By: Bruce B. Siegal, Esq.
Collegiate athletics is in a period of transformation and change that will likely prove to be a defining moment. This blog and subsequent ones will focus on Name, Image and Likeness (NIL) and related hot topics in collegiate athletics.
This current period of change was accelerated in 2019 when the state of California enacted the first state law permitting student athletes to receive compensation for NIL use. Other state legislatures, upset over NCAA NIL restrictions and fearing being left in the dust, began to pass laws to overturn those restrictions in their own states. While California was the first state to pass legislation, Florida was first to pass a law with the earliest effective date – July 1, 2021.
The NCAA also faced an increasing number of antitrust lawsuits, including the case that resulted in the June 21, 2021, Supreme Court decision in NCAA v. Alston . In Alston , the Supreme Court’s decision essentially found the NCAA’s restrictions regarding educational benefits to be an illegal restraint of trade, raising implications about restrictions on the ability of athletes to profit from their NIL, and leaving the NCAA vulnerable to lawsuits any time it makes a new rule that impacts athletes. In fact, another antitrust lawsuit over NIL is ongoing. House v. NCAA , which centers on the NCAA and its members denying NIL and broadcast revenue, is before the same judge who ruled for Alston , as well as for Ed O’Bannon in an earlier case arising out of college video games.
On June 30, 2021, the Division 1 Board of Directors approved an interim NIL policy. This policy allows all NCAA D1, D2 and D3 student-athletes to be compensated for their NIL as of July 1, 2021, regardless of whether their state has a NIL law in place or not. NCAA guidance for college athletes, recruits, their families, and member institutions includes:
Athletes can engage in NIL activities that are consistent with the law of the state where the institution is located.
Athletes who attend an institution in a state without a NIL law can also engage in NIL.
Athletes can use a professional services provider for NIL activities.
Athletes should report NIL activities consistent with state law or school and conference requirements to their institution.
Furthermore, the NCAA clarified that prohibitions on pay-for-play (Bylaw 16 ) and improper recruiting inducements (Bylaw 13 ) remain in effect, and the NCAA would not monitor compliance with state law.
Per the recent NCAA clarifications to the interim policy, including on May 8, 2022, and October 26, 2022, NCAA enforcement is instructed to review violations prior to directive related to actions that are “clearly contrary” to the interim policy (recruiting and pay-for-play) and clarified the definition of boosters as “any third-party entity that promotes an athletics program, assists with recruiting or assists with providing benefits to recruits, enrolled student-athletes or their family members.” This definition could include collectives. More on this in a future blog.
As things stand, we have a patchwork of rules governing NIL use, including various state laws and university policies. Companies looking to enter the NIL space need to carefully navigate and ask the right questions. First, what state is the athlete in; and second, what college does the athlete attend? With the current absence of federal legislation, state law applies in the states that have passed legislation. While many state laws are similar , they are not entirely the same. The generally consistent state law terms provide that college athletes must be allowed to receive compensation for their NIL; however, the schools themselves may not compensate the student-athlete for their NIL or for playing the sport at their school.
University policies are applicable as well. After checking state law to confirm its guidelines, the next step is checking the specific school’s policy, which typically covers things, including disclosure of NIL deals to the school, to determine whether any conflict exists with the schools’ current sponsorships. Most states and schools have laws or policies that prohibit students from entering NIL agreements that conflict with school contracts. Certainly, a Nike-sponsored school would be concerned about one of their students promoting Adidas. Some state laws and school policies prohibit deals involving activities such as gambling, adult entertainment, tobacco, or banned substances.
In an interesting twist, states with NIL laws are seeing themselves operating under more restrictions than the states without such laws. As a result, the focus of many states that have adopted NIL legislation has shifted to repealing or revising it to make it more flexible in the light of the minimal restrictions provided under the NCAA guidelines. Florida and Alabama are among states that have recently repealed NIL laws that they viewed as unnecessarily restrictive. Mississippi and Tennessee have both eased up on provisions against interaction between athletic departments and third-party organizations, like collectives, permitting athletic department employees (athletic directors, coaches, etc.) to be more involved in the NIL process as long as they aren’t coercing or compelling an athlete’s decision to attend or stay at their institution.
The current patchwork of state laws and policies has resulted in non-uniform NIL policy across the United States. This creates confusion with respect to what NIL activities are permissible and what NIL activities are prohibited. While there have been discussions and even a few proposed federal bills in the past, a federal NIL law does not appear to be happening any time soon. This must be a top priority for incoming NCAA President Charlie Baker. Federal legislation will be addressed in a subsequent blog, so stay tuned…
Meanwhile, for now, businesses, fans, donors, colleges, and student athletes will need to continue to monitor NCAA policy as well as their respective state laws and college policies.
