American football originated as a college club sport controlled by the players. Initially, the game did not have coaches, especially professional ones, so it developed a tradition against coaches, players on the sidelines, or fans instructing players during the game. Prohibitions against coaching from the sideline made their way into the rulebook in 1892, accompanied by a 15-yard penalty.
Of course, sometimes coaches could not help themselves and violated the rule. A story often told on the banquet circuit described a coach whose team had problems on offense, turning over the ball or committing a penalty for every successful play. Frustrated, the coach yelled instructions to his quarterback.
Hearing the instructions, the referee walked over to the coach and said, "I'm penalizing you for coaching from the sideline," and then walked off a ten-yard penalty. That led the coach to step onto the field and say, "You dumb so-and-so, you don't even know that coaching from the sideline is a 15-yard penalty."
That led the ref to respond, "The way you coach, it's only a ten-yard penalty."
Anyway, coaching from the sideline remained illegal in college football into the 1960s, when the rule began to ease along with the substitution rules that returned college football to two-platoon football.
Still, through the 1966 season, coaches could not talk to players during timeouts. The 1967 rules allowed coaches to speak to one player during timeouts. When asked about the new rule before the first game of the 1967 season, Notre Dame's Ara Parseghian commented:
This is a rule that has been a long time coming. Many coaches, myself included, have urged this for years.
...It has been allowed for years in high school and professional games, but the college committee has been slow to adopt it.
...I think it will give a coach the chance to help his team on the field when help is needed. It will especially help teams that rely on a young quarterback or defensive signal-caller. Too many times, the inexperienced player reacts adversely to the extreme pressure of calling plays when it counts.
Now he can get help from his coach when it is needed. It can't help but improve the game.
Later, it became legal for high school coaches to bring all eleven players to the sideline during timeouts to talk strategy, fire up, or calm their teams. The colleges later adopted the same rule, and it now seems like the ban on coaching from the sideline never existed.
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