With Governor Andy Beshear’s June 24, 2021 Executive Order, Kentucky joins a growing minority of states allowing student-athletes to receive compensation for the use of their name, image, and likeness (NIL). Effective July 1, the Order applies to student-athletes at all post-secondary institutions in Kentucky.
The Order prohibits universities and other post-secondary educational institutions from preventing student-athletes from earning NIL compensation and obtaining a certified agent relating to such compensation. Exceptions include: (1) compensation for the student-athlete’s athletic participation in competitions; (2) compensation for endorsement/promotion the postsecondary institution determines is in conflict with an existing endorsement or promotional contract entered into by the institution; and (3) compensation for the use of the student-athletes’ NIL by or at the direction of the institution or for its or another athletic authority, or their officers, directors, employees, or agents. Universities and post-secondary educational institutions may impose reasonable limitations on the dates and times student-athletes may participate in endorsement, promotional, social media, and other activities related to a NIL contract and may likewise create reasonable limitations if the institution determines the student NIL contract is incompatible with or detrimental to the institution’s image, purpose, or stated mission. Post-secondary institutions affected by the Order may also require student-athletes to disclose to a designated institution official any third-party agreement pertaining to compensation for the commercial use of the student’s NIL.
Importantly, the Order imposes a duty on universities and other post-secondary educational institutions to provide financial literacy, social media and brand management, and time management education and resources for student-athletes who earn NIL compensation. Marketing, referrals, or solicitations by any entity or association outside of the post-secondary institution may not be included in the education and resources provided.
To date, nearly 20 states have enacted laws requiring post-secondary educational institutions to allow their students to earn NIL compensation. In addition to Kentucky, 10 other states – Alabama, Florida, Georgia, Illinois, Louisiana, Mississippi, New Mexico, Ohio, Oregon, and Texas – have NIL laws effective on July 1, 2021. The NCAA also recently approved an interim nation-wide policy suspending the NCAA’s former NIL rules, allowing all incoming and current student-athletes, in all sports, the opportunity to monetize their name, image, and likeness. According to the policy, students may engage in NIL activities if the activities are aligned with the law of the state where the student’s school is located and, for athletes who attend school in a state without NIL laws in effect, the policy allows such students to engage in NIL activities without violating NCAA rules.
This unprecedented shift from amateurism creates a significant need for both student-athletes and post-secondary educational institutions to ensure compliance with NIL laws. In addition to Kentucky, other state-regulated institutional compliance includes the following:
Alabama: Requires post-secondary educational institutions to conduct financial literacy and life skills programming for student-athletes. Programming must include information concerning financial aid, debt management, time management, as well as recommended model budgets for student-athletes based on the estimated cost of attendance and scholarship status for each academic year.
Florida: Requires post-secondary educational institutions to conduct a financial literacy and life skills workshop at the beginning of the athlete’s first and third academic years, with specified stipulations.
Georgia: Compels all colleges to provide at least five hours of financial literacy and life skills training during the freshman and sophomore years.
Illinois: Allows post-secondary educational institutions to pay for an independent, third-party administrator to support education, monitoring, disclosures, and reporting related to NIL or voice activities by student-athletes. Provided, however, the third-party administrator cannot be a registered athlete agent.
Louisiana: Requires post-secondary institutions to provide a minimum of five hours of financial literacy and life skills training at the beginning of the student-athlete’s first and third academic years. At minimum, the workshops must include information concerning: financial aid, debt management, a recommended budget for the current academic year, time management skills, and available academic resources. The workshops cannot include marketing, advertising, referral, or solicitation by financial services or products providers.
Texas: Mandates that post-secondary educational institutions require student-athletes to attend a financial literacy and life skills workshop at the beginning of the student’s first and third academic years with the institution.
The NCAA and state NIL policies evidence a revolutionary shift to an open market in college athletics, which will open a plethora of opportunities for NIL collaboration between student-athletes, post-secondary institutions, and private businesses. With no cap on student-athlete compensation, varying regulations among states, and no current regulations at a federal level, the ramifications of this shift to NIL compensation for student-athletes and post-secondary institutions is undetermined.
If you have questions or need assistance in navigating the changes and legal requirements related to NIL compensation, we invite you to contact us.