In the world of college athletics, the introduction of name, image, and likeness (NIL) rights on 1 July 2021 revolutionized the landscape for student-athletes, presenting new challenges and opportunities for student-athletes. This article, aimed at conference commissioners, legislators, NIL collectives, college leaders, athletic directors, and current and prospective student-athletes and their families, offers a critical understanding of these changes and challenges. It provides a thorough exploration of NIL rights, examining the evolving roles and responsibilities of key stakeholders and offering strategies to navigate this new era.
This article is designed to provide key stakeholders, ranging from policymakers to student-athletes, with crucial knowledge and practical advice for navigating the challenges and possibilities presented by NIL in college athletics.
Historical Backdrop: The Tipping Point in Student-Athlete Compensation
The turning point in this debate was the landmark 2014 case O’Bannon v. NCAA,[1] in which former UCLA basketball player Ed O’Bannon challenged the NCAA’s use of former student-athletes’ likenesses in video games without compensation. The case set in motion a series of events that culminated in state-level legislation and NCAA policy changes. This legal challenge highlighted the growing discontent among former student-athletes over the uncompensated use of their name, image, or likeness, especially in popular video games like EA Sports’ NCAA Football series. In 2013, EA Sports discontinued its NCAA College Football series, a decision influenced by legal pressures and the changing landscape of athlete rights.[2] The discontinuation of this video game after years of success and popularity demonstrates the significant impact of NIL debates on commercial interests in college athletics.
Understanding NIL: A New Frontier for Student-Athletes
NIL rights refer to the rights of student-athletes to monetize their personal brand while retaining their NCAA amateur status. Under the new NIL guidelines, student-athletes can now earn money through endorsements, social media influence, personal appearances, and other entrepreneurial ventures that utilize their name, image, or likeness.
Who Can Contribute to NIL Deals?
- Corporations and Small Businesses: From national brands to local enterprises, businesses are keen to tie their products to popular college athletes.
- Individual Donors: Alumni and fans can now support student-athletes directly, although they must navigate NCAA regulations to ensure compliance.[3]
- Community and Non-Profit Organizations: These groups can collaborate with student-athletes for promotional activities and community service initiatives.
Notably, colleges and universities, and individuals associated with a college or university, are prohibited from directly paying student-athletes. This ensures a clear distinction remains between compensation from external sources and compensation from colleges and universities.
Navigating the Risks in the NIL Landscape
As they enter deals under the new NIL guidelines, it’s crucial for student-athletes and donors alike to be aware of—and take steps to mitigate—the following potential risks and challenges:
- Due Diligence – Know Your Donor (KYD): Colleges and universities and student-athletes must be thorough in identifying the sources of their endorsements. Associations with illicit businesses or individuals can lead to significant legal and reputational harm.
- Money Laundering: The increase in financial transactions with NIL deals necessitates anti-money laundering (AML) controls to prevent inadvertent involvement in illicit activities. Both corporate and individual donors must be vigilant, implementing robust checks against risks like money laundering. Similarly, student-athletes need to be discerning about their endorsements, ensuring partnerships are with credible entities. Vigilance and thorough vetting are vital for all parties in NIL deals to mitigate risks of exploitation or unethical practices.
- Tax Liabilities: Student-athletes must understand and fulfill their tax obligations arising from NIL income. Inadequate tax management can lead to unforeseen financial penalties.
- Clawback Clauses: Some contracts may include provisions allowing companies to reclaim payments under specific circumstances, a critical consideration for student-athletes while signing deals.
Navigating NIL agreements requires informed decisions and professional advice. Student-athletes should consider consulting licensed professionals, attorneys, or accountants for advice on contract negotiations and financial management. Educational programs can also provide vital knowledge about NIL rights and responsibilities. Donors must ensure compliance with NCAA rules and legal standards, often seeking expertise from compliance firms like K2 Integrity for due diligence and risk assessment. Legal advice is also beneficial for understanding NIL regulations. For all involved in NIL, accessing appropriate resources and guidance is essential for informed decision-making and risk management.
Understanding and Mitigating Competitive Imbalance
One of the most debated aspects of the establishment of NIL rights is its potential to create competitive imbalances among college programs. This concern stems from the reality that schools with larger, more affluent fan bases and deeper connections to wealthy donors and businesses may have a significant advantage in attracting top-tier talent. The fear is that high-profile programs might leverage NIL opportunities to beat out smaller schools, further widening the gap in recruiting and overall competitiveness.
To address competitive imbalances, it’s crucial for the NCAA and individual conferences to consider regulations that maintain competitive fairness while respecting student-athletes’ rights to be compensated for their NIL. This could involve:
- Revenue Sharing Models: Pooling a portion of NIL earnings for redistribution could help level the playing field. This approach aims to provide equitable support to student-athletes across various programs, regardless of the program’s financial strength (i.e., revenue- vs non-revenue-generating sports).
- Caps on Endorsement Deals: Implementing a cap on the value of endorsement deals is a debated strategy. It could create a more balanced competitive environment but faces potential legal and ethical challenges. The feasibility of this approach would require careful consideration of both student-athletes’ rights and market dynamics.
- Enhanced Support for Smaller Programs: Providing additional resources and support to less affluent athletic programs could help improve competition. This support could be in the form of marketing assistance, financial grants, or educational resources to help student-athletes and programs navigate NIL opportunities effectively.
- Uniformity in NIL Regulations: NIL rules currently vary from state to state, with state laws superseding NCAA rules. This patchwork of regulations can create disparities, as some states offer more lenient or advantageous conditions for NIL deals. Uniform national standards or federal legislation is needed to minimize these disparities and create a more level playing field.
- Collaborative Oversight Mechanisms: Establishing joint committees or working groups comprising representatives from various states, institutions, and athletic conferences could facilitate better coordination and oversight. This collaborative approach could aid in developing a consensus on standardizing NIL practices and addressing legal disparities between states.
By implementing these strategies, the NCAA can aim for a balanced environment where opportunities through NIL are available more equitably, preserving the competitive integrity and spirit of college athletics.
Call to Action in U.S. House of Representatives
At a 17 October 2023 Senate Judiciary Committee hearing,[4] a bipartisan panel of senators, including Sen. Lindsey Graham (R-SC) and Sen. Richard Blumenthal (D-CT), along with representatives from the NCAA and several college and university athletic departments, discussed the need for a unified approach to NIL policies in college athletics. There was a consensus on the urgency of creating a national standard to streamline NIL deals and resolve the current patchwork of state laws.
The hearing, sparked by the NCAA v. Alston Supreme Court decision,[5] explored the implications of potentially recognizing student-athletes as employees under the Fair Labor Standards Act. NCAA President Charlie Baker and other witnesses, including Jill Bodensteiner of Saint Joseph’s University, stressed the adverse impacts this shift could have on college athletics.
Proposals for granting employee status to student-athletes, specifically in high-revenue generating sports, found little support among committee members. Issues such as medical trust funds for athletes were also discussed, but the primary focus remained on preventing the fragmentation of NIL regulations and ensuring equitable treatment of student-athletes across all sports. The Senate Judiciary Committee hearing made it clear that senators from both parties acknowledge the flaws in the current NIL system. The committee emphasized the need for Congress to step in and establish fair and protective rules for student-athletes in all sports, with the goal of bringing greater clarity and equity to NIL agreements.
The Future of NIL: A Balanced Approach
The introduction of NIL rights is a monumental step in recognizing the value and influence of student-athletes. However, it’s crucial to balance these new opportunities with the integrity of college athletics and the well-being of student-athletes. Institutions, student-athletes, and stakeholders must work together to navigate this new era, ensuring that the spirit of college athletics remains intact while adapting to the evolving landscape of student-athlete compensation. This collaborative oversight will provide the necessary framework for student-athletes to appropriately monetize their talents and influence.
Proactive Steps for Stakeholders: Ensuring Integrity in NIL Agreements
It’s essential for conference commissioners, legislators, NIL collectives, college and university executives, athletic directors, and student-athletes and their families to take early action in grasping and applying effective controls in the NIL arena. Active involvement with relevant resources, expert advice, and educational programs enables these key stakeholders to significantly contribute to a well-regulated and ethical NIL environment. Such forward-thinking measures not only protect against financial pitfalls but also guarantee that the development of NIL agreements remains aligned with the principles of fairness and integrity, reflecting the overarching goals of college athletics.
[1] O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049 (9th Cir. 2015), https://casetext.com/case/obannon-v-natl-collegiate-athletic-assn-10.
[2] In 2014, EA Sports, the NCAA, and the Collegiate Licensing Company (the NCAA’s primary licensing agent) settled a class-action lawsuit for $60 million. This lawsuit, filed by college athletes, alleged the unauthorized use of their names, images, and likenesses in NCAA football video games released between 1997 and 2013, as well as NCAA basketball video games released from 1998 to 2009.
[3] For example, NCAA regulations state that donors cannot make contributions to NIL entities that are contingent on a student-athlete’s enrollment at a particular school or on athletic performance; be involved in arranging or negotiating NIL deals on behalf of student-athletes; provide compensation to student-athletes for their athletic performance; or disclose their contributions to NIL entities to the school where the student-athlete is enrolled.
[4] https://www.lexology.com/library/detail.aspx?g=e3bdac70-bbde-4076-9667-273d99e5e31c.
[5] In 2021, the U.S. Supreme Court unanimously sided with student-athletes in an antitrust challenge to the NCAA’s rules against compensating athletes. NCAA v. Alston, 141 S. Ct. 2141 (2021), https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf.
