The Southeastern Conference is proposing a policy that would penalizing member schools for spending over the $21.6 million House v. NCAA settlement revenue-share cap, with escalating fines that exceed $10 million for those spending more than $70.5 million on their rosters, administrators briefed on the plan told Ross Dellenger of Yahoo Sports.
Unlike the Big Ten's cap rules passed last month, the SEC plan would consider some school-affiliated, third-party NIL deals as "institutional pay," implementing terms of the House settlement that have not previously been enforced — with, importantly, the addition of pro sports-like luxury taxes, Dellenger reported.
Financial penalties would begin low and gradually increase. Fines begin at less than 1% for those spending below $50.5 million on their rosters, and then increase to 1% for those spending $50.5 million to $60.5 million, then to 3% for those spending $60.5-70.5 million and, finally, to 10% for those spending more than $70.5 million, per Dellenger.
"This means a school could spend $70.5 million on its athletes with a fine of around $7 million," he wrote Wednesday. "However, the financial penalties in each tier increase with each new cap year. Next year, for example, the model increases the penalty from 3% to 5% for those spending between $60.5-$70.5 million and from 10% to 15% for those exceeding $70.5 million. The following year, the penalty would reach 20% for the biggest spenders — a tax of roughly around $14-16 million."
Said one power conference athletics director, "The headline here is that the new cap would basically be $70 million."
Moreover, the SEC's proposal may remove the requirement for schools to gain approval from the College Sports Commission's NIL Go clearinghouse for NIL agreements with associated entities redirecting revenue from the athletic department to the roster, Dellenger wrote, adding these deals — which likely feature school corporate sponsors, multimedia rights partners and perhaps even apparel brands — represent a large chunk of submissions in the current system.
The SEC's fining system is meant to close a loophole that schools are using to exceed the cap by redirecting revenue from school-affiliated entities to athletes.
"This would eliminate what officials say are time-consuming and resource-draining measures to circumvent the existing cap by redirecting revenue to athletes in the form of concocted marketing and endorsement agreements," Dellenger wrote. "Many universities are paying as much as 20% to third party entities to 'wash money,' several power conference leaders contend, in an effort to effectively pass the contracts through the NIL Go clearinghouse."
A retroactive implementation date of Oct. 1 is under discussion for the new fining structure.
The Big Ten's month-old compensation cap rules fine schools spending more than $49 million on their rosters in a similarly escalating system, according to Dellenger. The fining system permits schools to spend the $21.6 million allowed under the House settlement plus $27 million in school-affiliated third-party NIL deals before the penalties begin. However, the Big Ten's policy features a significant league fine — as much as $25 million — once a school exceeds the $60 million mark.
