Universities running outright pro programs would test many legal waters, including the non-profit status of the sponsoring institutions. Some have pointed to the Green Bay Packers, but while a non-profit corporation, they are not chartered as an educational institution. Lawyers and courts would have a heyday with all the possible rulings and counter rulings of say, the O$U professional football team, sponsored by the Wexler Foundation.
This keeps getting brought up, but doesn’t really make sense to me, so perhaps you (or someone else on here) could explain: most of the major athletic universities are public, state owned institutions (right?), so how is their non-profit tax status going to be at risk, as a state owned entity? I don’t see the IRS, nor state departments of revenue, rolling up to tax operating revenues from state universities anymore than i see them coming to tax the state highway department. What am i missing? Or is the issue more that people wouldn’t be able to make tax deductible donations?
(Clearly this question excludes private schools, your Notre Dames and Miamis, etc.)
I think the same problem would ensue if ODNR or ODOT started to run a pro sports franchise, but it's even more germane for an academic institution. I'll admit this is novel ground, but can you cite another time in history when a state-supported university or state agency ran a for-profit business?
The closest thing that I can think of would be the university innovation center, which has spun off for-profit businesses such as Diagnostic Hybrids (now part of Quidel), but as I understand it, there were all kinds of legal safeguards put in place to distance the university from the profit side of these businesses while they were still a part of the innovation center and before they severed the umbilical cord from the university.
For instance, I believe that these incubator businesses, kept their profits and then paid the university for the use of its facilities on a rental basis. In some cases where university professors were also employees of the new developing business it got very complicated. The university claimed some percentage of funds that came in from patents these professors secured, but not from their work at the innovation center but due to their employment as professors. Once the business was spun off, the university continued to receive a percentage of these patent royalty payments, but the university did not receive any further payments directly from the new private company, except the occasional corporate gift, which is a whole different can of worms. This stuff keeps a whole lot of university and contract lawyers very busy.
So, I suppose the university could spin off the Athletic Department, have them pay the university for such things as the rental of the stadium or field house. The AD's office would of course then be responsible for coaches salary and other expenses. The university would no longer be able to us student fees to support athletics. This model would only work at maybe 20 institutions in the U.S., including the Big Farm in Columbus. I don't think that this is a road we want to travel.