In July of 2021, the NCAA instituted an interim NIL policy, that afforded student-athletes the opportunity to profit from their NIL rights, a first in collegiate athletics. We are approaching a year under these new opportunities for our college athletes and overall there was some success but at the end of the day, the NIL policy has brought confusion to universities, college athletes, boosters, etc.
The confusion stems directly from the NCAA interim policy because the policy removed the restriction on student-athletes receiving compensation for NIL but did not enact uniform NIL policies or rules. The only clear guidance was to maintain existing restrictions on recruiting inducements and pay-for-play. With no federal legislation in place, no NCAA NIL rules, and limited precedent on NCAA enforcement under the interim policy, it is important to keep in mind that NIL activities and restrictions vary from state to state and school to school. The attorneys at Gross McGinley, LLP, are here to ensure that our college athletes and NCAA sports organizations legally navigate through the NIL process.
Four Key Aspects of NIL:
The Wild West of NIL
NIL deals have developed an entirely new industry filled with potential legal and compliance issues. Although federal legislation on NIL is the best hope for a consistent framework, there are various issues that schools, coaches, players, and sponsors should keep in mind until such legislation is in place.
At a minimum, compliant NIL deals should (i) require quid pro quo (e.g., payments in exchange for the student-athletes autograph signings, personal appearances, social media posts, etc.); (ii) ensure payments and incentives are not tied to individual or team performance (e.g., no bonus for winning a championship or scoring a certain number of points); and (iii) involve payments commensurate with the fair market value of the services the student-athlete actually provides. Although fair market value for personal services can vary greatly depending on the endorser’s popularity, NIL deals cannot be used as a shell to disguise otherwise illegal payments to student-athletes. If a school’s compliance program identifies a student athlete’s NIL deal that appears on its face to be a clear violation of one of the foregoing principles, further investigation (and documentation showing such investigation occurred) would be warranted.
Carefully Navigate if a School is Directly Involved
Some state NIL laws prohibit schools from facilitating NIL deals for their athletes. Some states do not have such restrictions, but any NIL deal involving a coach or school representative is likely to be subject to further scrutiny as a potential violation of current NCAA policies. Schools and coaches must not only comply with current NIL legislation but must also continue to adhere to long-standing NCAA policies. As a quick tip, the more involvement from the school on the NIL activity, the greater chance that such activity could be considered pay-for-play or improper inducement in violation of both NIL and NCAA policies.
School Intellectual Property
As schools develop their own NIL policies, they should clarify their position on potential conflicts concerning the school’s intellectual property, licensing, and sponsorship deals in compliance with applicable state law. Some schools have allowed student-athletes to use school trademarks and logos in individual NIL deals, while some strictly prohibit sponsored posts from depicting school uniforms or other trademarks. Some state laws allow schools to reject individual student-athlete endorsement deals to the extent they conflict with schoolwide or teamwide sponsorship deals. Sponsors signing student-athlete endorsement deals should consider whether they need separate agreements with schools in order to avoid intellectual property infringement or “ambush marketing” claims.
With inconsistencies among the NCAA, state laws, litigation, and standing precedent, it is important to maintain open flexibility to adapt as circumstances change. Quick tip, all NIL deals should include an amendment mechanism in the event that applicable laws or policies change. Additionally, school NIL policies and compliance protocols should be revisited, refined, and updated as precedent is set in the world of NIL compensation.
Where is NIL Headed?
The NIL market has proven to be lucrative and affords student-athletes a larger share of power than they have ever held before. NIL offers current and future generations of athletes the ability to both pursue their athletic dreams and make money, without the headache of choosing between a single path. NIL topics have garnered interest from both the regulatory and marketing standpoint, and many groups are working to effect changes that will benefit everyone involved in NIL deals. Confusing and frustrating times still lie ahead but the attorneys at Gross McGinley, LLP, are here to help you navigate this new market. As Spring of 2022, and the second fall of NIL sponsorships, graces us, we are ready to work through any surprises, challenges, and precedential clarity that is provided so that our schools, student-athletes, and businesses can capitalize on the NIL model.
The content found in this resource is for informational reference use only and is not considered legal advice. Laws at all levels of government change frequently and the information found here may be or become outdated. It is recommended to consult your attorney for the most up-to-date information regarding current laws and legal matters.