By: Josh Goldberg, Esq.
It’s been a little over a year-and-a-half since the NCAA’s Name, Image, and Likeness (NIL) policy went into effect on July 1, 2021.
College athletes across the country have been able to monetize their NIL by partnering with brands, hosting youth sports camps, giving back to charity, and more. Looking back just a few years ago, a college football player had to forfeit his eligibility because he refused to demonetize his YouTube channel. Now, a few years later, some of the biggest college athletes are utilizing YouTube, Tik Tok, Instagram and other social platforms to build their audiences and monetize their efforts.
High school athletes are also getting in on the NIL game. However, currently only about half of the states allow for high school athletes to benefit off of their NIL. Two of the biggest states, Texas and Florida, still do not allow high school athletes to pursue NIL deals. Many people in states that do not allow high school NIL are petitioning their state legislatures and high school athletic associations to amend the rules to allow high schoolers to have the same NIL rights as every other high school student.
Why should a high school influencer be able to endorse beauty products on social media, but a high school soccer star cannot endorse Adidas in certain states?
Many people and brands want to support high school and college athletes and see the benefit of partnering with athletes in their local communities. However, there are still many legal hurdles that athletes, brands, and others should be aware of in the NIL world, which our team at Greenspoon Marder LLP has experience in navigating. There is still a large amount of gray area, as the NCAA has not been clear about its policies and has yet to strictly enforce any potential wrongdoing by bad actors. However, earlier this year the NCAA did amend its bylaws and flipped the “innocent until proven guilty” principle upside down.
The NCAA’s new bylaw 19.7.3 puts the burden on the schools accused of violating NCAA rules to disprove the allegation.
Bylaw 19.7.3 states:
Violations Presumed in Select Cases. In cases involving name, image and likeness offers, agreements and/or activities in which related communications and conduct are subject to NCAA regulation, the infractions process – including interpretive requests – shall presume a violation occurred if circumstantial information suggests that one or more parties engaged in impermissible conduct. The enforcement staff may make a formal allegation based on the presumption. The hearing panel shall conclude a violation occurred unless the institution or involved individual clearly demonstrates, with credible and sufficient information, that all communications and conduct surrounding the name, image and likeness activity complied with NCAA legislation (Adopted: 10/26/22, Effective: 1/1/23).
It’ll be important for individuals to tread carefully in the NIL space as the NCAA is likely to start cracking down on violations.
Who are the players in NIL and how will they play out in 2023?
The Collectives
Collectives, which are independent of a university, are working to raise funds from boosters and businesses to help facilitate NIL deals for student athletes at certain schools. There are over 200+ collectives, some organized as non-profits and some organized as for-profit companies, engaging in the NIL space. Collectives take a management/marketing fee similar to how an agency operates to support the management team who runs the collective.
The NCAA may start to target collectives who are operating outside the legal boundaries of the law and are putting athletes in harms way.
The Marketplaces
Athlete marketplaces are acting as a bridge to facilitate deals between brands and athletes. Brands are able to post an advertising campaign on the marketplace’s deal board where athletes can then apply to partner with the company. Brands can also reach out to the athletes directly who have signed up on the marketplace. Depending on the marketplace, different fees are involved in which the marketplace may take a percentage of the deal, or the brand bears the cost.
There are over 20+ athlete marketplaces that are competing for market share in this niche industry. Expect some of the bigger marketplaces to acquire and buyout other companies, as there is a race to the bottom with so many competing players.
The Companies/Brands
Brands have seen a great return on investment working with college and high school athletes to endorse their products and services. Whether a brand partners with a Heisman quarterback or only has the budget to partner with multiple micro-influencers, brands will continue to tweak their marketing strategy to get the best return possible on NIL deals.
Companies must be compliant with all FTC advertising guidelines and be careful when an endorsement deal involves equity, securities, crypto, NFTs, or any other regulated industry.
The College and High School Athletes
College and high school athletes should surround themselves with a trustworthy team and competent representation. Schools need to educate athletes on financial literacy and tax implications as athletes are seeing larger sums of money at a younger age. Athletes should be strategic with each deal they take and shouldn’t agree to every deal on the table. It’s important to understand the terms of a NIL contract before signing any rights away.
