NIL Update – Should Student Athletes Seek Professional Advice?
Stites & Harbison Client Alert, August 27, 2021
On July 1, 2021, several state laws allowing student athletes to profit from their name, image and likeness (“NIL”) went into effect. The NCAA also adopted an interim NIL policy allowing student athletes in any State to receive monetary compensation for their NIL. For a brief discussion regarding state NIL laws, please see our July 2 article, Kentucky Joins Growing Number of States Allowing Student-Athletes to Receive Name, Image, Likeness (NIL) Compensation - Stites & Harbison.
Most recently, the NCAA announced that it would hold a constitutional convention to “explore proposals for a new system of governance and rules enforcement that examines the role of the NCAA's national oversight.” It is unclear what changes the NCAA will make, but they will likely be far-reaching. It will be important to learn how, after months of unregulated NIL dealings, the NCAA will enforce NIL-specific rules. It will also be interesting to see how the States and Congress react to limitations placed on NIL dealings by the NCAA.
Less than two months ago, there was very little regulation concerning student athletes and NIL deal-making. However, looming NCAA intervention and ever-increasing university rules on deal making have created a complex NIL marketplace. Accordingly, more and more athletes are signing deals with professional advisors, like marketing agencies, sports agents, and attorneys.
Why should student athletes seek professional advice before signing NIL deals?
You may wonder why a student athlete would seek the advice of a professional advisor. After all, before July 1, 2021, it was against NCAA rules for student athletes to sign with a professional agent. It seems obvious why someone like Bryce Young – the Alabama quarterback rumored to have signed NIL deals estimated at $1,000,000 – would hire outside representation. However, there are several reasons why student athletes at all levels should seek professional advice when making NIL deals, including the following:
- Universities cannot represent student athletes concerning NIL.
Universities across the country have created in-house NIL programs that provide online deal making platforms and digital marketing advice to student athletes. While these programs are great resources for student athletes and should be utilized, schools cannot negotiate or represent student athletes in NIL deals. Thus, universities cannot not provide direct guidance concerning negotiating and drafting contracts.
Contract issues arise in every NIL deal and the terms may be complex, particularly with respect to the athlete’s intellectual property rights in their NIL. College athletes do not have a union and thus, do not have a collectively bargained form-contract like those offered by many professional leagues. Instead, student athletes will be presented with unique contracts and terms, and many entities will attempt to slip fine print into a contract that negatively impacts an athlete’s brand. For example, a company called YOKE gaming, which allows people to play video games with athletes, offered to pay athletes around $20 in exchange for an endorsement on social media. Several members of the Iowa football team signed up but did not realize that in making the deal they granted YOKE perpetual, royalty-free, and irrevocable rights to use the content. Put simply, because the students failed to fully vet the contract language, instead of receiving payment for each use of their NIL, the athletes granted YOKE free use of their NIL forever.
The Iowa football players will not be the last athletes to be preyed upon by bad actors. Unfortunately, the current laws granting NIL rights to non-professional athletes fail to provide clear protection for athletes. Accordingly, the onus is on the athletes to protect their brand by hiring an outside professional to provide guidance, negotiate on the athlete’s behalf, and review and draft contracts.
- Rules are coming.
On August 2, 2021, the NCAA announced that it would hold a constitutional convention to “explore proposals for a new system of governance and rules enforcement that examines the role of the NCAA's national oversight.” This announcement comes on the heels of one of the wildest months in the history of college sports. The NCAA’s inability to adapt led to States forcing open the floodgates to allow compensation to student athletes for their NIL. The NCAA was left without an enforcement procedure and the States did not provide for regulation within their borders. As such, the NIL marketplace is, for the most part, unpoliced. It is difficult to determine if certain athletes are being paid fair market value for their NIL or if athletes are being paid for the athletic performance (notably, payments for athletic performance are still prohibited by NCAA rules and State law). The NCAA will address this during their convention, but the convention is not until November 2021, and it is unlikely the NCAA will have an enforcement plan completed by then.
For now, athletic departments are creating university-specific rules to comply with State laws and existing NCAA rules. For example, the University of Louisville recently advised its student athletes to cease all relationships with Barstool Sports. The University stated that Barstool does not comply with the University’s policies or Kentucky’s executive order allowing student athletes to profit from their NIL. The University’s position most likely stems from Barstool’s 36% ownership interest in Penn National, a company that owns and operates casinos and hotels nationwide, and advertising of tobacco and alcohol products on Barstool’s digital platforms. This is just one example of how schools are cracking down on NIL deal-making. Universities are also concerned with pay-for-play payments to recruits and performance payments to current athletes. To monitor athletes dealings, schools have instituted reporting requirements that mandate all athletes, including incoming freshman, report all NIL deals.
In summary, it is always a good idea to obtain advice from a professional, especially when navigating a new and unregulated marketplace. The decision to seek professional advice is different for all athletes but it is an option worth consideration, particularly in light of the recent changes related to NIL.