Big scores: NIL trends and laws attorneys should know

“We are concerned that some activity in the name, image and likeness space may not only be violating NCAA recruiting rules, particularly those prohibiting booster involvement, but also may be impacting the student-athlete experience negatively in some ways. We want to preserve the positive aspects of the new policy while reviewing whether anything can be done to mitigate the negative ones.” – NCAA Board Chair and University of Georgia President Jere Morehead, February 2022

As most of us know, the United States Supreme Court heard American Athletic Conference et al. v. Alston et al. in June 2021. In its precedent-setting decision, the Court unanimously sided with former college players in a dispute with the National Collegiate Athletic Association (NCAA) about compensation and academic benefits.

Since then, following the developments of name, image and likeness (NIL) rights among student athletes is similar to the drama of attending an actual sports event. Your team may be striding toward victory, but at the buzzer, a different outcome.

Much of this back and forth can be attributed to how the NCAA reacted to the Court’s decision by stepping back from its century-old tradition of prohibiting NIL. It then put an interim policy in place that relied on individual states and schools to enforce jumbled rules while also aligning with existing NCAA guidelines – all in the absence of a federal global framework. This opened the floodgates for a variety of opportunities and deals by athletes who could suddenly make real money, sometimes without even having to set foot on a field or court.

The NCAA publicly acknowledged that the limits of its own guidelines and still-evolving NIL laws are being tested and the association requested a preliminary examination and report by April with final recommendations for possible action due by June.

Ahead of their findings, let’s discuss the types of deals the NCAA will likely address and, with this insight, how lawyers can help their clients understand NIL rules, and lawfully navigate any changes.

The NCAA has a strict no pay-for-play rule, which prohibits any school from directly compensating its players as payment for enrolling or for their athletic performance.

Some state laws restrict schools from arranging NIL deals for their athletes. The NCAA rules leave that decision up to individual schools, but it warns schools not to cross any lines where that could be perceived as paying the players or using NIL payments as a recruiting tool. It will very likely happen, or may be happening now, but good luck proving it.

All it takes is one high-profile player with a headline-making deal to attract the interest of another potential college phenom, and promising athletes may create a beeline. For example, consider Jackson State University’s (JSU) football program, where this rule is currently being tested.

In September 2021, Beats by Dre headphones kicked off its entry into the collegiate space by signing JSU quarterback Shedeur Sanders to an NIL deal. Sanders is the first college football player to sign with Beats and doubles as the youngest ambassador on the Beats roster. In December, Sanders also signed an NIL deal with Tom Brady’s BRADY apparel line.

One would think that the chance to play for JSU’s head coach, iconic pro football and baseball star Deion Sanders – who also happens to be Shedeur Sanders’ father – would be alluring enough for an athlete to apply. Now that there is money to be made, the incentives have seriously changed. Shortly after these NIL signings, the elder Sanders was able to recruit cornerback Travis Hunter (the first time a five-star high school prospect ever signed with a Football Championship Subdivision team) and phenom wide receiver Kevin Coleman.

This is just one example of the interconnection of a school’s prestige, its players, and the NIL arrangements surrounding them. Talented players should look for the best fit and financial opportunities. No one could or should blame them. Moreover, given these facts, it is all permissible under current NCAA rules and most state guidelines.

Between the start of a college term, actually taking the field, and the potential to make millions, what can jeopardize an NIL deal? Common sense would dictate to follow the money and the paper trail.

Even more likely is its 21st century equivalent – internet rumors and an errant tweet or text. Some media commentators and online communities speculated that Hunter was promised a substantial NIL deal with online betting site Barstool Sports – where Deion Sanders hosts a podcast – if he joined JSU. This was merely a rumor and probably would have not held any water, had it not been for Barstool founder Dave Portnoy engaging his 2.7 million followers on Dec. 15, 2021: “#barstool millions #nil”.

Portnoy’s activity may have lent credence to the rumor which, if proven true, may have violated the NCAA’s rules on NIL deals. All types of professional careers have been destroyed over mere tweets – imagine how just propagating this inference could taint the earnings potential of a student during a time when the rules are still being written.

This is just one high-profile example, and you can expect the NCAA to get both vigilant and creative about the ways in which they curb perceived illegal activity or unethical agreements.

Possible Inducements And Securing Big Amounts Prior To Posting Big Numbers

Some players have secured life-changing NIL agreements before even playing or starting their college season. That was clearly the case when it was announced that University of Alabama quarterback Bryce Young earned nearly $1 million before taking to the field for the Crimson Tide in 2021. His coach attributed that amount to the combination of the team’s brand and the inherent draw of a quarterback’s position.

Unbelievably, that deal was allegedly surpassed in March 2022, when it was revealed that a high school junior had signed a NIL deal that could be worth nearly $8 million. The NCAA could not impose caps on NIL deals because it would almost inevitably be prevented by virtue of antitrust laws. It is widely believed that an NIL collective is the engine of the agreement. Remember, since the collective is a third-party which pools booster funds and does not formally represent a university, it can circumvent most rules prohibiting inducement for recruiting purposes. Expect to see more huge dollar collectives driving more NIL deals.

It is for these reasons and others that members of Congress are putting forward federal legislation that would close these loopholes, govern NIL laws, and provide guidance for enforcement. Many stakeholders have been nonplussed by our U.S. senators’ grasp of college sports regulation. Furthermore, major world events such as managing the U.S. involvement in the war in the Ukraine are taking priority, so schools and coaches are surprisingly now leaning on the NCAA for stronger leadership and action.

As previously mentioned, the NCAA board is expected to have a preliminary NIL report with recommendations on how to manage NIL by the late spring. Until then, expect players to accept more lucrative – and larger dollar – NIL deals, and the NCAA to beg congress for NIL laws.

Advising clients not to comment on the scope or value of their NIL deals publicly, privately, in writing, and especially on social media may be a great strategy for now. Advisors should let the endorsement speak for itself and quietly cash their checks. Furthermore, they should know that NCAA guidelines are still in effect and a certain level of decorum is required.

Ultimately, NIL laws are creating an unofficial free agency in college sports. How beneficial that could be for athletics and higher education remains to be seen. As of Spring 2022, NIL is legal. Until governing bodies can create a federal framework or the NCAA can properly police it, Pandora’s box has been opened and it is unlikely to close anytime soon.

I have advocated nationally for our college athlete’s ability to monetize and control their NIL for years. Our kids can now earn and protect their financial futures if a career-ending injury or sickness should dash their dreams. They are learning how to negotiate, bargain, deal, and earn while getting a fine education playing their sport. t’s about time.