UK Sanctions Update: New OFSI Reporting Requirements for High Value Dealers and Art Market Participants
Late in 2024, the UK’s Office of Financial Sanctions Implementation (“OFSI”), the agency within His Majesty’s Treasury that is charged with the implementation of financial sanctions in the UK, introduced new sanction measures aimed generally at augmenting the operation and enforcement of UK financial sanctions and targeted specifically at High Value Dealers (“HVDs”) and Art Market Participants (“AMPs”).
These new measures come into force in May 2025—just two months from now—making time very much of the essence.
To Whom do the New Sanctions Measures Apply?
The new measures extend the existing statutory definition of “Relevant Firms” to include HVDs and AMPs.
HVDs are defined as firms or sole traders whose business is trading in goods and who make or receive payments of at least EUR 10,000, whether executed in one transaction or a series of linked transactions. HVDs typically sell luxury goods, high-end vehicles, and jewelry, and encompass anyone manufacturing, selling and/or supplying any articles made from gold, silver, platinum, palladium, or precious stones or pearls. Auctioneers, who facilitate the sale and purchase of these items, are considered HVDs.
AMPs include firms or sole traders whose business is trading in, or acting as an intermediary in the sale and purchase of, works of art, where the transaction value or the value of a series of linked transactions is EUR 10,000 or more.
What are the Key Requirements under the New Sanctions Measures?
The effect of extending the definition of “Relevant Firms” to include HVDs and AMPs is to subject them to a range of mandatory reporting requirements.
Specifically, starting May 14, 2025, HVDs and AMPs will be required to inform OFSI “as soon as practicable” if they know or have reasonable cause to suspect that a person:
is a “designated person” (i.e., an individual or entity subject to financial sanctions imposed by the UK government); or
has violated UK sanctions regulations.
With respect to the UK’s Russia sanctions regime (the Russia Regulations), HVDs and AMPs also will have to inform OFSI as soon as reasonably practicable if they know or have reasonable cause to suspect that they hold or control, in any jurisdiction, funds or economic resources for a designated person.
What must Reporting to OFSI Include?
When reporting to OFSI, HVDs and AMPs must include:
the information or other matter on which the knowledge or suspicion is based; and
any information the HVD or AMP holds that may identify the relevant person or designated person.
If a person or firm knows or has reasonable cause to suspect that a person is a “designated person” and that person is also a client, then details of the nature and amount of any funds or economic resources held for that client must also be provided.
What are the Consequences of Non-Compliance?
Violating UK financial sanctions, including by failing to report, is serious. OFSI may impose a civil penalty of up to GBP 1 million or 50% of the total value of each violation, whichever is higher, on a strict liability basis.
Additionally, OFSI may refer cases to law enforcement agencies for investigation and potential prosecution, and anyone convicted of violating UK financial sanctions is liable on conviction to imprisonment for up to seven years and/or a fine.
Additional Considerations
Recent Guidance issued by OFSI[1] makes clear that high value and luxury goods are extremely susceptible to misuse by malign actors, particularly those seeking to circumvent UK financial sanctions. The susceptibility is due in part to the following factors:
the art market’s penchant for anonymity, including the common use of shell companies and intermediaries;
the relative ease with which many of these goods are concealed and/or transported internationally;
the subjectivity of their value, meaning prices and payment amounts can be easily manipulated; and
the relatively unregulated nature of international markets for some high value goods.
Given the severe criminal, civil and reputation harm that flow from sanctions violations, it is imperative for HVDs and AMPs to carefully assess their business operations and implement robust compliance programs prior to May 14, 2025. In particular, HVDs and AMPs would be well-served by:
conducting risk assessmentsto evaluate exposure to common sanctions evasive practices;
developing, implementing, and adhering strictly to written compliance policies, procedures, processes, and standards of conduct;
conducting appropriate due diligence on customers, including ownership and control structures, and all participants in trades and related transactions;
providing updated compliance trainingto relevant personnel; and
conducting regular audits, including periodic external audits,to ensure that compliance programs remain effective.
[1] UK Government, Financial Sanctions Guidance for High Value Dealers & Art Market Participants, (November 14, 2024).
Big Game, Big Distractions: Navigating Employment Issues During the Super Bowl
A new national holiday? If football fans had their way, the day after the Super Bowl would be declared work-free! Millions of football fans across the United States will be tuning into the Super Bowl on Sunday, February 9, 2025, in what has become an annual national tradition. But with so much attention and excitement for the “Big Game,” employers may face a host of employment issues, from absences on the Monday after to sports betting and other potential workplace distractions.
Quick Hits
Employers may want to proactively address the potential for increased absenteeism on the Monday following the Super Bowl, often called “Super Sick Monday.”
With heightened excitement leading up to the game, employers may want to address the potential for distractions and loss of productivity.
The National Football League’s (NFL) Kansas City Chiefs will play the Philadelphia Eagles in Super Bowl LIX in New Orleans, Louisiana. Surveys show that 75 percent or more of Americans plan to watch the game. Notably, in a 2024 survey of more than 3,000 U.S. residents by Siena College Research Institute (SCRI) and St. Bonaventure University’s Jandoli School of Communication, 50 percent of respondents indicated they support making the Monday following the Super Bowl a paid day off work.
Here are some potential employment issues around the Super Bowl that employers may not want to punt on addressing.
Watching for ‘Super Sick Monday’
The day after the Super Bowl, often referred to as “Super Sick Monday,” is notorious for high absenteeism and tardiness. Employers may want to anticipate this and consider implementing strategies to mitigate its impact. One course of action for employers would be to remind employees of the organization’s attendance and paid time office and sick leave policies. Other employers—particularly those in the Kansas City and Philadelphia areas, where many are expected to be watching and rooting on their hometown teams—may want to consider flexible scheduling or remote work options for the Monday following the game. Additionally, employers in and around the winning city may want to consider similar steps to prepare for potential absences for the typical championship parade.
Addressing Workplace Distractions
In the days leading up to the Super Bowl, employees may be more distracted than usual, discussing game predictions, organizing office pools, or planning game-day parties. While fostering a sense of camaraderie can be beneficial, employers may want to set clear expectations regarding productivity and/or encourage employees to enjoy the festivities during breaks or lunch hours. Some employers may want to organize a fan event, such as encouraging employees to wear clothes supporting their favorite team or a Super Bowl-themed luncheon. Such company-wide events provide employees with an outlet to express their excitement while maintaining productivity and can also be opportunities for employers to boost employee engagement and morale.
Handling Office Pools and Gambling
Office pools, squares, or other wagering games are always popular for the Super Bowl. These activities can foster camaraderie and communication among the workforce and raise concerns for employers. While the legalization of sports betting has spread rapidly in recent years, the practice is legal and operational in only thirty-eight states and Washington, D.C., as some major states, including California, Texas, and Georgia, are still on the sidelines. As such, employers may want to remind employees of their policies on gambling in the workplace. Employers may further want to avoid company-sponsored office pools or wagering games. If they do, employers may need to ensure that they are conducted in a manner that complies with state and federal laws and that participation is voluntary.
Next Steps
The Super Bowl is a time of excitement and celebration, but it can also present challenges for employers. By proactively addressing these issues employers can maximize and maintain employee morale and productivity.
Netflix Content Becomes Federal Evidence: EDNY’s OneTaste Prosecution Faces Scrutiny Amid DOJ Transition
Recent developments in the Eastern District of New York’s prosecution of wellness company OneTaste in U.S. v. Cherwitz have raised novel questions about the intersection of streaming content and criminal evidence.1 Defense motions filed in December of 2024 and January 2025 challenge the government’s use of journal entries originally created for a Netflix documentary as key evidence in its forced labor conspiracy case. This occurs during a sea change in DOJ priorities entering a new presidential administration.
After a five-year investigation, EDNY prosecutors in April of 2023 filed a single-count charge of forced labor conspiracy against OneTaste founder Nicole Daedone and former sales leader Rachel Cherwitz. The government alleges the conspiracy unfolded over a fourteen-year span, but in a prosecutorial first did not charge a substantive crime. Over the course of the prosecution, the defendants filed repeated motions with the court asking it to order the government to specify the nature of the offense. Most recently, Celia Cohen, newly appointed defense counsel for Rachel Cherwitz, highlighted in a January 18 motion the case’s unusual nature: “The government has charged one count of a forced labor conspiracy…without providing any critical details about the force that occurred and how it specifically induced any labor.”
In recent defense filings, the prosecution has faced mounting scrutiny over the authenticity of journal entries attributed to key government witness Ayries Blanck. Prosecutors had previously moved in October of 2024 for the court to admit the journal entries as evidence at trial for their case in chief. In a December 30 motion, Jennifer Bonjean, defense counsel for Nicole Daedone revealed that civil discovery exposes that the journal entries presented by the government as contemporaneous accounts from 2015 were actually created and extensively edited for Netflix’s 2022 documentary “Orgasm Inc” on OneTaste.
“Through metadata and edit histories, we can watch entertainment become evidence,” Bonjean argued in her motion. Technical analysis from a court-ordered expert showed the entries underwent hundreds of revisions by multiple authors, including Netflix production staff, before being finalized in March 2023 – just days before a sealed indictment was filed against defendants Cherwitz and Daedone. The defense has argued that this Netflix content was presented to the grand jury to secure an indictment.
The government’s handling of these journal entries took a dramatic turn during a January 23 meet-and-confer session. After defense counsel challenged the authenticity of handwritten journals matching the Netflix content, prosecutors abruptly withdrew them from their case-in-chief. While maintaining the journals’ legitimacy, this retreat from evidence previously characterized as central to their case prompted new defense challenges.
“This prosecution is a house of cards,” argued defense counsel Celia Cohen and Michael Roboti of Ballard Spahr in a January 24 motion to dismiss. Cohen and Roboti, who joined Rachel Cherwitz’s defense team earlier this month, highlighted how the government’s withdrawal of the handwritten journals “exemplifies the serious problems with this prosecution.” Their motion notes that defense witnesses in a parallel civil case have exposed government witnesses as “perjurers” who “have received significant benefits from the government and from telling their ‘stories’ in the media.”
The matter came to head during a January 24 hearing before Judge Diane Gujarati, who had previously denied prosecutors’ request to grant anonymity to ten potential witnesses. When Cohen attempted to address unresolved issues regarding the journals, she was sharply rebuked by the court, which had indicated it would not address the new filing during the scheduled hearing. Gujarati stated that she did not intend to schedule any further conferences before trial. The trial date is scheduled for May 5, 2025.
The case’s challenges coincide with significant changes at DOJ and EDNY under the new Trump administration. EDNY Long Island Division Criminal Chief John J. Durham was sworn in as Interim U.S. Attorney for EDNY on January 21, following former U.S. Attorney Breon Peace’s January 10 resignation. Peace spearheaded the OneTaste prosecution. Durham will serve until the Senate confirms President Trump’s nominee, Nassau County District Court Judge Joseph Nocella Jr.
The timing is particularly significant given President Trump’s January 20 executive order “Ending The Weaponization of The Federal Government.” The order specifically cites the EDNY prosecution of Douglass Mackey as an example of “third-world weaponization of prosecutorial power.” This reference carries special weight as EDNY deployed similar strategies in both the Mackey and Cherwitz cases – single conspiracy charges without substantive crimes, supported by media narratives rather than traditional evidence.
As Durham takes the helm at EDNY, this case presents an early test of how the office will handle prosecutions that blend entertainment with evidence, and whether novel theories of conspiracy without specified crimes will survive increased scrutiny under new leadership. The transformation of Netflix content into federal evidence may face particular challenges as the Attorney General reviews law enforcement activities of the prior four years under the new executive order’s mandate.
The government’s position faces further scrutiny as mainstream media begins to question its narrative. A January 24 Wall Street Journal profile by veteran legal reporter Corinne Ramey presents Daedone as a complex figure whose supporters call her a “visionary,” while examining the unusual nature of prosecuting wellness education as forced labor. The piece’s headline – “She Made Orgasmic Meditation Her Life. Not Even Prison Will Stop Her” – captures both the prosecution’s gravity and Daedone’s unwavering commitment to her work despite federal charges.
1 U.S. v. Cherwitz, et al., No. 23-cr-146 (DG).
New York Governor Signs Privacy and Social Media Bills
On December 21, 2024, New York Governor Kathy Hochul signed a flurry of privacy and social media bills, including:
Senate Bill 895B requires social media platforms that operate in New York to clearly post terms of service (“ToS”), including contact information for users to ask questions about the ToS, the process for flagging content that users believe violates the ToS, and a list of potential actions the social media platform may take against a user or content. The New York Attorney General has authority to enforce the act and may subject violators to penalties of up to $15,000 per day. The act takes effect 180 days after becoming law.
Senate Bill 5703B prohibits the use of social media platforms for debt collection. The act, which took effect immediately upon becoming law, defines a “social media platform” as a “public or semi-public internet-based service or application that has users in New York state” that meets the following criteria:
a substantial function of the service or application is to connect users in order to allow users to interact socially with each other within the service or application. A service or application that provides e-mail or direct messaging services shall not be considered to meet this criterion on the basis of that function alone; and
the service or application allows individuals to: (i) construct a public or semi-public profile for purposes of signing up and using the service or application; (ii) create a list of other users with whom they share a connection within the system; and (iii) create or post content viewable or audible by other users, including, but not limited to, livestreams, on message boards, in chat rooms, or through a landing page or main feed that presents the user with content generated by other users.
Senate Bill 2376B amends relevant laws to add medical and health insurance information to the definitions of identity theft. The act defines “medical information” to mean any information regarding an individual’s medical history, mental or physical condition, or medical treatment or diagnosis by a health care professional. The act defines “health insurance information” to mean an individual’s health insurance policy number or subscriber identification number, any unique identifier used by a health insurer to identify the individual or any information in an individual’s application and claims history, including, but not limited to, appeals history. The act takes effect 90 days after becoming law.
Senate Bill 1759B, which takes effect 60 days after becoming law, requires online dating services to disclose certain information of banned members of the online dating services to New York members of the services who previously received and responded to an on-site message from the banned members. The disclosure must include:
the user name, identification number, or other profile identifier of the banned member;
the fact that the banned member was banned because, in the judgment of the online dating service, the banned member may have been using a false identity or may pose a significant risk of attempting to obtain money from other members through fraudulent means;
that a member should never send money or personal financial information to another member; and
a hyperlink to online information that clearly and conspicuously addresses the subject of how to avoid being defrauded by another member of an online dating service.
Geolocation Data in AI: Lessons from Niantic’s “Pokémon Go”
The use of geolocation data in AI development is rapidly evolving, with its applications expanding across various industries. In this advisory, members of Varnum’s Data Privacy and Cybersecurity team examine a key AI use case: Niantic’s “Pokémon Go”. This case highlights critical considerations that businesses must address as they leverage vast amounts of data for new applications. These considerations include the protection of children’s data and the compliance requirements necessary to safeguard sensitive information.
What is “Pokémon Go”?
“Pokémon Go”, launched in 2016 by Niantic, is an augmented reality (AR) mobile game that overlays digital creatures on real-world locations. Players interact with the game by traveling to specific geolocated spots to capture virtual Pokémon, participate in battles and explore their surroundings. With over one billion downloads globally, “Pokémon Go” has gathered vast amounts of geolocation data as users traverse real-world environments.
What Did Niantic Do with This Data?
Recently, Niantic revealed that it has been leveraging data collected from “Pokémon Go” to develop a large-scale geospatial AI model. This model uses anonymized and aggregated location data to better understand geographic patterns and improve AR experiences. According to Niantic, the model not only aids in enhancing its existing products but also paves the way for broader applications in geospatial intelligence, urban planning and beyond. Niantic’s efforts underscore the value of real-world data in building sophisticated AI systems, potentially revolutionizing industries ranging from gaming to infrastructure.
Why Is This Valuable for Companies?
The integration of real-world geolocation data into AI systems offers significant advantages:
Enhanced AI Models: Access to extensive geospatial data allows companies to train AI systems that better understand spatial relationships and human movement patterns.
Improved Customer Experiences: Applications powered by such AI models can offer personalized and context-aware services, leading to increased user engagement and satisfaction.
New Revenue Streams: Companies can monetize insights derived from location data across industries such as retail, real estate and logistics.
Special Considerations for Children’s Data
The ability to use data collected from a globally popular app highlights the potential for gaming companies and other businesses to pivot into data-driven AI innovation. However, leveraging such data raises critical privacy considerations. For example, when leveraging a mobile gaming application, companies should be cognizant of the fact that the game may be largely used by younger audiences, increasing the likelihood that the company will be collecting children’s data and be subject to regulations such as the Children’s Online Privacy Protection Act (COPPA). As such, companies must address several key issues to ensure compliance with privacy regulations and maintain public trust:
Transparency: Companies should clearly disclose how geolocation data is collected, processed and used. For example, concise and accessible privacy policies tailored to both parents and children can help end users better understand how the company is leveraging the data collected through the use of the app and foster better understanding and trust.
Consent: In many cases, companies should obtain explicit parental consent before collecting or processing data from children. This step is crucial to comply with regulations in the United States and similar laws globally. For example, COPPA not only mandates that a company obtain verifiable parental consent before collecting personal information from minors, but also requires that the parent is given the opportunity to prohibit the company from disclosing that information to third parties (unless disclosure is integral to the site or service, in which case, this must be made clear to parents).
Opt-Out Mechanisms: Companies should give parents the opportunity to prevent further use or online collection of a child’s personal information. Providing users, especially parents, with the ability to opt out of data collection or usage for AI development ensures greater control over personal information.
Protections and Guardrails: Companies should implement safeguards to prevent misuse or unauthorized access to children’s data. This includes anonymizing datasets, restricting data sharing and adhering to data minimization principles. Companies should also have mechanisms in place to allow parents access to their child’s personal information to review and/or have the information deleted.
As companies increasingly leverage tracking technologies, such as geolocation data or online behavior, to enhance their AI models, it is imperative to address privacy concerns proactively. Sensitive data, particularly information related to children, must be handled with care to comply with regulatory requirements and uphold ethical standards.
Niantic’s use of “Pokémon Go” data serves as a compelling example of how innovative applications of real-world data can drive advancements in AI. However, it also emphasizes the need for organizations to prioritize transparency, consent and robust data protection. By doing so, businesses can unlock the potential of cutting-edge technology while safeguarding user trust and meeting their legal obligations.
Update: Former Collegiate Football Stars’ NIL Lawsuits for Retroactive Compensation
For many years, college athletes fought for the right to license their name, image, and likeness (NIL) while keeping their amateur status and participating in college athletics. Since the NCAA conceded and allowed payments to student athletes, litigation has shifted to those athletes who now want to receive compensation for failing to be permitted to collect such payments while they were playing collegiate sports. Following our recent article in Sports Litigation Alert about former collegiate student athletes filing NIL antitrust lawsuits against the NCAA and others for retroactive compensation, interesting developments have ensued in the NIL legal landscape. In this update, we cover advancements in previously discussed lawsuits, newly filed NIL lawsuits, and new NIL legislation.
Case Update: Retroactive Compensation for Ex-Michigan Football Players’ NIL
After filing their lawsuit on September 10, 2024, against the National Collegiate Athletic Association (NCAA), among others (the MI Defendants), on December 12, 2024, the ex-Michigan football players (the MI Plaintiffs) asked a judge to certify their proposed student-athlete class on December 5, 2024; the MI Plaintiffs admit that it is early in the case to do so. The motion asks the judge to certify a plaintiff class, defined as follows:
All persons who were NCAA student athletes prior to June 15, 2016, whose image or likeness has been used in any video posted by or licensed by the NCAA, Big Ten Network, or their agents, distributors, contractors, licensees, subsidiaries, affiliates, partners, or anyone acting in concert with any of the foregoing entities or persons.
According to the motion, “Plaintiffs’ counsel has over 270 former student athletes who have joined this action,” and they estimate that there will be thousands of members. The NCAA and Big Ten Network have not yet responded to the MI Plaintiffs’ complaint. On December 17, 2024, the parties filed a joint stipulation to adjust deadlines, which provided the Defendants until January 13, 2025, to file responsive pleadings (the Defendants indicated that they intended to file motions to dismiss and/or to transfer venue), with a deadline to respond to the Motion for Class Certification suspended pending “resolution of Defendants’ forthcoming responsive motions.”
On January 13, 2025, the MI Defendants filed a Motion to Dismiss the Amended Complaint, arguing the MI Plaintiffs’ claims are untimely, as much of the alleged conduct took place well over four years before the action commenced and was thus barred by the four-year statute of limitations for antitrust claims. The MI Defendants also argued that the MI Plaintiffs’ claims are barred because of their participation in previous lawsuits that addressed NIL compensation, all of which have settled. In a separate filing, the MI Defendants moved to transfer venue to the United States District Court for the Southern District of New York (SDNY) to proceed alongside the earlier-filed action Chalmers v. National Collegiate Athletic Association, No. 1:24-cv-05008 (PAE) or, in the alternative, to stay proceedings pending the outcome of Chalmers, which was filed in New York federal court in July, before this case was commenced.
Case Update: Retroactive Compensation for Reggie Bush’s NIL
On September 23, 2024, Reggie Bush filed suit against the University of Southern California (USC), the Pac-12 Conference (Pac-12), and the NCAA (collectively, the CA Defendants), alleging violations of the California Cartwright Act for unreasonable restraints of trade or commerce, a violation of the California Unfair Practices Act, and for unjust enrichment. The CA Defendants have since urged a Los Angeles state court to dismiss the case, arguing that Bush’s claims are time-barred under the Cartwright Act’s four-year statute of limitations, since Bush explicitly alleged that his injuries occurred while he was in college. The NCAA attorneys also argue that the Complaint is “legally insufficient,” with “few facts” beyond Bush’s football career.
Case Update: In re College Athlete NIL Litigation
As the parties in In re College Athlete NIL Litigation await final court approval for the proposed $2.78 billion settlement for NIL compensation, on December 5, 2024, the National College Players Association, an advocacy group made up of four politicians who are involved in drafting NIL laws in their states, released a statement objecting to the settlement. The lawmakers provided that their states’ NIL laws shared several common clauses that conflict with the terms of the House v. NCAA settlement – including “(complying) with or enforcing any conference or NCAA rules that restrict or prohibit NIL compensation paid by athletic boosters and NIL collectives to athletes and rules that otherwise do not comply with our state’s NIL law.” They also emphasized that because their states were not party to the NIL class action, “the settlement does not affect our states’ ability to enforce our NIL laws.” However, just six days later, the lawmakers retracted their statement, admitting that the settlement “has not been deemed illegal in any way.”
On December 20, 2024, the parties jointly filed a supplemental brief addressing the court’s Tentative Ruling on their Joint Motion for Approval of Additional Settlement Class Communications. The parties had agreed to a revised question-and-answer document that can be published. This document was necessitated by the number of prospective student athletes who have “frequently approached NCAA member institutions with clarifying questions about the settlement.” The parties have requested that the court approve a standardized communication that can be provided to prospective and current student athletes. Objectors to the settlement filed opposition to the proposed standardized communication, claiming that one of the items in the question-and-answer document was incorrect and needed to be corrected, insofar as the objectors claim that:
“Question No. 4 misleadingly implies that schools’ discretion is currently bound by set roster sizes under NCAA rules. It is not. The Amended Settlement imposes those boundaries. This incomplete Q&A ‘will surely result in confusion’ among potential Class Members and must be corrected.”
The objectors believe even posing the question “Is a student athlete’s roster spot guaranteed?” is itself misleading and have submitted that the proposed Q&A omits the most important information about how the Amended Settlement changes the state of play for countess student athletes.
On December 23, 2024, the court granted the Joint Motion for Approval of the Additional Settlement Class Communication, which permits the publishing of the revised Q&A.
The final settlement approval hearing for In re College Athlete NIL Litigation is scheduled for April 7, 2025.
On December 17, 2024, counsel in the instant three consolidated cases (House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA) filed a motion requesting Judge Wilken to approve more than $500 million in attorneys’ fees and costs, to be paid over 10 years – the same time frame that NIL money and shared revenues are to be paid out to athletes going forward. Counsel noted that their request of 20 percent of the settlement funds in the House and Hubbard cases was reasonable in relation to the work involved, and also below the generally accepted market rate of 25 percent.
Case Update: Terrelle Pryor’s NIL Suit
Following former Ohio State football player Terrelle Pryor’s complaint filed on October 4, 2024, the NCAA, Learfield Communications LLC, The Ohio State University, and The Big Ten Conference, Inc. (the OH Defendants) filed motions to dismiss on January 3, 2025. In a joint motion, the OH Defendants argued that Pryor’s claims are time-barred because he left college football at least 14 years ago, which is outside the Clayton Act’s four-year statute of limitations for federal antitrust claims. Further, the OH Defendants argued Pryor’s claims are barred by his alleged participation in the Alston and Keller settlement releases and the O’Bannon judgment. Additionally, the OH Defendants argued that Pryor has not plausibly pleaded an injury since he has “nonexistent rights,” “no copyright interests in games in which he played,” and “no cognizable right of publicity in rebroadcasts of NCAA game footage.” In the joint motion, the OH Defendants also requested oral arguments.
Individually, The Ohio State University filed a motion to dismiss for lack of subject-matter jurisdiction, arguing that Eleventh Amendment “sovereign immunity bars the Plaintiff’s claims against Ohio State” since “Ohio State is a public university and instrumentality of the State of Ohio, and Plaintiff is a citizen and resident of Pennsylvania.” Similarly, Learfield Communications filed its own motion to dismiss, citing immunity under both the state action doctrine and the Noerr-Pennington doctrine.
New Case: South Dakota NIL Lawsuit
While the In re College Athlete NIL Litigation settlement was pending preliminary approval before District Court Judge Wilken, on September 9, 2024, by and through the South Dakota attorney general, Marty Jackley, the State of South Dakota, and the South Dakota Board of Regents on behalf of South Dakota State University and the University of South Dakota (collectively, SD Plaintiffs) filed The State of South Dakota et al. v. National Collegiate Athletic Association 4:24-cv-04189 in Brookings County Circuit Court in South Dakota. The University of South Dakota and South Dakota State University are members of the Summit League Basketball Conference, which is a non–Power Four conference member of the NCAA.
The complaint claimed that the $2.78 billion proposed settlement would go primarily to student athletes from the “Power Four” conferences – the Atlantic Coast Conference, Big Ten Conference, Big 12 Conference, and Southeastern Conference – leaving smaller schools such as those in South Dakota to face an unfair burden of the settlement’s cost. Jackley argued that such smaller schools would have to collectively shell out roughly $960 million in NCAA distributions over the next 10 years to assist the deal – noting that less than 10 percent of the proceeds have been saved for female student athletes. Further, Jackley argued the proposed settlement would unlawfully rid the NCAA of its guiding principle of amateurism. In their prayer for relief, the SD Plaintiffs seek damages, declaratory relief, and injunctive relief.
On October 9, 2024, the NCAA filed its Notice of Removal under federal-question jurisdiction. The SD Plaintiffs subsequently argued for remand to state court, arguing that “the California court has already ruled that there is no common question of law or fact between the settlement approval and the NCAA’s allocation model under its rules, bylaws or constitution.” In response, the NCAA argued the SD Plaintiffs voluntarily chose to participate in the NCAA, and “a lawsuit seeking to undo a federal court’s preliminary approval of a settlement of claims under federal law plainly belongs in federal court.”
Further, the NCAA argued that Count 6 of the Complaint raises a federal issue, “namely whether the settlement meets the requirements imposed by Fed. R. Civ. P. 23 for judicial approval of the settlement.” Thereafter, on November 15, 2024, SD Plaintiffs filed their Amended Complaint, removing Claim 6. On November 18, 2024, SD Plaintiffs filed their Reply Brief in Support of Motion for Remand, arguing that “Claim 6 was the only ‘federal question’ the NCAA identified in its response brief.”
On November 13, 2024, SD Plaintiffs filed a motion to compel defendants to provide notice to South Dakota, and other affected states and their institutions of higher education, under 28 U.S.C. section 1715(b), since the “NCAA’s notice facially fails to comply” with the two requirements under the statute. The State of South Dakota contacted the NCAA’s counsel on October 17, 2024, stating that the notice was deficient; the NCAA did not respond within the 10-day period provided by the State of South Dakota.
On January 15, 2025, the SD Plaintiffs filed a Notice of Decision Re: Motions for Remand and Stay. In the notice, the SD Plaintiffs asked the court to take notice of the decision in Royal Canin, Inc. v. Wullschleger, 23-677 (U.S.), wherein the court “unanimously held that when an action is properly removed to federal court on the basis of federal-question jurisdiction, but the plaintiff then amends the complaint to omit the federal questions leaving only supplemental state-law claims, ‘the federal court loses its supplemental jurisdiction over the related state-law claims [and] [t]he case must therefore return to state court.’”
Additional NIL Updates: New Legislation
In other NIL news, on November 18, 2024, Ohio Governor Mike DeWine signed Executive Order 2024-08D, effective immediately, allowing Ohio colleges to pay student athletes for their NIL. The law provides that any post-secondary educational institution may offer compensation or compensate a student for the use of the student athlete’s NIL provided that no post-secondary education shall use funds allocated by the State of Ohio. The executive order will expire if the settlement comes into “full operational effect.” Despite this Order, Ohio State continues to be at the top of the list of schools benefitting from NIL deals, reportedly spending “around $20 million to keep their 2024–2025 football team intact.”
Conclusion
This is a highly active time for college athlete compensation, and the impact it will have on the industry is still unknown. College sports is already showing signs that the availability of this money has reshaped recruiting dynamics, as schools and boosters are using NIL deals to entice high school athletes and transfer students. A survey conducted by the National College Players Association reported that nearly 75 percent of athletes consider NIL opportunities an important factor when choosing a school. The competition on the field is now met by competition off the field in trying to attract the top talent.
As these competitions increase, universities must contend with the litigation from prior athletes and there does not seem to be any signs that this will be slowing anytime soon. Whether legislation will help is also undetermined at this time. In the interim, it appears that the current top student athletes are benefitting from the new availability of money, and prior standouts are interested in their own gain.
More Than Child’s Play: $520 Million FTC Settlement Signals Risks for Digital Platforms
For years, one of the world’s most popular online video games, Fortnite, profited from in-game purchases (or “microtransactions”) that, according to the Federal Trade Commission (“FTC”), were unlawful and deceptive. [1] Although Fortnite is “free-to-play,” individuals playing Fortnite—many of whom, the FTC says, are minors—use real-life money to buy in-game currency. But the game’s interface and controls make it easy to accidentally make purchases using in-game currency. And the game did not make clear when users’ payment information was being saved or require additional authentication when purchases were made with saved payment information. This allowed children playing the game to make purchases without parental permission. Then, Fortnite employed what the FTC calls “dark patterns” to discourage or prevent users from cancelling transactions, requesting a refund, or issuing a charge-back on their credit card.
Those practices, along with game setting that the FTC claimed violated the Children’s Online Privacy Protection Act, were the basis of the FTC’s settlement with Epic Games, Inc. (“Epic”), the creator of Fortnite. Epic agreed to pay $275 million in penalties related to the privacy violations—the largest monetary penalty ever obtained for violating an FTC rule—and $245 million in refunds. Epic also agreed to make specific changes to Fortnite’s microtransaction system. Specifically, Epic agreed to obtain “express, informed consent” coupled with “clear and conspicuous disclosures” meeting specific criteria before billing users. It also agreed to provide users with “a simple mechanism to revoke consent at any time.” The FTC intends this settlement to be “a message to all online providers” that “protecting the public, and especially children, from online privacy invasions and dark patterns is a top priority for the Commission.” [2]
The FTC’s strong statement on billing practices and “dark patterns” impacts more than just video games; it potentially touches on all online platforms that store payment information to allow users to periodically purchase services or products. Online content providers should consider whether their own billing practices satisfy the requirements of the Consent Agreement or otherwise sufficiently inform users of when, how, and for what they are being charged.
[1] Fortnite Video Game Maker Epic Games to Pay More Than Half a Billion Dollars over FTC Allegations of Privacy Violations and Unwanted Charges | Federal Trade Commission
[2] The full Consent Order can be viewed here: Epic Games: Agreement Containing Consent Order
Two-Minute Drill: Department of Education Guidance and Department of Justice Weigh in on House Settlement
Change is inevitable. This sentiment resonates across the college sports landscape. Few, if any, would argue that the current model of college athletics is sustainable. While fans continue to tune in and March Madness remains a cornerstone of excitement, the line between amateurism and professionalism in college sports has grown increasingly blurry since July 2021.
As the fallout continues from the potential settlement of an antitrust class-action lawsuit filed against the NCAA — providing for nearly $2.8 billion in backpay to former athletes — new guidance from the Department of Education’s Office for Civil Rights and a Statement of Interest from the Department of Justice may disrupt the approval and impacts of the settlement, as well as the immediate future of college sports. The new DOE guidance warns NCAA schools that name, image, and likeness (NIL) payments must be distributed in a nondiscriminatory manner, pursuant to Title IX regulations. Meanwhile, the DOJ’s statement objects, among other things, to the settlement’s 22% cap on revenue sharing, citing concerns over antitrust violations since the cap was not collectively bargained.
With the potential final approval of the House v. NCAA settlement on the horizon, a hearing is set for April 7, 2025, rampant claims of transfer portal tampering, and headlines about college athletes signing deals rivaling NFL rookie contracts, the call for a solution to this largely unregulated system is louder than ever. Proposals for a “new model” are making headlines, but without fundamental legal and organizational changes, any attempts to fix college sports’ NIL system are as futile as us trying to guard Cooper Flagg at the top of the key — doomed to fail.
Under the proposed settlement in House v. NCAA, which has been preliminarily approved, in addition to the nearly $2.8 billion in backpay to Division I athletes who competed from 2016 to the present, a 10-year revenue-sharing plan would allow NCAA conferences and their member schools to share 22% of annual revenue with student-athletes. The settlement would establish a salary cap framework, in which schools would initially be able to pay their athletes up to $22 million annually.
Title IX
The new fact sheet from the Department of Education, released on January 16, 2024, may impose new guardrails on how the proposed revenue-sharing plan is implemented. The department’s guidance states that the department considers NIL compensation provided by a school as “athletic financial assistance.” Under Title IX, schools must provide equal athletic opportunity, regardless of sex, including “athletic financial assistance” awarded to student-athletes. The department further stated: “The fact that funds are provided by a private source does not relieve a school of its responsibility to treat all of its student-athletes in a nondiscriminatory manner [and it] is possible that NIL agreements between student-athletes and third parties will create similar disparities and therefore trigger a school’s Title IX obligations.”
Whether or not the new guidance from the Department of Education will significantly impact the distribution of the payments under the House v. NCAA settlement, with objections to the settlement due at the end of January, remains an open question. Jeffrey Kessler, an attorney for one of the plaintiffs in the class action, said that the guidance “has no impact on the settlement at all.” Instead, “the injunction does not require the schools to spend the new compensation and benefits that are permitted to any particular group of athletes and leaves Title IX issues up to the schools to determine what the law requires. [The House v. NCAA case] resolved antirust claims — not Title IX claims.”
Additionally, the timing of the new guidance, only days before the beginning of President Donald Trump’s new administration, may also influence how long the fact sheet will be relevant, if at all. Gabe Feldman, a professor of sports law at Tulane, stated that “the timing does call into question the impact this is going to have, because it is likely, as in a number of areas of law, that a new administration will reverse, rescind, amend, or completely change the guidance.” Indeed, the guidance itself states that the fact sheet “does not have the force and effect of law” and is “not meant to be binding” beyond what is required by actual law. Finally, in the wake of the U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo last year, overruling the Chevron doctrine that required courts to defer to agency interpretation of ambiguous statutes, the new guidance will likely have an even less binding effect.
The new guidance, released just days before the beginning of a new presidential administration, implies that schools may face risks under Title IX with the distribution of NIL payments, even if third parties or collectives are providing the funds. However, with a new administration, the position of the DOE could change resulting in even more uncertainty.
Cap on Revenue Sharing
The DOE was not the only government agency to raise concerns over the proposed House settlement. In a Statement of Interest filed on January 17, the DOJ raised objections surrounding the proposed settlement’s 22% cap on revenue sharing. The DOJ argues that the cap “functions as an artificial cap on what free market competition may otherwise yield” and raises “important questions about whether the settlement is fair, reasonable, and adequate.” The DOJ argues that even though the settlement would increase the cap on NIL payments from zero to $22 million, “the new amount is still fixed by agreement among organizations that collectively control the entire labor market.” Additionally, the DOJ objects to arguments that the revenue share cap is similar to caps imposed in professional sports leagues. The DOJ argues that salary caps in professional sports leagues were collectively bargained, which are generally immune from antitrust scrutiny. In this case, however, the 22% cap was not collectively bargained, and the proposed settlement was negotiated without college athletes benefiting from the substantive and procedural rights afforded to workers during collective bargaining.
The DOJ is also concerned that the proposed settlement could be used by the NCAA and power conferences as a defense in future antitrust cases. The DOJ has asked the court to either decline to approve the settlement or make it clear that the approved salary cap does not constitute a judgment on its competitive impact or that it complies with antitrust laws. Effectively, the DOJ has asked the court to either decline to approve the settlement or allow future litigants to file antitrust claims regarding the cap.
In order to approve the settlement, Judge Claudia Wilken, the presiding judge over the House case, must assess whether the settlement is fair, reasonable, and adequate. It remains to be seen whether Wilken will follow the DOJ’s requests. Regarding the settlement being used as a defense, the proposed settlement has certainly not dissuaded litigants from filing antitrust actions against the NCAA. Even after preliminary approval, at least two college athletes brought antitrust claims against the NCAA — a trend that is likely to continue, even if the settlement is granted final approval. The timing of the Statement of Interest is also notable, as it was filed mere days before Trump was sworn into office. The new administration might not align with the previous DOJ’s position, but the timing of confirmation hearings could delay any retraction or opposing opinion prior to the April 7th hearing.
Schools and athletes alike should continue to closely monitor the progress of the House v. NCAA settlement, as well as potential changes or rollbacks from the new administration that would affect distribution of the settlement payments and the proposed new revenue-sharing plan. With so much uncertainty surrounding college sports, schools are navigating uncharted waters, trying to maintain a competitive edge. Without a clear picture of the future, any decisions may feel like walking a tightrope — one wrong move could lead to success or setback.
After Supreme Court Upholds Ban, Trump Issues EO Giving TikTok an Extension
Despite bipartisan support for banning TikTok – essentially spyware presenting a national security threat from the People’s Republic of China (PRC) – in the United States (as done by India) and the Supreme Court’s upholding of the law as constitutional and requiring the app to go dark, President Trump signed an Executive Order (EO) during his first day in office giving TikTok 75 days to “pursue a resolution.”
TikTok already had several months to “pursue a resolution,” which was to divest itself from the PRC so it could not collect and use Americans’ sensitive data. TikTok does not want to pursue this resolution because it wants to keep collecting, using, manipulating, and spying on U.S. citizens.
This is a disappointing development, and hopefully, Trump, who originally supported the ban, will come to his senses to protect national security and keep the PRC from spying on unwary citizens.
OCR Issues Guidelines on Title IX’s Application to NIL Payments
As the sun sets on the Biden administration, the Office for Civil Rights of the U.S. Department of Education (OCR) provided a new Fact Sheet on Jan. 16, 2025, to “clarify” how Title IX will apply to universities’ direct payments to student-athletes for use of their names, images and likenesses (NIL) under the proposed House vs. NCAA settlement. The Fact Sheet is consistent with decades of prior OCR guidance. It is not surprising that “compensation from a school for use of a student-athlete’s NIL” under the House settlement will qualify as “athletic financial assistance” subject to Title IX. It is also not surprising that OCR reminded schools that they retain responsibility to treat male and female student-athletes equitably even when NIL payments are made by affiliated third parties like collectives.
The key, as always, to Title IX compliance is in the implementation – the details of how schools are implementing their House structures.
Title IX Applies to Schools’ House Payments
While OCR inaccurately mingled two different Title IX standards applicable to athletic financial assistance on page 4 of the Fact Sheet (which confused many commentators on social media), OCR ultimately set forth the standard in the applicable Section 4 that is consistent with Title IX regulations dating back to 1979:
“When a school provides athletic financial assistance in forms other than scholarships or grants, including compensation for the use of a student-athlete’s NIL, such assistance also must be made proportionately available to male and female athletes.” (Emphasis added.)
This is not necessarily a dollar-for-dollar proportionality test. There may be legitimate non-discriminatory justifications to explain differences in who qualifies for House payments as well as their amounts, as long as a school’s House payment structure provides for equitable availability.
Implementation Is Key
The pathway for schools to implement House consistently with federal civil rights laws remains available for those universities that choose to take it.
The keys for schools’ Title IX-compliant implementation will remain implementing an equitable NIL marketing strategy and structuring good-faith NIL valuations, as many schools have begun to do. Of course, there are many nuances to the legal implementation.
Conclusion
Because the new Fact Sheet doesn’t change long-standing Title IX guidance, this particular Biden administration action is unlikely to affect Judge Claudia Wilken’s approval of the House settlement itself, and nothing would be accomplished if this Fact Sheet were withdrawn by OCR next week because it merely reiterates existing Title IX concepts. Of course, the incoming administration or Congress may take a new legal approach to this evolving area of our industry.
Lawsuits are inevitable over Title IX’s application to schools’ House implementation strategies. Developing Title IX-compliant NIL and House frameworks now are essential for future defense strategies.
TikTok, the Clock Won’t Stop, and Cases Involving Court Jurisdiction Narrowly Focused – SCOTUS Today
As the snow has fallen on Washington, DC’s First Street over the past few days, the Supreme Court has begun to issue opinions in the current term.
One of those cases has been in the news constantly, as it relates to a matter at issue in the recent presidential campaign that will likely get attention after the inauguration. The other two relate to federal court jurisdiction, but they are also consequential because their fact patterns are likely to be duplicated in future litigation.
While, with the advent of the new administration, things very well might change, the news today that the Court has upheld a law that could ban the social media platform TikTok this Sunday is significant not only to expressive younger Americans (perhaps your children and mine) but also as a matter of national security.
In a per curiam opinion in TikTok, Inc. v. Garland, the Court noted the following:
There is no doubt that, for more than 170 million Americans, TikTok offers a distinctive and expansive outlet for expression, means of engagement, and source of community. . . . But Congress has determined that divestiture is necessary to address its well-supported national security concerns regarding TikTok’s data collection practices and relationship with a foreign adversary.
And the Court has sided with Congress. Accordingly, TikTok either must divest or shut down the app this Sunday, January 19, as of which date, “the Protecting Americans from Foreign Adversary Controlled Applications Act [the “Act”] will make it unlawful for companies in the United States to provide services to distribute, maintain, or update the social media platform TikTok, unless U.S. operation of the platform is severed from Chinese control.”
The petitioners are two TikTok operating entities and a group of U.S. TikTok users who claimed that the Act, as applied to them, violates the First Amendment. The Court acknowledged that the case could be considered more of a regulation as to a foreign government adversary’s corporate ownership than as a matter of speech. Thus, the Court holds that “a law targeting a foreign adversary’s control over a communications platform is in many ways different in kind from the regulations of non-expressive activity that we have subjected to First Amendment scrutiny.” Those differences include “the Act’s focus on a foreign government [and] the congressionally determined adversary relationship between that foreign government and the United States. . . .” However, “[t]his Court has not articulated a clear framework for determining whether a regulation of non-expressive activity that disproportionately burdens those engaged in expressive activity triggers heightened review. We need not do so here. We assume without deciding that the challenged provisions fall within this category and are subject to First Amendment scrutiny.”
The Court goes on to set forth a primer on the conditions predicate for considering governmental action that arguably suppresses speech. “Content-based laws—those that target speech based on its communicative content—are presumptively unconstitutional and may be justified only if the government proves that they are narrowly tailored to serve compelling state interests.” Reed v. Town of Gilbert, 576 U.S. 155, 163 (2015). Content-neutral laws, in contrast, “are subject to an intermediate level of scrutiny because in most cases they pose a less substantial risk of excising certain ideas or viewpoints from the public dialogue.” Turner Broadcasting System, Inc. v. FCC, 512 U. S. 622, 642 (1994) 512 U.S., at 642 (citation omitted). “Under that standard, we will sustain a content-neutral law ‘if it advances important governmental interests unrelated to the suppression of free speech and does not burden substantially more speech than necessary to further those interests.” Turner Broadcasting System, Inc. v. FCC, 520 U. S. 180, 189 (1997).’”
”As applied to petitioners, the challenged provisions are facially content neutral and are justified by a content-neutral rationale.” Noting that the Act in question is “designed to prevent China—a designated foreign adversary—from leveraging its control over ByteDance Ltd. to capture the personal data of U. S. TikTok users,” which “qualifies as an important Government interest under intermediate scrutiny,” the Court held that this standard, including its narrow focus, justified the divestiture order at issue.
Justice Sotomayor and Justice Gorsuch concurred in the result. Justice Gorsuch’s caveat, expressing satisfaction that the Court did not consider evidence available to it but not to the petitioners, is noteworthy. That is a potential issue in many national security-related cases.
Labor law practitioners who read this blog will be particularly interested in the Court’s unanimous opinion in E.M.D. Sales, Inc. v. Carrera. The case concerns the application of the Fair Labor Standards Act (FLSA), guaranteeing a federal minimum wage for covered workers, 29 U. S. C. §206(a)(1), and requiring overtime pay for those working more than 40 hours per week, §207(a)(1). There are, however, many employees who are exempt from the FLSA’s overtime-pay requirement, e.g., salesmen who primarily work away from their employer’s place of business. §213(a)(1). The application of that exemption places the burden on the employer to show that it applies. Here, EMD, a Washington, DC-area food distributor, faced overtime claims by certain sales representatives who manage inventory and take orders at grocery stores. Several sales representatives sued EMD, alleging that the company violated the FLSA by failing to pay them overtime.
At trial, the U.S. District Court for the District of Maryland held that EMD failed to prove by “clear and convincing evidence” that its sales reps were “outside salesmen.” The U.S. Court of Appeals for the Fourth Circuit affirmed. EMD argued that the sales representatives were outside salesmen and, therefore, exempt from the FLSA’s overtime-pay requirement and that the District Court should have used the less stringent “preponderance of the evidence” standard.
The Supreme Court agreed, holding that the preponderance-of-the-evidence standard applies when an employer seeks to demonstrate that an employee is exempt from the minimum wage and overtime pay provisions of the FLSA. Noting that at the time of enactment of the FLSA in 1938, and continuing to the present, the preponderance standard is the default mode in American civil litigation, the Court held in favor of EMD.
There are three main circumstances in which a more stringent standard might apply: (1) where a statute requires it, (2) where the Constitution requires it, and (3) where coercive governmental action is present. None of those is present here. Moreover, in a related area to the case at bar, employment discrimination, the preponderance standard has consistently been applied. Additionally, the Court rejected the notion that the non-waivability of FLSA rights is material to what standard of proof applies.
Ultimately, the remedy applied by the Court is a limited one. In reversing the decision, the Court simply remands the case to the Court of Appeals to determine whether employees would fail to qualify as outside salesmen even under a preponderance standard.
In a case decided two days ago, Royal Canin U.S.A. Inc. v. Wullschleger, the Court dealt with a consumer claim that the manufacture of a brand of dog food (full disclosure: my dog loves the Golden Retriever variety) had engaged in deceptive marketing practices. The consumer’s original claim, filed in state court, asserted both federal and state law violations. Royal Canin removed the case to federal court pursuant to 28 U. S. C. §1441(a). The plaintiff, Anastasia Wullschleger, wanted the case to be resolved in state court, so she amended her complaint to remove any mention of federal law and petitioned the district court for a remand to state court, which the court denied. However, the Eighth Circuit reversed, and a unanimous Supreme Court, per Justice Kavanaugh, affirmed, holding that “[w]hen a plaintiff amends her complaint to delete the federal-law claims that enabled removal to federal court, leaving only state-law claims behind, the federal court loses supplemental jurisdiction over the state claims, and the case must be remanded to state court.”
Thus, the Court has begun to issue new opinions, at least one of which is going to resound loudly on the domestic political scene.
Mississippi Gaming Commission Meeting Report (January 2025)
January 16 Meeting
The Mississippi Gaming Commission held its regular monthly meeting on Thursday, January 16, 2025, at 9:00 a.m. at the Bolton State Building – D.F.A. Auditorium in Biloxi, Mississippi. Executive Director Jay McDaniel and Chairman Franc Lee, Commissioner Kent Nicaud and Commissioner Jeremy Felder were all in attendance. The following matters were considered:
LICENSING
The Commission approved the issuance of a license to the following:
New Palace Casino, L.L.C. d/b/a Palace Casino, as an Operator
FINDINGS OF SUITABILITY
The Commission approved findings of suitability for the following persons or entities:
Robert Joseph Granieri – Land Holdings I, LLC d/b/a Scarlet Pearl Casino Resort
Alan Wayne Ellingson – Crown MS Gaming Inc.
Satvinder Bhens – BetMGM, LLC
Parag Mahesh Vora – HG Vora Capital Management LLC
HG Vora Capital Management LLC — Greater than 5% Shareholder of PENN Entertainment, Inc.
OTHER APPROVALS
The Commission approved the following additional items:
Biloxi Capital LLC – Site Approval—Deferred
End of Other Approvals