism rules prohibit member colleges and universities from revenue sharing proceeds from media and game-streaming contracts).  The Power 5 consists of the Atlantic Coast Conference (ACC), Big Ten Conference (Big Ten), Big Twelve Conference (Big Twelve), Pacific-Twelve Conference (Pac-Twelve), and Southeastern Conference (SEC).  See Signing Day Sports, What Is the Power 5?, The Wire (June 9, 2023), https://thewire.signingdaysports.com/articles/what-is-the-power-5/ (listing conferences that make up Power Five).

[21] House v. NCAA, 545 F. Supp. 3d 804 (N.D. Cal. 2021).

[22] See Ethan J. Sanders & Jonathan D. Wohlwend, Taking It to the House: Preliminary Approval of Settlement in House v. NCAA Could Bring Significant Changes to College Sports, Bradley Arant Boult Cummings LLP (Oct. 15, 2024), https://www.bradley.com/insights/publications/2024/10/preliminary-approval-of-settlement-in-house-v-ncaa-could-bring-significant-changes-to-college-sports (stating that Plaintiffs in House claim that NCAA’s, along with collegiate conferences, current amateurism guidelines rob student-athletes of potential to “realize their true market value.”).

[23] See In re Coll. Athlete NIL Litig., Case No. 4:20 CV 03919, at *10 (N.D. Cal. Oct. 7, 2024) (approving revised settlement).  This settlement agreement would require current defendant NCAA members, and colleges or universities that choose to join, to pay around $2.8 billion over the next ten years.  See Sanders & Wohlwend, supra note 22 (stating that if House settlement is approved, NCAA would be forced to pay $2.78 billion to affected student-athletes, resulting in option for revenue sharing with student-athletes).

[24] See Eben Novy-Williams & Scott Soshnick, Inside CAS: Management Fees, 15-Year Revenue and Waterfalls, Sportico (June 27, 2024, 8:00 AM), https://www.sportico.com/business/finance/2024/cas-college-sports-investor-private-capital-details-deals-1234785800/ (explaining that private equity firm, Collegiate Athletic Solutions (CAS), is institutional investor interested in investing in collegiate institutions’ sports programs while providing additional advisory support).

[25] See id. (“The firm was created by RedBird Capital and Weatherford Capital and plans to invest $50 million to $200 million each into five to 10 public or private athletic departments across top-tier college sports.”).

[26] See id. (providing that CAS would recoup its money through future athletics revenue).

[27] See Elvis Picardo, Two and Twenty: Explanation of the Hedge Fund Fee Structure, Investopedia (Mar. 3, 2021), https://www.investopedia.com/terms/t/two_and_twenty.asp (explaining that “two and twenty” is common industry-wide performance fee that is regularly used in private equity and venture capital deals).

[28] See id. (stating that fund managers share profits with fund investors generated by fund “above a certain predefined benchmark.”).

[29] See id. (stating that “[twenty] means the incentive fee of [twenty percent] of profits above a certain threshold known as the hurdle rate.”).

[30] See Novy-Williams & Soshnick, supra note 24 (explaining that CAS intends to collect less than industry standard fees).  

[31] See id. (“The imagined structure is to create a university-controlled special purpose vehicle, ‘NewCo,’ to be landing place for all athletic department income.”).

[32] See id. (stating that NewCo would have custody of CAS’ initial contribution along with revenues generated from sports programs).

[33] See id. (explaining that CAS would not exercise any control over executive board for NewCo).

[34] See id. (“Cardinale and his RedBird Capital Partners have deep experience in sports ownership and adjacent businesses.  RedBird is an investor in Fenway Sports, AC Milan, the Alpine F1 team and the UFL.  Cardinale helped build Legends, the YES Network, On Location Experiences, One Team and Everpass”).

[35] See, e.g., Michael W. Perlo, The Legal Implications of Private Equity in Collegiate Sports, Sports Bus. J. (Aug. 13, 2024), https://www.sportsbusinessjournal.com/Articles/2024/08/13/oped-13-perlo#:~:text=One%20of%20the%20most%20significant,an%20effort%20to%20preserve%20amateurism (discussing uncertainty over role of private equity in collegiate sports, acknowledging that private equity influence only cares about profits or expansion of commercialization at expense of amateurism).

[36] See id. (explaining that presence of private equity and outside financial resources to support collegiate athletics programs threatens NCAA’s amateurism model that it has viciously defended every year since its inception).  Moreover, PE firms may incentivize NIL deals that closely mimic professional sports contracts.  See id. (“Although student-athletes are now allowed to profit from their NIL, NCAA guidelines are still in place to ensure these activities do not violate amateurism principles. PE firms may push for aggressive NIL deals that could toe the line of compliance”).

[37] See McCann, supra note 19, at 888–89 (recounting Supreme Court Justices’ surprise after NCAA’s attorney “lauded the purity of college sports and the virtues of students as amateur athletes”).  Chief Justice Roberts questioned how colleges paying for multimillion-dollar insurance policies for student-athletes’ future earnings fit into an amateur sports model.  See id. (recalling how Chief Justice questioned ethics of academic institutions paying millions of dollars for “insurance policies for college athletes' future earnings,” when NCAA argued for amateurism model).  Justice Thomas called into question the compatibility of the NCAA’s idealized image of amateurness with astronomical coaches’ salaries.  See id. (“Justice Clarence Thomas questioned how Waxman's romanticized depiction of college sports comported with the upsurge in coaches' salaries.”).  Justice Barrett was frustrated with the NCAA’s definition of “amateur,” asking if it was functionally meaningless because it just describes someone who is not paid.  See id. (“Justice Amy Coney Barrett expressed frustration with the NCAA's definition of amateur, questioning if it was defined as someone who is unpaid.”).  The most telling reaction was from Justice Kavanaugh who condemned the NCAA, accusing schools of colluding to deny athletes pay while they reap billions from student-athlete labor.  See id. (quoting Justice Kavanaugh’s remarks where he “bluntly declared” that schools are conspiring to deprive student-athletes of just compensation).   

[38] For further discussion of the House settlement statement, see supra note 23 and accompanying text.

[39] See Sanders & Wohlwend, supra note 22 (worrying that House may create “a super conference or super league composed of high-revenue football and basketball programs in the future.”).

[40] See Dennis Dodd, House v. NCAA Settlement Paves Way for Private Equity to Infiltrate College Football as Landscape Evolves, CBS Sports (May 24, 2024), https://www.cbssports.com/college-football/news/house-v-ncaa-settlement-paves-way-for-private-equity-to-infiltrate-college-football-as-landscape-evolves/ (stating that influx of financial resources from private investors is necessary to ensure continuing growth of college athletics after death of amateurism model).

[41] See id. (stating that SEC and Big Ten conferences account for fifty-eight percent of College Football Playoff media revenue by themselves).

[42] See id. (explaining how “[s]even of the last nine national champions have come from the top [ten] in annual athletic budget revenue–the exceptions being Clemson in 2016 and 2018 as the Tigers ranked [seventeenth] in that category[.]”).

[43] See id. (stating that if settlement is approved, NCAA, along with member institutions, will have to accept reality that players are already compensated for their NIL because amateurism model is dead).

[44] For further discussion of the synergy between colleges’ and universities’ needs and PE’s ability to fulfill them, see supra notes 24–34 and accompanying text.

[45] For further discussion of the operational expertise that RedBird Capital and Weatherford Capital bring to the table, see supra note 34 and accompanying text.  A less obvious operational expertise that PE will offer is more accurate accounting systems to increase the economic efficiency of the institution.  See Matt Brown & Jason Kirk, Be Skeptical When Big College Athletic Departments Act Broke, Banner Soc’y (Aug. 12, 2019, 10:22 AM), https://www.bannersociety.com/2019/8/12/20704195/college-football-athletic-budgets (drawing attention to frequent accounting mistakes in athletic departments).  Notable accounting deficiencies include underreported athletic merchandise revenue and a lack of amortizing large facility expenses and other capital expenditures which results in large disparities.  See id. (noting differences in member schools’ financial situations, explaining difficulty in calculating or assessing financial health of each individual institution).

[46] See Sara Levien, There’s a Crack in the NCAA’s Amateurism Shield: Johnson v. NCAA May Shatter it Completely. What Then?, 57 Suffolk U. L. Rev. 175, 199 (stating that NCAA has long defended its amateurism model due to its ability to keep costs for athletic departments and member universities manageable).  Levien’s article primarily discusses a case brought by former Villanova University football player, Ralph “Trey” Johnson, which asserts that student-athletes meet the employee classification test under the Fair Labor Standards Act (FLSA).  See id. at 178 (explaining Johnson’s argument that student-athletes’ responsibilities mirror that of students who are employed by their university or work other part-time jobs during school).

[47] See Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations 42 (Edwin Cannan ed. 1904) (“It is the necessary . . . consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.”).

[48] See id. at 43 (discussing principles behind division of labor).

[49] See id. at 43 (“We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”).  Importantly, this natural inclination benefits both individuals and society as a whole.  See id. (explaining that individuals are more likely to act to benefit others if they also personally benefit).  Not only has this capitalist system benefited individuals and society by allowing people to create and trade, but it has led to revolutionary innovations, life-saving technology, and a quality of life that is unrivaled by non-capitalist nations.  See Michael Novak, The Spirit of Democratic Capitalism 13 (revised ed. 1990) (declaring that “[o]f all the systems of political economy which have shaped our history, none has so revolutionized ordinary expectations of human life–lengthened the life span, made the elimination of poverty and famine thinkable, enlarged the range of human choice–as democratic capitalism.”).

[50] For further discussion of why athletic departments are going to incur a substantial financial burden should the House settlement be approved, see supra notes 22–23 and accompanying text.