NCAA Issues NIL Interim Guidance
On June 21, 2021, the Supreme Court published its opinion in Alston v. NCAA. That opinion affirmed the lower court’s opinion and provided the following:
The NCAA can continue to limit grants-in-aid at not less than the cost of attendance;
The NCAA is allowed to continue to limit compensation and benefits unrelated to education; and
The NCAA is enjoined from placing any restraints on - education related benefits- but can continue to allow limits on education-related benefits (ie- academic or graduation awards or incentives).
This opinion does not touch on the issue of student-athletes’ ability to profit off of their name, image and likeness (NIL). With that being said, after the opinion came down, the NCAA announced that student athletes are able to “participate in NIL Activity,” without jeopardizing their status as a student-athlete. The NCAA issued an Interim Policy. This policy is effective as of July 1, 2021 until congress enacts legislation or the NCAA enacts new rules.
The Policy is vague to say the least, and puts the responsibility of compliance and governance on the University/College (“Institution”) and the student athletes. Before getting into specifics, let’s review some of the basics of the NCAA Policy.
DEFINTIONS
NIL ACTIVITY. NIL Activity is activity that involves the use of an individual’s name, image and likeness for commercial or promotional purposes.
PROFESSIONAL SERVICES. The NCAA explicitly allows for Student Athletes to use a Professional Services Provider for NIL activities, except as otherwise prohibited by state law or executive action. The NIL FAQ defines a Professional Service Provider as an, “Individual who provides third-party services to a prospective or current Student Athlete. It includes, but is not limited to: agent, tax advisors, marketing consultant, attorney, brand management company or anyone who is employed or associated with such persons.”
PAY FOR PLAY. “…Compensation for athletic participation or achievement (e.g., financial incentive based on points scored).” Athletic performance as consideration” for NIL compensation.”
IMPROPER INDUCEMENT. Compensation contingent on enrollment at a particular school.
CONSIDERATIONS FOR THE EDUCATIONAL INSTITUTIONS
State Law. Many states have passed NIL legislation that applies to certain state institutions. Universities must confirm whether their state has such a law. The NCAA explicitly states that it will NCAA will not monitor the Student Athletes for compliance with state law.
Student Reporting. The NCAA does not require that students report their NIL Activities to their Institutions; however, the Interim Policy provides that Student Athletes, “should report NIL Activities consistent with state law and/or institutional requirements.” It follows that Universities can require students to report their NIL Activities. Again, University should consult with counsel to ensure it is complying with any state specific NIL law. Some Universities have promulgated NIL Policies.
NIL Activity Cannot Serve as Improper Inducement or Compensation for Athletic Participation. The NCAA vaguely announces that, “[t]he expectation is that Universities and Student Athletes will not use NIL transactions to compensate for athletic participation or achievement or an an improper inducement.”
NIL Contract Prohibitions. The following prohibitions apply:
NIL Compensation cannot be contingent upon enrollment at a particular school;
NIL contract cannot serve as compensation for athletic participation;
NIL contract cannot serve as compensation for athletic achievement;
Athletic performance cannot serve as consideration for any NIL contract;
NIL Agreements that do not include any work to be performed. (In other words, the NIL Agreement must be a contract for work to be performed, it cannot be just a contract to pay a student-athlete money.)
Institutions cannot enter into a contract that provides compensation to the student-athlete in exchange for the Institution’s use of the student-athlete’s NIL.
Essentially, NIL contracts are permissible so long as the NIL Activity does not constitute Pay-For-Play or an Improper Inducement.
Boosters. It is worth noting that while an institution cannot enter into an agreement with student-athletes, the boosters can enter into agreements with the student-athletes. The NCAA attempts to provide limits on this by stating that Boosters NIL Contracts are allowed, “provided the activity is in accordance with state laws and school policy, is not an impermissible inducement and does not constitute pay-for-play.”
CONSIDERATIONS FOR STUDENT-ATHLETES
Prudent Student-Athletes should consult with a Professional Services Provider to ensure that they are in compliance with all applicable laws and guidance. Below is a high level overview of considerations for Student-Athletes:
Consult the laws of the state of their Institution;
Consult the NIL Policy of their Institution. Confirm whether there are notice and/or reporting requirements.
Consult the NCAA Materials (FAQ, Cycle of an Individual, Interim Policy, Key Takeaways)
Student-Athletes have the freedom to engage a Professional Services Provider to aid in such compliance.
CONSIDERATIONS FOR PROSPECTIVE STUDENT-ATHLETES
To add another wrinkle to this new landscape, the NCAA even provides guidance to Prospective Student-Athletes.
State Laws. The NCAA cautions Prospective Student-Athletes to be aware of the NIL laws of where the athlete lives.
Amateur Governing Bodies. The NCAA cautions Prospective Student-Athletes to be aware of the NIL rules for any “amateur governing bodies.”
NIL Cannot be a Recruiting Inducement. The NCAA reiterates that NIL contracts for Prospective Student-Athletes cannot, “be used as a recruiting inducement or as a substitute for pay-for-play.”
Professional Services Provider. According to the NCAA, Prospective Student Athletes may engage a Professional Services Provider. (See definition above.)
FINAL THOUGHT
The NCAA puts most of the responsibility on the Institutions and the Student-Athletes (prospective/current). This blog simply covers the NCAA Guidance. Institutions and Athletes must confirm the requirements of the state where they reside and the state of their institution. The NCAA guidance does not preempt any state laws. Institutions and Athletes are encouraged to seek advice to confirm NIL contracts are compliant with applicable laws.