"There's no legal basis for Memphis to deny a release at this point," lawyer Don Jackson told ESPN on Tuesday. "This isn't about one school. They have denied the release to over 40 schools."
"There's a very realistic possibility this winds up in federal court," Jackson added.
Nichols, who averaged 13.3 points and 6.1 rebounds last season, was given a release by the school last week with stipulations after initially asking for the release in late June.
Nichols is not allowed to transfer to another school within the American Athletic Conference, nor can he go to any nonconference opponent on Memphis' 2015-16 schedule (which includes Ohio State, Oklahoma, Ole Miss and South Carolina) as well as Virginia, Iowa, Providence and Tennessee.
Sources told ESPN that Virginia is high atop his list of suitors due to a connection between Nichols' former summer coach, Ernie Kuyper, and the family of John Paul Jones -- whom Virginia's arena is named after. Kuyper runs an event in Memphis called the Jack Jones Shootout.
Nichols could still transfer to the aforementioned schools, but he would have to pay his own way for his redshirt year in 2015-16.
Virginia, Tennessee and Duke were among the finalists when Nichols chose Memphis out of high school.
Memphis will participate in the 2016 Emerald Coast Classic in Florida. Virginia, Iowa and Providence are also in the field, but the matchups have yet to be determined for the event -- and there's a chance that Memphis won't play Virginia.
There has been no shortage of schools trying to land the 6-foot-9 Nichols. Duke, Notre Dame, Wisconsin, Marquette, Baylor and Auburn are among those who have requested the release, sources told ESPN.
Memphis initially refused to give Nichols a release to transfer, but last week allowed him a release with conditions.