On Wednesday October 26, 2022, Division I schools received clarification from the National Collegiate Athletic Association (“NCAA”) on their involvement in Name, Image and Likeness (“NIL”) activities. The Division I Board of Directors (the “Board”) voted unanimously to issue new guidance to member schools to clarify how existing NCAA rules apply to the Interim NIL Policy.
This Interim NIL Policy was announced and became effective July 1, 2021, shortly after the Supreme Court issued a landmark decision in National Collegiate Athletic Association v. Alston, bringing about fundamental change for collegiate athletes seeking benefits and compensation in connection with their athletic performance. In Alston, the Court unanimously struck down the NCAA’s limitation on education-related benefits for student-athletes. While the main holding packed a punch, Justice Kavanaugh’s concurrence and critique of the NCAA spoke volumes and sparked change. Justice Kavanaugh concluded “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. . . . The NCAA is not above the law.”
Since then, the NCAA has taken a very “hands off” approach, which led to individual states taking action. Approximately 29 states have passed legislation allowing student-athletes to capitalize on and monetize their NIL. A number of other states, including New York (Senate Bill S5891F), have proposed legislation in the pipeline. Since New York has no signed NIL law and there is no federal legislation, New York student-athletes and member schools must abide by the NCAA policies and guidance, the school’s NIL policy (if any) and the conference’s NIL policy (if any).
Education and monitoring for current student-athletes
The Board noted that schools should provide education to current student-athletes, including topics on financial literacy, taxes, social media practices and entrepreneurship. This education can also extend to collectives, boosters and prospective student-athletes. Programs such as athletic department-wide presentations, classes, guest speakers and the like are all excellent examples and opportunities to educate. The board also noted that – when permitted by applicable state laws – schools should require student-athletes to report NIL activities to the athletics department.
School support for student-athlete NIL activities and revenue sharing/compensation
The Board further clarified school support for student-athlete NIL activities regarding revenue sharing and compensation. Under the Interim NIL Policy, schools can inform student-athletes of potential NIL opportunities and work with an NIL entity, however a school cannot enter into contracts with athletes for the sale of products related to the student-athlete’s NIL. The new guidance prohibits schools, athletic staff members and third party agents or rights holders acting on behalf of the athletics department from representing enrolled student-athletes for NIL deals, including securing and negotiating deals on behalf of the student-athlete or NIL entity (e.g., a collective). Schools cannot provide free services (most notably, contract review) to student-athletes to aid in NIL activities unless those services are available to the general student body. These rules increase the importance of the education component section of the guidance -- student-athletes must be aware they may need legal support and advice to properly understand contracts they sign.
It was likewise clarified coaches and other staff members are prohibited from providing NIL deals to student-athletes through their own businesses, including paying athletes to promote the coach’s camp. Student-athletes are also prohibited from receiving compensation for promoting an athletics competition in which they participate.
School involvement with a collective and other NIL entities
Under the Interim NIL policy, questions persist about schools and/or school personnel involvement with collectives and other NIL entities. For reference, a collective is an organization formed to benefit student-athletes, usually at a specific institution. The basic principle of most collectives is that an alum, or group of alums, form a company with a goal of funneling NIL opportunities for student-athletes of that institution. In May of this year, the NCAA released guidance clarifying that a collective falls under the purview of the NCAA’s definition of “booster,” which means they are precluded from recruiting and/or providing benefits to prospective student-athletes.
The newly released guidance makes it clear there are permissible ways for coaches and other school personnel to engage with collectives. School personnel, including coaches, can assist with fundraising activities through appearances or by providing autographed memorabilia. However, they cannot donate cash directly to the collective or other NIL entity, and they cannot be employed by, or have an ownership stake in, an outside NIL entity. Schools are also permitted to request donors to provide funds to the collective and other NIL entities, provided the schools do not request those funds be directed to a specific sport or student-athletes. Schools also can provide tickets or suites to NIL entities through sponsorship agreements, provided the terms of those agreements are the same as for other sponsors. Those same assets cannot be offered as an incentive to provide funds to an NIL entity.
In this guidance, the NCAA has adopted a new standard for potential violations that places a substantial burden on member schools. Where available information indicates a school engaged in impermissible conduct under the NIL Interim Policy, the NCAA “will presume a violation occurred unless the school clearly demonstrates that the behaviors in question were in line with existing NCAA rules and the interim policy.” This leaves schools with a lot of vagueness, uncertainty and an uphill battle if there is a question of a potential violation. The board reiterated the purpose of this guidance, and others regarding the NIL Interim Policy, is “not intended to question the eligibility of enrolled student-athletes.”
It’s important to remember a New York school policy may be more restrictive than what is allowed under this new guidance. With the fast-changing NIL landscape, it is vital to stay abreast of NCAA NIL policies and guidance, the New York NIL bill and any potential federal bills.
