Why sports lawyers should study the NCAA’s newest NIL memo

July 2023 marked two years since the National Collegiate Athletic Association (NCAA) adopted interim guidelines for college players to earn income while playing for a school. Though it was a first, the momentum for players’ rights had been building for years and culminated in the landmark decision handed down by the Supreme Court of the United States in American Athletic Conference et al. v. Alston et al. Furthermore, it finally cleared a path for states and schools to create their own state laws and policies regarding name, image and likeness rights (NIL).

However, the NCAA recently moved the goalpost for participating schools to preempt state laws, with NIL and fundraising at the heart of it all. This legal maneuvering calls into question whether NCAA rules supersede state laws, particularly in the absence of a current federal framework.

States and schools are reacting quickly with new targeted legislation, so let’s discuss how to unmash the latest NIL potatoes.

A brief replay

Since 2021 and with the protections inferred by the decision in Alston, unfair labor practice claims further legitimized the notion that student-athletes had legal rights to earn substantial NIL payments. States continued drafting and enacting NIL laws to help guide players, teams and schools in lieu of a federal framework. More than 30 states have since passed NIL laws, some states passing more than one, and more have proposed new bills – most of which aim at weakening or sinking the NCAA rules.

In Spring 2023, House Bill 2804 was making its way to Texas Gov. Gregg Abbott’s desk for enactment on July 1. The bill allowed school fundraising groups to spend money on NIL endorsements, and fans who donated could earn special benefits, such as schools giving fans priority for game tickets.

The NCAA unsurprisingly took issue with this, considering that $2 billion of its reported $19 billion revenues from 2019 was generated by ticket sales. As live sporting events inch back toward pre-pandemic attendance levels, the NCAA certainly wants to recapture the financial glory.

Ahead of Governor Abbott signing the bill into law, the NCAA issued a memo to member schools in Texas (and many in the Southeast Conference) that they must follow association rules even if they conflict with state laws, and that entities such as school foundations are prohibited from NIL and offering donor incentives. On June 27, Sports Illustrated got ahold of the memo, and many legal and media spectators put special emphasis on the answer to Question No. 6, which stated that all schools are “required” to comply with the NCAA despite their own state laws.

Schools are pushing back and citing the Tenth Amendment, which states: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The current legal quicksand transcends the Southeastern Conference. In New York, legislation was passed in November 2022, allowing students to receive compensation for their NIL without forfeiting scholarships or eligibility to participate in collegiate athletics. Gov. Kathy Hochul strengthened these protections in early July 2023, signing a separate state law making it illegal for the NCAA to prohibit New York schools from facilitating NIL arrangements for its athletes. The New York law also forbids the NCAA from punishing a New York school for any rule violation that involves a NIL deal.

Against this explosive backdrop and the recent wave of countrywide state legislation, the NCAA’s ability to prevent any conduct, punishment or otherwise is up for serious debate. Ultimately, the NCAA is betting big on the idea that it can seize the moment since no federal legislation will be passed any time soon.

The NCAA continues in the memo to tell schools to either change the rules through the organization’s procedures or leave the association if they feel they are being treated unfairly.

A playbook for extended legal options

Ahead of the Fall season of play, it is highly likely the first school to violate NCAA rules will claim protection under state law and argue their position in the courts. Considering how Alston changed the landscape, it is surprising the NCAA chose this strategy, because if the association loses, it will essentially be defanged.

Therefore, outside counsel might consider crafting a few strategies for clients – in the short- and long-terms, as well as conditional ones. The first step is to review state law, if any, and identify the remedies for breach by the NCAA.

Next, create a plan for the current climate as well as one that might reflect the NCAA maintaining its hold in the short-run. This is the more likely scenario in the absence of a federal framework. Schools will want to conduct business as usual and have a reputation for winning on the field, and perhaps not necessarily for relying on the court.

Waiting for the Fed

Several federal bills have been introduced by members of Congress, some on a bipartisan basis, to help govern NIL and usher in a new era of off-the-field sports matters.

A federal NIL framework would set a precedent for future generations and truly promote equity among schools and players. From the outset, a federal framework would eliminate the aforementioned cacophony of state rules and college-written guidelines and replace it with a uniform code, bill, or act, that should level the national landscape.

Unfortunately, the interest among lawmakers waxes and wanes. Now is the time for all of us to offer input and feedback to our lawmakers, via bar association committees and our individual efforts. More importantly, our work could help get federal legislation over the goal line and put an end to the compliance quagmires.

Looking to the next round of guidance

The NCAA ultimately wants to gnash its teeth again and is betting big on the idea that federal legislation will not be passed any time soon, so they can reclaim their financial stranglehold.

It will be a short matter of time before the violation of an NCAA policy based on NIL is heard by a judge. Pay close attention to the outcomes, as they will indicate how players can leverage NIL policies during this transitional time. These court battles may now be the battle cry for Congress to finally pass a comprehensive federal framework that students, schools, lawyers and other stakeholders need and clearly want.