On October 26, 2022, the NCAA’s Division I Board of Directors unanimously voted to clarify how schools and collectives can be involved with the name, image and likeness (NIL) activities of enrolled student-athletes. The Board found it necessary to provide additional guidance to schools and booster organizations on a number of key questions that have arisen since the adoption of the Interim NIL Policy in July of 2021. The guidance appears to address several questions related to booster organizations known as “collectives” that have been raising funds for NIL activities in cooperation with schools. The guidance defines collectives generally as “NIL Entities” and makes it clear that when it comes to current Student-Athletes, a school cannot:
- Communicate with an NIL Entity regarding a specific Student-Athlete’s request/demand for compensation (for example, a Student-Athlete needs X dollars in NIL money);
- Encourage an NIL Entity to fulfill a Student-Athlete’s request for NIL money; or
- Proactively assist in the development/creation, execution or implementation of a Student-Athlete’s NIL activity.
The guidance also provides some clear examples of what an institution can do with respect to NIL Entities involving current Student-Athletes, including:
- Engage NIL Entities to inform Student-Athletes of NIL opportunities;
- Engage NIL Entities to administer a marketplace that matches Student-Athletes with NIL opportunities without the involvement of the institution;
- Transmit or provide information about NIL opportunities;
- Provide stock, stored photo/video/graphics to an NIL Entity;
- Arrange Space for NIL Entities to meet with Student-Athletes;
- Promote Student-Athletes NIL activity, provided there is no value or cost to the institution; and
- Promote Student-Athletes NIL activity on a paid platform provided the Student-Athlete or NIL entity is paying the going rate for advertisements (such as for in game video board advertisements).
The guidance also reinforces earlier guidance issued in May of 2022 that said that NIL Entities could not organize, facilitate, or arrange a meeting between an NIL Entity and a prospective Student-Athlete or communicate directly or indirectly with a prospective Student-Athlete on behalf of an NIL Entity. The guidance is clearly drawing a distinction between current Student-Athletes and prospective Student-Athletes and making it clear that the rules are different. NIL Entities must steer clear of prospective Student-Athletes and should not engage in conversations with coaches or school staff about arranging compensation arrangements for a prospective Student-Athlete. Similarly, coaches and staff cannot make promises on behalf of NIL Entities when having discussions with prospective Student-Athletes.
The new guidance appears to be another attempt by the NCAA to let collectives and schools know that some of the things that they are currently doing are not acceptable and border on pay-to-play arrangements. In other words, the concept raising and using an NIL fund to entice players to play for a particular school is still against the rules, especially when you connect the NIL fund donors to a prospective Student-Athlete. Existing NCAA policies previously made it clear that when you are making payments to current Student-Athletes, they must be based upon the fair market value for the services that are actually performed. NIL Entities that are organized as not-for-profit entities will need to be able to establish that the money that is paid to a Student-Athlete is fair market value for the services that are actually performed, and not some veiled inducement to play for a school. While for-profit entities have a long history of hiring people to endorse their products and services, it may be harder for a not-for-profit entity to establish an economic justification for paying a Student-Athlete large sums of money.
Ironically, the NCAA guidance comes shortly after the Power 5 conference commissioners (Big Ten, Big 12 SEC, Pac 12, ACC) sent a letter to Congress where they essentially admitted that boosters are inducing high school students and transfer athletes to attend their respective universities with payments that are inaccurately labeled as NIL licenses, with no connection to the value of any endorsement or NIL activity. They went on to encourage Congress to make such actions illegal and then outlined six pillars that they say are integral to a fair, and enforceable, federal framework, including (1) making sure that all students have an opportunity to license their NIL under the same rules; (2) prohibiting all pay-for-play payments and all boosters involvement in recruiting; (3) providing protections for athletes, including assurances that agents are subject to meaningful regulation; (4) banning third parties or agents from obtaining long term rights of a Student-Athlete’s NIL; (5) requiring deals to be commensurate with market rates for the NIL activity and not a veiled inducement or pay-for-play; and (6) requiring athletes to disclose NIL deals to their school.
While the NCAA and the Power 5 Conference Commissioners all appear to be on the same page it appears that some of the individual schools and respective booster organizations are not. We will likely see future NCAA enforcement actions that call out specific behavior of schools and booster organizations. We may also see federal legislation that trumps all of the NCAA and state rules related to NIL activities. Stay tuned because this story isn’t close to being over.
About Steven J. Thayer and NextName: Steven J. Thayer is a founding partner of Handler Thayer, LLP, a nationally recognized law firm and a co-founder of NextName. NextName is an on-line platform that sells digital collectibles of Student-Athletes. The majority of the proceeds received by the company are paid to Student-Athletes in exchange for a license of their name, image and likeness. Fans can support their favorite teams and players by buying player and team tokens and storing them in a digital wallet. For more information about the company click www.nextname.io.