The college-sports arms race has no equilibrium. Someone needs to build one

ON BEHALF OF THE athlete, NIL deals were supposed to be a market reform. In practice, they have become a backdoor payroll that is bankrupting athletic departments, concentrating talent, and provoking a federal crackdown.

The headline valuations tell part of the story. As of July 1st 2026, On3 — the leading NIL valuation tracker, which this month switched from algorithmic projections to deal-based figures — places Miami's Darian Mensah, a quarterback, at $6.5m, with Kentucky's Milan Momcilovic and Louisville's Flory Bidunga each valued at $6m. Nine other athletes sit at $5m each. The top ten are all quarterbacks or basketball stars, almost all of whom have the option of turning professional. That is not a market for talent. It is a market for leverage.

The real question is not how much the star player earns. It is why the system produces these numbers, who they benefit, and whether it can be stopped.

The answer begins with incentives. Since the NCAA relaxed NIL restrictions in 2021, college athletics has operated under a structural bargain. Schools are prohibited from paying athletes directly for performance — at least in theory — but third-party "collectives", funded by wealthy alumni and local businesses, may compensate players for the use of their name, image and likeness. The collective structure exists precisely because it blurs the line between endorsement and inducement. A restaurant chain in a college town does not need a star quarterback's likeness to sell burgers. It needs the quarterback to show up on Saturday.

The consequence is an arms race with no natural equilibrium. In a normal labour market, wages settle at the intersection of productivity and supply. In college sports, collective spending is driven by a coordination problem: if one school stops paying, it loses recruits to the school that does not. The equilibrium is therefore not efficiency but maximum feasible extraction.

The House v. NCAA settlement, which took effect on July 1st 2025, was supposed to bring order. It allows schools to share up to 22% of their average revenue with athletes directly, capped at roughly $20.5m per institution in its first year. The settlement establishes a compliance clearinghouse, managed by Deloitte, to monitor third-party NIL deals of $600 or more. It was designed to replace opaque booster spending with transparent institutional payments.

To be sure, the settlement has merits. Revenue sharing, at least in principle, recognises that athletes generate the product and should share in its proceeds. It also creates a single pool that can, however thinly, support non-revenue sports. The clearinghouse at least introduces a paper trail.

Yet the cap is already being circumvented. Industry sources estimate that top football programmes face total roster costs of $40m to $50m annually: $20m from the capped school payment, the rest from third-party collectives. Ohio State spent roughly $20m on its national championship roster last season. That figure is the floor, not the ceiling. One personnel director told reporters that anyone who thinks spending will moderate "is nuts". The settlement did not curb pay-for-play. It gave schools their own line of credit and told collectors to use the rest.

The financial strain is visible. Some athletic departments are raising student fees, cutting administrative staff, and re-evaluating benefits. A few are considering private equity investment or eliminating non-revenue sports. Florida State, for instance, tested a new revenue model in 2026 as schools grapple with structural deficits. Two major programmes carried athletics-related debt of $535m and $437m respectively in fiscal year 2025. The system is transferring wealth from the institutional mission — teaching, research, the broader student body — to a small cohort of football and basketball players, while leaving everyone else to cover the tab.

The White House has now intervened. An executive order signed on April 3rd 2026, effective August 1st, defines "fraudulent NIL schemes" as payments above fair market value and prohibits federally funded institutions from participating in them. It bars federal funds from being used for NIL or revenue-sharing payments, imposes a five-year participation cap for athletes, and directs the attorney-general to invalidate conflicting state laws. The order applies only to schools generating more than $20m in athletics revenue — a threshold that captures roughly 90 Division I programmes and spares the long tail of smaller schools.

The executive order is a clumsy instrument, but it recognises a reality the settlement dodged: the money does not stop at the cap. It also carries enforcement teeth. The Office of Management and Budget is directed to treat violations as causes for suspension or debarment as federal contractors. Universities that depend on defence, health and research grants are unlikely to risk non-compliance.

Three structural problems remain.

First, the concentration is staggering. The top 10 athletes all earn $5m or more; the next echelon falls sharply behind. Among women, the highest NIL valuations reported in 2025-26 were in the range of $1m to $1.5m. The gap is not a reflection of marketing demand alone. Football and men's basketball receive the lion's share of media revenue and, under the House settlement, are expected to consume roughly 75% of the school's revenue-sharing pool, with men's basketball taking 15-20% and women's basketball 5-10%. The economics of college sports funnel money to the top of a very narrow pyramid and call it reform.

Second, the competitive imbalance is widening. Wealthy alumni bases and large media markets — the Big Ten's total alumni wealth dwarfs that of any other conference — can outspend smaller institutions regardless of coaching quality or tradition. The transfer portal amplifies the effect: schools can now assemble rosters from instant-service transfers, purchased rather than developed. The result resembles professional free agency without the salary cap.

Third, enforcement is uncertain. Collectives are private entities. Wealthy donors who are told they cannot give a star player $2m may simply sue. The Deloitte clearinghouse has no punitive power of its own; it can flag violations but cannot impose sanctions. The White House order threatens federal-contractor status, but that leverage is blunt and politically contestable.

The deeper problem is not that athletes are being paid. It is that the payment system is designed to obscure rather than clarify. NIL collectives exist because schools want the competitive advantage of paying players without the accountability of actually doing so. The House settlement tried to fix the transparency problem without fixing the spending problem. The executive order tries to fix the spending problem with a stick aimed at institutions that were never the primary spenders in the first place.

A wiser approach would combine three elements. Schools should be required to report total athlete compensation — institutional, collective and otherwise — as a single figure, audited and public. A hard cap on total per-player spending, enforced through the NCAA rather than through federal-contractor threats, would create the coordination solution that the current system cannot generate on its own. And revenue-sharing pools should include meaningful allocations for non-revenue sports, so that the subsidy flowing from football to, say, women's gymnastics, is explicit rather than extracted from student fees and administrative cuts.

The athletes at the top of the NIL leaderboard are not the problem. They are the symptom. College sports has built a financial structure in which wealthy donors outspend institutions, institutions outbill taxpayers, and the NCAA presides over a system it no longer controls. Fixing it requires admitting that the game has changed, and that amateurism's successor is not a market but an unregulated arms race. The better answer is regulation, not denial.