Name, Image and Likeness (NIL) Landscape Six Months After NCAA Cleared the Way for College Athletes to Make Money Off Their NIL Print PDF
It’s been half a year since the NCAA issued its formal interim NIL policy, which cleared the way for college athletes to make money off their name, image and likeness.
The interim policy is essentially a “hands-off” policy, essentially guiding schools and student athletes to adhere to the NIL laws in the state where the school is located (if the state has NIL laws), and to adhere to the school’s NIL policy (if the state does not have specific NIL laws).
Almost 20 states have already-effective NIL laws, while at least 10 more have passed legislation that will take effect within the next 1-4 years. While these state laws can vary (e.g. some state laws include prohibited categories of goods and services for student athletes, such as adult entertainment, gambling, tobacco and controlled substances), they all prohibit pay-for-play agreements (i.e. the school cannot pay a player directly to play for the school), and most of them require a student athlete to disclose to the school his or her transactions (which the NCAA policy also requires and prohibit decreases in student aid based on NIL earnings.
While the NCAA continues to debate the substance and timing of a more comprehensive NIL policy (even though the latest draft of its constitution included NIL rights for student athletes, it is likely trying to hold out as long as possible to see if Congress passes uniform federal legislation preempting state NIL laws and school NIL policies), a flood of wide-ranging NIL deals has been entered into by student athletes, from social media endorsements to autograph signing to motivational speaking engagements to appearances at clinics and camps.
While the six-figure deals get all the publicity, the vast majority of NIL deals are for small amounts of compensation (for example, certain platforms that offer NIL deals have stated that the average NIL deal is around $1,000 for Division I student athletes, and as little as $50-100 for Division II or III student athletes). However, these deals still provide student athletes from financially distressed backgrounds with much needed income (or at least some disposable income for student athletes), each of which was not available under the old landscape.
Another trend that has emerged is the establishment of “collectives” by school alumni/donors, in which they pool their funds to create or offer NIL deals to their school’s student athletes (most of which are related to charitable work). More than a dozen of these collectives have launched, including the collective associated with the University of Texas, which has claimed it has already pledged over $10 million to support NIL deals for their student athletes.
These collectives are maintained as officially unaffiliated with the schools since pay-for-play by the schools are prohibited. Some view these collectives as a great opportunity for the student athletes to make money off of their NIL while also contributing to the community, while others point out that they will act as incentives to potential student athletes and significantly enhance the recruiting abilities of schools with deeper pocketed alumni/donors.
Although NCAA’s interim rules are scant, it does appear that they are actively going to police the pay-for-play prohibition. According to Sportico, the NCAA is actively looking into deals involving football players from BYU and the University of Miami (each of which cover all the members of the football team) for potential violations of the pay-for-play rule. Sportico stated: “The probes, regardless of how they turn out, could be a watershed moment for the nascent college athlete NIL industry. The patchwork school-by-school and state-by-state nature of the space has created confusion surrounding the rules and their enforcement.”
While the new NIL landscape has unquestionably been a boon for student athlete’s wallets, our opinion is that too much attention is being paid to the dollar signs of the deals and the actions of schools and their boosters, while not enough attention is being paid to the very real risks that many of these student athletes face in connection with these NIL transactions, namely, that they will be taken advantage of because of their limited business, financial and legal knowledge.
Student athletes should consider everything from adequately protecting their rights under agreements (such as limiting the other party’s right to use an athlete’s name, image and likeness), to limiting their liability by forming legal entities (such as LLCs or corporations), to determining their tax obligations relating to the money they earn.
Further, many NIL agreements include morality clauses that give the advertiser the right to terminate the agreement based on a student’s “immoral” actions. The staggering amount of time students spend on social media certainly enhances the risk that advertisers will find behavior that they do not approve. The failure to pay meaningful attention to these issues can significantly damage a student athlete’s earning power. Unfortunately, while these deals are likely still too nascent to generate real world examples of these risks coming to fruition, it is unavoidable that some student athletes will get hurt because not enough focus is being put on protecting and educating them.
Accordingly, in addition to including compliance related items in their institutional policies governing NIL activities, schools should be providing robust applicable education to student athletes, including the areas of finances, contracts and taxes.
Doug Fillis, founder of Accelerate Sports Ventures, an NIL education and consulting firm, believes “The NIL era is here and it’s all about opportunities and athlete empowerment. Student athletes can finally take advantage of their celebrity status to capitalize on marketing and revenue opportunities. However, it’s critical that we provide these student athletes with proper educational tools and instruction in the areas of finance, contracts and taxes so that they avoid pitfalls.”