The Price of Exit: Why Buyouts Fail in College Athletics

‍The usefulness of contract law derives from establishing sufficiently clear expectations that enable parties to order their affairs without judicial intervention. To that end, a contract that requires litigation to perform one of its most important functions has already failed. Well-constructed liquidated damages provisions are useful tools for promoting contractual clarity by assigning a predetermined consequence for breach. Thus, they allow parties to properly evaluate the costs of nonperformance before a dispute occurs.

This principle is central to the law-and-economics theory of efficient breach. While contract remedies can discourage nonperformance and protect the parties’ expectations, they also permit parties to redeploy resources to higher-value uses while requiring them to internalize the costs imposed on others. For that system to function effectively, the consequences of breach must be sufficiently predictable to serve as credible price signals. If the price of exit becomes uncertain, parties lose the ability to make informed ex ante decisions and are rationally incentivized to negotiate under the shadow of the law.

The burgeoning market for college-athlete services provides an acute illustration of the problems created by uncertain enforcement. This Article argues that, because the legal enforceability of buyout provisions remains uncertain and enforcement costs remain high, such provisions fail to serve as credible price signals. That uncertainty undermines contractual efficiency and creates incentives for opportunistic challenges to knowingly negotiated obligations, allowing parties to exploit litigation risk in efforts to extract discounted settlements.

When the costs of enforcement fall disproportionately on the non-breaching party, contractual commitments become vulnerable to strategic behavior that treats litigation not as a mechanism for resolving genuine disputes but as leverage to renegotiate the price of exit. In a market increasingly dependent on multi-year commitments to promote roster stability and efficient resource allocation, restoring confidence in the exit price is essential to ensuring that contractual obligations function as binding commitments rather than an opening position in settlement negotiations.

Since 2021, state legislatures, courts, and market actors have fundamentally reshaped college athletics. Mounting pressure from state NIL legislation, coupled with the Supreme Court’s unanimous decision in NCAA v. Alston, pushed the NCAA to permit athletes to monetize their publicity rights, commonly referred to as name, image, and likeness (“NIL”).[1] That rule change gave rise to a shadow economy in which third-party entities, known as collectives, solicited booster financing to underwrite sham endorsement contracts[2] that, while structured as influencer marketing agreements, functioned primarily as vehicles to recruit and retain athletic talent for a particular institution.[3]

The subsequent liberalization of transfer rules in April 2024 permitted athletes to move from school to school at the conclusion of every season, replacing the previous framework that generally limited athletes to a single penalty-free transfer.[4] This transformed every offseason into a turbocharged bidding market for athlete services known within the industry as the transfer portal. In the subsequent 2024-2025 college football season, reports suggested that some of the nation’s leading programs were spending more than $20 million annually to compensate athletes on their rosters.[5]

In an effort to promote competitive parity, reduce litigation exposure, and preserve autonomy, the NCAA and its member institutions agreed to dramatically revise their rules via settlement of an antitrust lawsuit, House v. NCAA. Effective July 2025, the settlement most notably ended the NCAA’s longstanding prohibition on direct compensation from schools to athletes beyond grant-in-aid scholarships.

The post-House framework of college sports can be understood as a transition from an unregulated free market for player payments to a more structured, increasingly professionalized system of player compensation and team budgeting. Principal components of the new framework include direct athlete compensation from institutions (revenue-sharing payments), a revenue-sharing cap, and the NCAA’s authority under the House settlement to designate an auditing and enforcement entity.[6] Pursuant to that authority, the NCAA designated the College Sports Commission (“CSC”), which reviews third-party NIL agreements and seeks to invalidate sham endorsement contracts that could otherwise be used to circumvent the revenue-sharing cap.[7]

While the extent of the CSC’s auditing authority remains in flux, college athletics is moving toward a model in which player compensation is constrained.[8] Prior to House, player compensation dynamics rewarded programs that could assemble the largest athlete payrolls; as the current model aims to compress player compensation budgets, it simultaneously shifts competitive advantage toward strategic allocation of finite resources.

In response to the prospect of flattened player budgets and greater athlete mobility, schools have begun hiring professional-style front-office personnel and turned to quasi-professional structures to generate outsized on-field returns from their respective athletic compensation budgets. As in American professional sports (with the notable exception of Major League Baseball), spending power will eventually become secondary to spending efficiency in producing winning records.[9]

As the college athlete compensation market continues to mature, institutions have increasingly turned to multi-year contractual commitments to secure talent and protect investments in player development. In exchange for guaranteed compensation over multiple seasons, institutions make calculated investments in athletes whose future performance they expect to exceed their present-day market value. Multi-year player contracts are not novel to athlete labor markets. In professional leagues, multi-year player contracts, whether fully or partially guaranteed, serve as a foundational mechanism for allocating risk between players and organizations.[10]

Athletes exchange a degree of short-term upside for long-term financial security, and teams secure cost certainty and roster stability while absorbing the downside risk of an extended relationship with an athlete who fails to develop. Although multi-year player contracts may limit an athlete’s ability to fully capitalize on a breakout season, athletes retain the ability to restructure existing deals during the term to reflect their increased value, preserving flexibility within the original contractual framework.

A similar structure in college athletics offers the same benefits. For athletes, multi-year player contracts provide income stability in a hyper-volatile labor market, where year-to-year valuation can plummet in the event of regression or injury. For institutions, multi-year player contracts allow for longer-term roster construction and player development timelines, reducing the need for constant replacement, evaluation, and participation in a fast-paced offseason marketplace. At a system-wide level, these player contracts promote efficiency and reduce transaction costs by limiting offseason movement and easing the burden on athletes and their agents navigating the transfer portal, as well as coaching staffs responsible for continuous recruitment. In this respect, multi-year player contracts serve as a stabilizing force for all parties in a tumultuous market.

The mere presence of a multi-year contract does not resolve the underlying mechanisms that lead to heightened roster churn in collegiate athletics. American professional sports leagues, operating under collectively bargained agreements, can grant teams enforceable rights over player movement. Players who fail to perform under contract are not free to sign elsewhere and may be barred from competing for another team absent the consent of their original club.[11]

The NCAA does not possess the same legal authority to restrict player movement. In this context, it is useful to think of collegiate athletes as analogous to independent contractors. They have the right to breach their agreements and redeploy their services elsewhere, and courts are generally unwilling to order negative injunctions mandating specific performance of personal services contracts.[12]

Every offseason, many collegiate athletes shop their talents and change teams without fear of ineligibility, even while under contract. The NCAA itself acknowledged that its rules “do not prevent a student-athlete from unenrolling from an institution, enrolling at a new institution and competing immediately.”[13]

In 2025, University of Wisconsin defensive back Xavier Lucas transferred to the University of Miami despite his institution’s refusal to enter his name into the transfer portal and the existence of a purported revenue-sharing agreement in place for the ensuing season.[14] Rather than challenging Wisconsin’s behavior, Lucas simply unenrolled from Wisconsin and enrolled at Miami, allowing him to compete without restriction.[15]

In response to limitless athlete mobility, college athlete contracts borrow from international sporting models by implementing liquidated damages clauses, colloquially known as buyouts, to price an athlete’s early departure during the term of the contract.[16] These provisions are commonly structured as a pre-negotiated estimate of the damages an institution would suffer from an athlete’s early departure, accounting for lost development value, roster disruption, and replacement costs.[17]

In theory, buyouts do not preclude mobility; they serve as exit prices, allowing athletes to move freely while requiring them to internalize the costs of early departure. In function, however, the buyout operates less as a traditional measure of damages and more as a mechanism for pricing uncertainty, assigning a fixed cost to the disruption of a highly speculative asset (the player) whose future value is inherently volatile.

The institution’s expected loss from an athlete’s breach of a multi-year player contract is fundamentally a function of the athlete’s development. When an athlete’s performance exceeds initial expectations, the player’s expected value relative to the remaining contractual compensation increases accordingly. The harm from early departure is therefore both nonlinear and difficult to estimate at the time of contracting, because it depends on high-variance factors such as athletic progression, opportunity, injury, and market demand. This asymmetry means the buyout’s friction is conditional: An athlete who underperforms expectations has no incentive to test the market, and the buyout never comes into play. It is precisely the athlete whose future value the institution correctly identified who has the strongest reason to leave, and whose departure the buyout is designed to price.

The buyout does more than mitigate flight risk. It alters the market for the athlete’s services by increasing the cost of acquisition for competing programs. Any school seeking to sign an athlete currently under a multi-year player contract must account for the additional cost of exit the buyout imposes, making the player more expensive to poach.[18] This added cost serves as a deterrent to potential suitors, who typically absorb the cost of the athlete’s buyout when signing them. Again, the buyout does not eliminate mobility; rather, it prices it and compensates the institution that assumed the risk of investing in the athlete’s development.

Consider the late-bloomer. A three-star high school basketball recruit receives only a single offer from a high-major institution. The deal is structured as a developmental investment, with limited expected playing time: a modest two-year agreement, $80,000 in year one, $120,000 in year two, and a $100,000 buyout if the athlete departs before year two.[19] During his freshman season, injuries to key players and his own development elevated him to a starting role, and by the offseason, he commanded a significantly higher market valuation in the transfer portal, let’s say a $500,000 annual payday.

In a functioning system, the buyout operates as a pricing mechanism that reshapes the market for the player’s services. Any competing program must now acquire the player already under contract at an all-in cost equal to his new market value plus the buyout ($600,000).[20] That premium creates a wedge between the player’s open-market value and the cost of acquiring him, allowing the player’s current school to restructure his contract from a position of advantage. The player’s current school needs only to match the player’s underlying market value, while competing programs must exceed it to justify the cost of exit.

This dynamic is the economic foundation of the bargain. In exchange for providing the athlete with multi-year income stability in an uncertain market, the institution receives a form of contractual protection that makes the player more expensive for others to acquire and relatively cheaper to retain. The buyout, in this sense, rewards the institution’s accurate wager on the athlete’s future value, regardless of whether the athlete chooses to stay or leave.

It is important to note that early departure is not always financially motivated, and where an athlete’s market value has stagnated or declined, institutions may have little incentive to pursue enforcement.[21] In such cases, mutual waiver of the buyout may maximize value by permitting the athlete to transfer while enabling the institution to redirect the athlete’s remaining compensation toward a higher-upside replacement.

In international sport, the buyout mechanism operates within a fundamentally different enforcement structure. Disputes over the enforceability of a buyout are resolved through sport-specific adjudicatory bodies, including arbitration systems such as the Basketball Arbitral Tribunal (BAT) recognized by FIBA, which apply and enforce contractual provisions within the context of the sport itself.[22] Arbitration bodies, like the BAT, afford substantial deference to the unique characteristics of athletic contracts and are supported by institutional mechanisms capable of imposing sporting consequences for non-compliance.[23]

The structural solution suggested by the international model is not readily available in the American context. While a sport-specific arbitral body could theoretically be operated by the NCAA or the College Sports Commission, the enforcement mechanism that gives such panels their value is the ability to impose consequences on non-compliant parties for restricting access to competition. Conditioning athletic eligibility on compliance with a compensation-related contractual obligation would likely invite antitrust scrutiny that neither body can confidently navigate post-Alston.[24] The analysis, therefore, turns to what mechanisms are available within the existing legal architecture.

College athletics, in contrast to professional systems, leaves enforcement to generalist courts or arbitrators applying traditional contract law doctrine. In that setting, buyout provisions are uncertain as to enforceability and are evaluated without the same institutional or contextual deference afforded to international sporting buyouts, undermining their function as credible constraints on exit.

Contract law doctrine requires that liquidated damages provisions function as a reasonable estimate of anticipated harm rather than a punitive measure.[25] In Vanderbilt University v. DiNardo, the Sixth Circuit upheld a buyout tied to a head football coach’s early departure, emphasizing that damages such as recruiting disruption and program instability are difficult to calculate precisely and are appropriately evaluated ex ante.[26] Although not a perfect analog, DiNardo provides an illustrative point of comparison for athlete buyouts in the post-House framework.

Three features of the Sixth Circuit’s analysis of upholding the buyout are particularly instructive. First, it recognized that Vanderbilt hired DiNardo for a unique and specialized position, making the consequences of an early departure inherently difficult to quantify. [27] Second, the court accepted the parties’ methodology of calculating the buyout as the coach’s remaining salary under the contract, recognizing that this rough approximation of anticipated damages was reasonable because such damages could not be ascertained with certainty at the time of contracting.[28] Third, the court emphasized that the parties negotiated the agreement at arm’s length and were each represented by counsel.[29] These same considerations are frequently present in buyout provisions contained in player contracts.

The logic underlying DiNardo suggests that athlete buyouts deserve at least comparable judicial deference to collegiate coaches, particularly where the provision reflects a reasonable estimate of the institution’s investment risk rather than an attempt to impose a punitive restraint on mobility. Courts should be cautious about evaluating athlete buyouts solely through the lens of ex ante replacement costs because such an approach overlooks the central economic purpose of multi-year player contracts as risk-allocation devices.

Outside the Sixth Circuit, where DiNardo is persuasive but not binding, legal uncertainty is particularly acute. Even a doctrinally favorable framework does not eliminate enforcement risk, and where enforcement cannot be reliably predicted, the buyout ceases to function as a credible price of exit and instead becomes a negotiable term untethered from its intended economic purpose.

A law-and-economics framework provides a useful lens for understanding this dynamic. Under Posner’s theory of efficient breach, contractual remedies are designed not to compel performance, but to assign a price to nonperformance.[30] Where a party can exit a contract, pay a predetermined amount, and redeploy resources to a higher-value use, breach is not only rational but economically desirable.[31]

That logic, however, depends entirely on the buyout operating as a credible and enforceable price. Where the enforceability of a buyout remains unsettled, the rational decision of the breaching party is not to treat the provision as a fixed price of exit. Under the shadow of the law, departing athletes can attempt to reduce their contractual obligations through a discounted settlement.

Both litigation and settlement negotiations impose meaningful transaction costs, and in either case, the parties incur expenditures to arrive at a price that the contract was intended to establish in advance. Competing programs need not fully internalize the contractual cost of acquisition, and the original institution loses the very advantage the provision was designed to create.

Three college quarterbacks on multi-year deals who entered the 2025-26 transfer cycle illustrate the spectrum. Washington threatened enforcement of a reported $4 million buyout against Demond Williams, and he then returned to Washington’s program.[32] Duke sued Darian Mensah, settled confidentially, and Mensah transferred.[33]

Most notably, Cincinnati filed a federal lawsuit against Brendan Sorsby after he transferred to Texas Tech without paying the contractually specified $1 million liquidated damages.[34] Sorsby’s representation responded by characterizing the buyout as an unlawful penalty, invoking the very doctrinal uncertainty DiNardo leaves unresolved in the athlete context.[35] Litigation is still ongoing, with no clear resolution to the issue in sight. Three programs, three outcomes, and no coherent price of exit.

Without direct judicial treatment of these provisions, the shadow of the law becomes darker. Greater uncertainty around enforcement outcomes expands the range of plausible bargaining positions, increasing the incentive for agents and attorneys to leverage litigation (or its threat) to negotiate discounted buyout payments through settlement.

The uncomfortable reality is that voluntary compliance will not fix this. Litigation is one part of the necessary corrective, not because courts are the ideal venue for college athletics disputes, but because a credible threat of enforcement is the only mechanism that can lighten the shadow of the law and bolster the buyout’s function as a genuine price signal. Cases like Sorsby’s are the vehicle through which courts can begin to draw the line that DiNardo leaves largely unresolved in the athlete context, distinguishing enforceable buyouts from impermissible penalties and, in doing so, providing the doctrinal guidance that schools, players, and agents currently lack.

Yet even a coherent doctrinal framework cannot solve the problem in isolation. The objective of a buyout provision is to serve as a self-executing exit price that parties internalize at the moment of decision. Even when buyouts are properly drafted and legally defensible, forcing institutions to litigate every breach remains costly, slow, and uncertain. Beyond direct litigation expenses, enforcement may impose long-term economic costs on institutions. Programs that develop a reputation for aggressively pursuing former athletes may incur reputational costs and strain relationships with agents, potentially affecting future recruiting and talent acquisition efforts.

Bad-faith actors know this. So long as the cost of enforcement falls entirely on the non-breaching party, agents retain every incentive to treat buyouts as negotiating theater. In this context, bad faith has a recognizable signature. In an athletics contract, a buyout provision is not an incidental term, but a central component of the parties’ negotiation. Where an athlete, with the advice of counsel, enters into such an agreement, accepts the compensation guaranteed by it, and later seeks to avoid that provision through litigation tactics designed to impose costs and extract a discounted settlement, courts may view that conduct as indicative of bad faith. In that circumstance, the concern is not the existence of a legal challenge, but the strategic use of litigation as leverage against a knowingly negotiated obligation. Absent additional penalties to disincentivize this behavior, it is unlikely to stop on its own.

The most immediate remedy available to institutions does not require regulatory or judicial intervention. A straightforward contractual fee-shifting clause, providing that the prevailing party in any enforcement action recovers its reasonable attorneys’ fees, offers a private mechanism for reallocating enforcement costs. The fee award derives from the parties’ agreement rather than judicial discretion and therefore operates outside the American Rule, the default principle of litigation under which each party bears its own attorney’s fees absent specific contractual or statutory authorization.[36]

An athlete or agent weighing whether to challenge a buyout must then account not only for the risk of losing on the merits and owing the full buyout, but also for the prospect of paying the institution’s legal fees. This shift in expected value transforms the buyout from a negotiating opening into a more credible constraint on exit, increasing the likelihood of avoiding litigation and securing payment as prescribed in the contract.

In practice, however, the athletes most likely to generate buyout disputes are precisely those with the leverage to resist such terms. An elite quarterback in the transfer portal with multiple high-profile offers, represented by experienced counsel, is not signing a boilerplate adhesion contract. Sophisticated agents understand that a fee-shifting clause converts what is currently a low-cost strategic option (breach, litigate, and settle at a discount) into a potentially expensive one, and they will negotiate accordingly. Where the athlete holds meaningful bargaining power, institutions may find that insisting on fee-shifting will cost them the ability to sign the player altogether.

As a practical matter, athlete buyout disputes are commonly six- or seven-figure claims and often involve parties located in different states, particularly when an athlete transfers to an out-of-state institution.[37] Therefore, these claims will frequently satisfy the requirements for diversity jurisdiction.[38] While contractual forum-selection clauses may channel some disputes into state court, federal court remains a forum frequently available to the parties.

Where contractual fee-shifting proves unachievable, the American Rule forecloses most judicial alternatives by default.[39] Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927 carve out narrow exceptions, authorizing sanctions for frivolous filings and litigation conducted for an improper purpose.[40] A challenge to a liquidated damages provision as an unlawful penalty is a colorable defense and will rarely satisfy either standard, regardless of the motivation behind it.[41]

The American Rule is not absolute: as the Supreme Court recognized in Chambers v. NASCO, Inc., where rule-based mechanisms prove inadequate, federal courts retain inherent authority to impose sanctions, including attorney’s fees, against a party that has litigated in bad faith.[42]

Challenges to the enforceability of liquidated damages provisions are often a legitimate feature of contract litigation, and fee shifting should not follow merely because a party disputes a buyout provision. The analysis changes when the manner of litigation itself reflects bad-faith conduct, where a party has knowingly negotiated a central contractual obligation, accepted the contract’s benefits, and then deployed litigation tactically to extract a discounted price of exit. In those cases, Chambers may provide a meaningful, if narrow, corrective.

Fee-shifting, properly applied, mitigates the leverage asymmetry that currently undermines buyout enforcement and provides institutions greater confidence to enter into multi-year player contracts. When the cost of litigation falls exclusively on the enforcing institution, counterparties retain strong incentives to treat buyout provisions as negotiable rather than binding. Allowing courts to shift fees in cases of demonstrable bad faith changes the calculus of leveraging the shadow of the law to reduce the price of exit and helps to solidify buyouts’ function as credible price signals. In such a system, multi-year contractual commitments can serve as a stable and efficient contractual foundation for a professionalizing college athletics marketplace, rather than as provisional agreements subject to renegotiation through opportunistic breach.

‍Copyright © 2026 Noah Henderson, Assistant Clinical Professor and Director of the Sport Management Program, Quinlan School of Business, Loyola University Chicago. J.D., University of Illinois College of Law. This Article is dedicated to the loving memory of my grandmother, Vicki Rosenfeld (“Mimi”), the only lawyer in my family, whose unconditional love and support I will always hold dear. I wish she were here to see my first publication. May her memory be a blessing. A special thank you to the California Law Review Online editors for their assistance. All errors are mine and mine alone.

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

          [2].     While some athletes secured legitimate endorsement opportunities, many collective-funded NIL agreements in football, men’s basketball, and women’s basketball resembled pay-for-play arrangements designed to facilitate recruiting and retention. See Michael H. LeRoy, Are Collectives Joint Employers of College Athletes? Empirical Analysis of NIL Deals and School Policies, 34 Marq. Sports L. Rev. 261, 278–79 (2024). Many of these agreements were structured as retainer agreements that required few, if any, meaningful promotional services, instead functioning principally as mechanisms to compensate athletes for enrolling at or remaining with a particular institution.

          [3].     Matthew T. Bodie & Esdras D. Camacho, Collegiate NIL Collectives: Context, Structure, and Future, 16 Harv. J. Sports & Ent. L. 283 (2025).

          [4].     Under the prior rule, a first-time transfer was immediately eligible, while subsequent transfers required a one-year residency absent a waiver, granted only for narrow categories such as graduate transfers, coaching departures, or documented hardship. The current rule traces to the NCAA’s 2023 denial of a transfer waiver to West Virginia’s RaeQuan Battle, which spawned a multistate antitrust suit joined by the DOJ in early 2024. See generally Complaint, State of Ohio v. NCAA, No. 1:24-cv-00008 (N.D.W. Va. Jan. 18, 2024). Facing an injunction suspending enforcement through the 2023-24 season, the NCAA adopted emergency legislation in April 2024 permitting unlimited transfers.

          [5].     Brad Crawford, College Football NIL Collective Leaders for 2025: NCAA Estimates Nation’s Top-25 Spenders, 247Sports (Dec. 12, 2024), https://247sports.com/longformarticle/college-football-nil-collective-leaders-for-2025-ncaa-estimates-nations-top-25-spenders-241949240/.

[6].     See, Fourth Amended Stipulation and Settlement Agreement, In re College Athlete NIL Litig., No. 4:20-cv-03919 (N.D. Cal. 2024) (Beginning with the 2025–26 academic year, Division I institutions that opted into the House settlement may distribute up to approximately $20.5 million annually in direct revenue-sharing payments to athletes. The annual revenue-sharing cap increases each year pursuant to the settlement’s indexing formula over the ten-year term of the agreement.)

[7].     See id at Appendix A. (explaining that the designated enforcement entity exists to enforce the terms and effectuate the purposes of the settlement).

          [8].     The scope of the CSC’s authority continues to evolve as arbitrators and courts confront disputes concerning “associated entities,” “valid business purpose,” “warehousing,” and other questions regarding the settlement’s anti-circumvention provisions. See generally Order Denying Plaintiffs’ Motion to Enforce the Fourth Amended Stipulation and Settlement Agreement, In re College Athlete NIL Litigation, No. 4:20-cv-03919-CW, ECF No. 1136 (N.D. Cal. June 25, 2026).

          [9].     Major League Baseball is a notable outlier because its competitive balance tax functions primarily as a financial disincentive to excessive spending rather than a binding cap on payrolls. By contrast, the NFL and NHL employ hard salary caps, and the NBA uses a soft salary cap that, although more flexible than a hard cap, still constrains team spending far more than Major League Baseball’s competitive balance tax.

        [10].     See, e.g., National Basketball Association Collective Bargaining Agreement art. IX (governing the permissible length of player contracts); Major League Baseball Basic Agreement arts. VI, XIX, XXIII (governing player contracts and the calculation of Competitive Balance Tax payrolls under multi-year agreements); National Football League Collective Bargaining Agreement app. A, § 2 (establishing the standard NFL Player Contract and its contractual term); National Hockey League Collective Bargaining Agreement art. 50 (governing standard player contracts and player compensation).

[11].     See, e.g., National Basketball Association, Collective Bargaining Agreement art. XI, § 3 (2023) (restricting players who fail to perform from signing with another professional team “unless and until the Team for which the player last played expressly agrees otherwise”).

        [12].     Restatement (Second) of Contracts § 367 (Am. L. Inst. 1981).

        [13].     Adam Rittenberg, Xavier Lucas leaves Wisconsin for Miami without entering portal, ESPN (Jan. 17, 2025).

[14].     Id.

        [15].     In April 2026, the NCAA’s Division I Cabinet finalized a penalty structure that directly targets this conduct, imposing automatic sanctions on any institution that signs, practices, or competes a transfer who did not enter the portal. The ghost transfer rule attempts to address that specific disruption, but it does not address the broader market failure this article identifies: the systemic inability to enforce buyout provisions as written on athletes who exit through the portal. Whether the ghost transfer rule itself survives post-Alston antitrust scrutiny is a separate question, but one the NCAA will almost certainly face.

        [16].     This Article treats buyouts as liquidated damages because that is how such clauses are most commonly drafted in practice; however, buyouts could also be drafted as an exit option with early termination fees. Although the two forms may be subject to different doctrinal analyses, they perform an identical economic function. Courts should look beyond contractual labels to evaluate the substance and practical operation of an agreement, making the provision’s functional role more important than the terminology used to describe it. This Article is principally concerned with the role of buyouts as price signals in a market for athletic services; its analysis focuses on that shared function rather than the label attached to the provision.

        [17].     Restatement (Second) of Contracts § 356.

        [18].     This cost may be borne directly or indirectly. Either the athlete’s new institution pays the buyout on the athlete’s behalf, or the athlete pays it from his new compensation. The allocation of the payment obligation does not alter the underlying economic effect of the buyout.

        [19].     “High-major” is a term of art in college basketball referring to universities competing in the Atlantic Coast Conference (ACC), Big Ten Conference, Big 12 Conference, Big East Conference, and Southeastern Conference (SEC), the sport’s highest-resourced conferences. The term is not formally defined by NCAA legislation but is widely used to distinguish those programs from lesser-resourced “mid-major” institutions.

        [20].     This hypothetical holds constant all variables other than the buyout and player compensation to isolate the economic effect of the buyout. In practice, athlete preferences and institutional characteristics, including geography, state tax treatment, coaching prestige, playing opportunity, institutional reputation, proximity to family, and academic fit, may influence an athlete’s choice among competing offers. As a result, institutions may negotiate more favorable or less favorable financial terms than those reflected in this simplified example.

        [21].     This dynamic appears in the ongoing Brendan Sorsby buyout litigation. In moving to dismiss Cincinnati’s enforcement action, Sorsby alleged that other athletes transferred without the institution seeking to enforce identical buyout provisions, while Cincinnati elected to pursue enforcement against a starting quarterback whose market value had substantially appreciated. See Motion to Dismiss at 4, Univ. of Cincinnati v. Sorsby, No. 1:26-cv-00200 (S.D. Ohio Apr. 2026).

[22].     Basketball Arbitral Tribunal (BAT), FIBA, https://about.fiba.basketball/en/services/basketball-arbitral-tribunal

[23].     Id. FIBA notes, “Failure to honour a BAT Award may entail sanctions by FIBA such as, a monetary fine, the withdrawal of a FIBA Agent’s License, a ban on international transfers for a player or a ban on registration of new players for a club, as provided in the FIBA Internal Regulations.”

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

        [25].     Restatement (Second) of Contracts § 356.

[26].     Vanderbilt Univ. v. DiNardo, 174 F.3d 751, 755–56 (6th Cir. 1999).

[27].     Id. at 757.

[28].     Id. Although no bright-line rule governs the calculation of buyouts in either athlete or coaching contracts, collegiate coaching contracts generally calculate buyout obligations by reference to the compensation remaining under the contract term, whether as the full amount or a predetermined percentage thereof. Accordingly, if courts were to adopt a limiting principle for athlete buyouts, the remaining compensation under the contract term would provide a sensible upper threshold.

[29].     Id.

        [30].     Richard A. Posner, Economic Analysis of Law 106, (3rd ed. 1986) (explaining that contract law generally affords parties the choice between performance and paying damages for breach because compelling performance is often economically inefficient).

[31].     Id.

        [32].     Justin Williams, Demond Williams Jr. stays at Washington: Did revenue share contract work as intended?, The Athletic (Jan. 12, 2026), https://www.nytimes.com/athletic/6956099/2026/01/12/washington-qb-demond-williams-nil-contract-dispute/.

        [33].     Brian R. Socolow & Alexander Loh, Duke University Settles Groundbreaking NIL Lawsuit Against Quarterback, Loeb & Loeb LLP (Jan. 2026), https://www.loeb.com/en/insights/publications/2026/01/duke-university-settles-groundbreaking-nil-lawsuit-against-quarterback.

        [34].     Complaint for Damages, University of Cincinnati v. Sorsby, No. 1:26-cv-00200-MRB (S.D. Ohio Feb. 25, 2026).

        [35].     Defendant’s Motion to Dismiss at 1, Univ. of Cincinnati v. Sorsby, No. 1:26-cv-00200-MRB (S.D. Ohio Apr. 28, 2026).

[36].     Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975).

[37].     Seesupra notes 34–37 and accompanying text (discussing the Williams, Mensah, and Sorsby disputes, involving buyouts of $4 million, an undisclosed but litigated amount, and $1 million, respectively).

        [38].     28 U.S.C. § 1332

[39].     Alyeska Pipeline Service Co., 421 U.S.at 257–259.

[40].     See Fed. R. Civ. P. 11; 28 U.S.C. § 1927

        [41].     Restatement (Second) of Contracts § 356

[42].     Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991) (“Although a court ordinarily should rely on such rules when there is bad-faith conduct in the course of litigation that could be adequately sanctioned under the rules, the court may safely rely on its inherent power if, in its informed discretion, neither the statutes nor the rules are up to the task.”).