As March Madness heats up this week, so do legal issues surrounding everything from office pools to antitrust suits. Depending on where you live, thanks to the federal system, the brackets people filled out and the ten dollars each participant contributed to office March Madness pools could mean the participants are committing anything from a misdemeanor to a felony or, in some states, possibly just violating company policy.

For those individuals who win their office pools, remember that the IRS requires people to report gambling winnings as “other income” on their 2014 tax returns. Individuals who show actual gambling winnings are allowed to offset those gambling winnings with gambling losses. Unfortunately, for those individuals who do not win their office pool, the losses cannot be used to set off the salary they earned while participating in the pool (or any other ordinary income).

Finally, unlike the individuals winning their office pools, the college basketball players are not compensated directly for the use of their images in broadcasting. Division I athletes sign a release that allows the NCAA to use their names and images indefinitely. Antitrust litigation has been pending in the Northern District of California since 2009, with current players seeking injunctive relief and former players seeking monetary damages for the use of their images in violation of their publicity rights. Recently, the players moved for class certification, and the court decided to hear the motion on June 20. The NCAA is opposing the class certification because the NCAA claims there are too many differences between individual plaintiffs. However, this determination could represent a critical juncture in the case, and if the court grants the motion, there will be increasing pressure on the NCAA to settle.

Do you think college athletes should be compensated for the use of their images on TV or in video games? Do you plan to report your bracket winnings on your next tax return? Should the IRS care?

—Samara C. Pals Cramer

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2 Responses to Legal Madness

  1. Michael Joshi says:

    I agree with Ryan that opening up compensation to college athletes is a huge can of worms. I think a more appropriate way to be equitable when talking about the huge business that college sports (primarily football) is to look at how the revenue is spent. As Ryan mentioned, these colleges already are committed to significant operating expenses (scholarships, facilities, etc.) that directly benefit these student-athletes. But I would be curious to see what happens with the profit. Are coaches and administrators just getting paid more? Or is the money being reinvested into other university programs that benefit students? Perhaps restrictions already exist, but I would think that monitoring/limiting where all this value generated by the success of college student-athletes is going would be an interesting approach.

  2. Ryan Loofbourrow says:

    Thanks for the great post, Samara! Personally, I do not have to worry about whether to post my winnings to the IRS because I lost in my pool big time this year. To that extent though, I would bet that most pool winners do not report their winnings, and the IRS probably does not care. The IRS probably cares a lot more about the people who win big money, such as from the casinos in Vegas (if you’re lucky), and not so much from the office pools.

    I think the use of a college football player’s image is an interesting one, and it ties in with Talor’s post about college football players wanting to trademark their images. To some extent, it feels like it would only be equitable to allow for the college football players to profit from their successes. However, the players know exactly what they are getting in to when they play in the NCAA. They are getting a free education, a degree, and, potentially, great mentors in their coaches who will try and help them succeed any way that they can. Adding money to the pile will only increase the amount of greed that many top high school and college athletes already have. Can you imagine the bidding wars for colleges that promise to get the athlete on TV so that they can make money? Boosters may even try and create video games with the players’ names on them so that they can indirectly pay the players. College athletes will always try to find new ways to get compensated, but as long as the NCAA stays strict on the “no pay for play” rule, there should not be loopholes for athletes who are good enough to get into a videogame.