Steven J. Thayer, Founder, NextName
Partner, Handler Thayer, LLP
In 2021, the Supreme Court permanently altered the landscape of collegiate athletics. In NCAA vs. Alston, past and present D1 athletes sued to prevent the enforcement of NCAA compensation rules that restricted a student-athlete’s ability to receive compensation and other education-related benefits. The Supreme Court unanimously held in favor of the student-athletes. In light of the ruling, the NCAA changed their rules to permit a student-athlete to receive compensation related to their name, image, and likeness (“NIL”). While the Supreme Court opened the door for compensation arrangements for student-athletes, the current landscape of new school rules and state laws have created a complex web for student-athletes to navigate.
The New Playing Field
While student-athletes can now be compensated for their NIL, they remain subject to certain NCAA rules, school rules, and state law. NCAA rules still prohibit pay-for-play arrangements that attempt to induce a student-athlete to attend a particular school. Schools have also created rules that restrict a student-athlete’s ability to use school names and trademarks. Some schools also prohibit school staff from participating in arranging NIL contracts, while other schools encourage it. Several states also passed laws that impact a student-athlete’s ability to profit from their NIL. While some states passed laws to encourage and support NIL activities, other states took a more restrictive approach and tried to limit the role that a school could play in NIL contracts. Some states have already amended and repealed their laws after realizing that their laws made it more difficult for student-athletes in their state compared to states that have no such laws. Sports enthusiasts, schools, and lawmakers across the country are now demanding a federal legal solution to level the playing field for college sports. For now, student-athletes who plan to attend schools that have no rules and that are located in states with no laws, will just have to comply with NCAA rules. Student-athletes that plan to attend schools that have their own rules will need to comply with school rules, NCAA rules, and any additional state laws.
After the Supreme Court ruling, the NCAA released a policy statement saying that it has: (1) authority to adopt reasonable rules, (2) the ability to determine what are truly educational benefits, and (3) a commitment to working with Congress to chart a path forward. While the NCAA is committed to working with Congress for federal NIL legislation, it created an Interim NIL Policy in the meantime. The Interim Policy takes a hands-off approach to most NIL activity but reinforces its prohibition on pay-for-play schemes or other improper inducements to attend a particular educational institution.
For states with NIL laws in effect, NIL contracts must be consistent with state law, and compliance will be monitored by the state, NOT the NCAA. The NCAA will likely be focused only on preventing pay-for-play deals and impermissible inducements, since those rules remain on the books after Alston. Since this Interim Policy was announced, the NCAA’s position has remained mostly unchanged. The only additional NCAA guidance came on May 9, 2022, when the NCAA made it clear that boosters include “any third-party entity that promotes an athletics program, assists with recruiting or assists with providing benefits to recruits, enrolled student-athletes or their family members.” The NCAA then made it clear that the “collectives” that have formed across the country to support NIL efforts of players are clearly boosters that are subject to their regulations. The NCAA stated that it would pursue violations that are “clearly contrary to the published interim policy, including the most severe violations.”
The State Law Response
The NCAA’s interim NIL policy opened the door for states to develop their own laws and rules related to NIL. Some states established NIL “trigger laws” before Alston was decided to make sure that the NCAA would be forced to change their rules regardless of the outcome of the Supreme Court case. Some of the first states to pass laws, however, quickly realized that their NIL laws may create more restrictive environment for student-athletes than states that have no laws, putting their native colleges at a recruiting disadvantage. There are essentially three approaches that states have taken with respect to a school’s ability to assist with NIL contracts: (1) states without any NIL laws on the books, (2) states with NIL laws on the books that allow schools to be involved in NIL contracts, and (3) states with NIL laws on the books that prohibit a school’s involvement with NIL contracts. In (1) and (2), schools can assist with NIL contracts for current student-athletes, so long as these deals were not contingent on a student-athlete’s enrollment or continued enrollment at their particular institution. This gives schools in states like Illinois, California, and Indiana, a major recruitment advantage over states where university assistance is prohibited.
In states where schools are prohibited from facilitating NIL contracts, coaches cannot speak on NIL opportunities at all, and it is the student-athlete’s responsibility to find their own deals. In these states, a school may not put players in touch with businesses seeking NIL contracts. In states that are more restrictive, school staff is forced to walk the fine line between educating student-athletes about NIL generally and assisting them with specific NIL contract opportunities. Many states that started with a prohibition on school cooperation have amended their laws to now permit schools to cooperate. Illinois, Mississippi, Tennessee, and Louisiana are all states that have since amended their state laws to allow for university NIL facilitation, while Alabama repealed its NIL law altogether. The pressure for states to either amend or abandon state laws or pass more favorable ones, is mounting.
NIL collectives are a group of third parties, usually alumni of specific institutions, who pool money and other NIL opportunities for student-athletes. The NCAA clarified that collectives are boosters and therefore may not directly or indirectly (i.e., through the coaches) recruit for the school, and are prohibited from providing benefits to prospective student-athletes. Agreements between current student-athletes and boosters/collectives may not be guaranteed or contingent on initial or continuing enrollment at a particular institution. This guidance appears to be more of a warning to collectives than a full-fledged investigation into past practices. The NCAA’s intention likely was to put schools and students on notice to NIL practices that appeared too close to rule violations and issued the above guidance to mitigate against these practices.
Given that Alston is barely a year old, there will likely be more changes in the NIL landscape going forward. While the NCAA is hoping for federal legislation, some schools appear to be embracing the new era and moving quickly to take advantage of it. There is even talk of new divisions and new leagues among elite college programs that may leave the NCAA altogether. What is clear is that schools that do nothing will start to fall behind in the recruiting game and will quickly realize that they cannot compete with schools and states that have embraced NIL opportunities for players.
The new world of college sports has arrived and it’s time for schools to either step up to play the game or allow their players to be left behind.
Steven J. Thayer, is co-founder of NextName, an on-line platform that sells digital collectibles of student-athletes.