Beginning in 2021, college athletes were, for the first time, allowed to profit off of their name, image, and likeness (NIL). Professional athletes of course have been accustomed to this as a revenue stream for decades, with many making more money from their multi-million-dollar endorsement deals with companies like Nike, PepsiCo, Under Armour, Coca-Cola, Amazon, and Chase than they do from their annual salaries and winnings. On June 21, 2021, the Supreme Court issued its decision in NCAA v. Alston, which held that the NCAA's rules restricting certain education-related benefits for student-athletes violated federal antitrust laws, opening the door to NIL compensation. Despite the significance of this shift, with many student-athletes now making upwards of five, six, or seven figures, there has been minimal official guidance on exactly how this should be regulated (from the NCAA or otherwise). Many states have stepped in and legislated around NIL, but there is no standard regulatory framework for the relevant stakeholders—universities, the NCAA, college athletes, boosters (i.e. representatives of an institution's athletic interests), and NIL collectives (such as Division Street associated with the University of Oregon and the 12th Man+ Fund associated with Texas A&M)—to follow. This sudden change—which effectively stripped the NCAA of its power to implement compensation rules due to potential antitrust violations—has provided more questions than answers. Who can be compensated for NIL? How do compensation structures work? Can college athletes be paid for attending certain institutions? Are college athletes now employees? Can they unionize? While some of these questions are beginning to be answered, others will require additional regulation and guidance.
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Background
While there are several ways for student-athletes to capitalize on their NIL—including licensing agreements, business sponsorships, participation in sports camps, and autograph signings—the method that has represented the biggest change in college sports is the proliferation of collectives. Collectives are entities that are separate from the university and can serve several purposes in the NIL space. They often are formed by boosters or alumni who create school or sport specific entities that raise funds and help create NIL opportunities for student-athletes. Collectives have created a new type of arms race in college sports, where boosters are attempting to use NIL to fund their favorite college teams and outbid competitors for talent. See Ross Dellenger, Big Money Donors Have Stepped out of the Shadows to Create 'Chaotic' NIL Market, SI (May 2, 2022), https://www.si.com/college/2022/05/02/nil-name-image-likeness-experts-divided-over-boosters-laws-recruiting.
NIL stakeholders—including these boosters—are subject to three tiers of laws, rules, and regulations: federal law, state law, and the NCAA Bylaws. Currently, there is no overarching federal law that specifically governs NIL, though several members of Congress have already introduced legislation and the NCAA has been heavily lobbying for a set of standardized laws. Among the biggest priorities on the NCAA's wish list are: (1) a uniform national NIL standard to preempt the patchwork of state laws that have been passed or proposed so that all student-athletes across conferences are operating under the same regulations and certain states do not pass laws that further hamstring the NCAA's regulatory power; (2) limited antitrust protection at a time when the association is increasingly vulnerable to legal challenges so that the NCAA can regain some of the regulatory power it lost after Alston with respect to student athlete compensation; and (3) a designation that student-athletes are not employees of their schools, conferences, or the NCAA, which would further reshape college athletics through granting student-athletes the federal protections that come with the employee classification, including the ability to unionize. See Eric Prisbell, Examining the NCAA's Aggressive Push for Federal NIL Laws, On3NIL (Sept. 25, 2023), https://www.on3.com/nil/news/ncaa-aggressively-pushes-for-federal-nil-bill-corey-booker-lindsey-graham-tommy-tuberville-joe-manchin/.
While there is no uniform federal NIL law, other federal laws, like Title IX, are implicated by the changing landscape. Because 95% of NIL collective dollars are distributed to men, and because collectives often coordinate their activities with colleges and universities, those institutions may be opening themselves up to liability and potential gender-based discrimination lawsuits. See Eric Prisbell, Why NIL and Title IX are 'about to collide,' On3NIL (Sept. 18, 2023), https://www.on3.com/nil/news/why-nil-and-title-ix-are-about-to-collide/.
The state law NIL landscape consists of a patchwork of different legislation that continues to be repealed, revised, and refined in light of the everchanging NIL landscape, with 31 states having some form of state law governing or restricting NIL arrangements.
The NCAA issued interim guidance in July 2021, and altered that guidance in 2022. This guidance included prohibitions on pay-for-play and improper recruiting inducements and required that student-athletes were paid only for work performed. New Interim Policy Key Takeaways, NCAA (July 1, 2021), https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_PolicyKeyTakeaways.pdf. Due to Alston, however, the NCAA did not provide specific and tailored guidance regarding the implementation of NIL to avoid engaging in potential antitrust violations. At the end of 2023, NCAA President Charlie Baker sent a letter to all Division I schools with a proposal that would allow those schools to offer student-athletes "enhanced educational benefits" and enter into NIL licensing opportunities with their student-athletes. Ralph D. Russo, NCAA President Charlie Baker Calls For New Tier of Division I Where Schools Can Pay Athletes, AP News (Dec. 5, 2023), https://apnews.com/article/ncaa-baker-nil-c26542c528df277385fea7167026dbe6. He also proposed the creation of a subdivision of Division I schools with "the highest resources to invest in their student-athletes" to invest at least $30,000 per year into an enhanced educational trust fund for at least half of the institution's eligible student-athletes within the framework of Title IX. Id.
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Recent Developments
The lack of regulation has created uncertainty and risk for those involved and has catalyzed some more targeted action, including by the NCAA, student-athletes, and federal agencies. At the beginning of this year, the NCAA Division I Council approved NIL disclosure and transparency rules, including disclosure requirements, standardized contracts, and comprehensive NIL education for student-athletes. See Meghan Durham Wright, Division I Council Approves NIL Disclosure and Transparency Rules, NCAA (Jan. 10, 2024), https://www.ncaa.org/news/2024/1/10/media-center-division-i-council-approves-nil-disclosure-and-transparency-rules.aspx. These rules will be implemented in August 2024.
The NCAA's latest action—Baker's March 1, 2024 letter to Division I schools halting any investigations into third-party NIL collectives—resulted from an injunction entered in federal court in Tennessee that prohibits the NCAA from punishing any athletes or boosters for negotiating name, image and likeness deals during the recruiting process or while they are in the transfer portal, which had previously been prohibited under NCAA guidelines. See Pete Nakos, Charlie Baker halts NCAA's NIL Investigations Following Preliminary Injunction in Tennessee, On3NIL (Mar. 1, 2024), https://www.on3.com/nil/news/ncaa-issues-updated-nil-guidance-after-preliminary-injunction-decision/; see also Dan Murphy, NCAA Can't Enforce NIL Rules After Judge Grants injunction, ESPN (Feb. 23, 2024), https://www.espn.com/college-sports/story/_/id/39585390/ncaa-enforce-nil-rules-judge-grants-injunction. The underlying case represents a challenge to the NCAA's rules by the attorneys general of Tennessee and Virginia who argue the NCAA is illegally restricting opportunities for student-athletes by preventing them from negotiating the terms of NIL deals prior to deciding where they want to go to school. Id. The court's grant of the preliminary injunction shows that the judge believes that the attorneys general have a reasonable chance of winning their case, which could further shift the regulations that member schools and student-athletes operate under.
Another hot button issue in the NIL world is the potential classification of student-athletes as employees of the colleges or universities for which they play. Student-athletes' push for an employee classification is driven by their desire to have a seat at the table to negotiate compensation, working conditions, practice hours, and travel and the new ability to profit off of their NIL. Most recently, the Dartmouth men's basketball team voted to unionize after the National Labor Relations Board (NLRB) determined that the student-athletes were indeed employees. See Jimmy Golen, Dartmouth Men's Basketball Team Votes to Unionize, Though Steps Remain Before Forming Labor Union, AP News (Mar. 5, 2024), https://apnews.com/article/dartmouth-union-ncaa-basketball-players-2fd912fade62ffd81218a6dc91461962. Additionally, in November 2023, an administrative law judge began proceedings regarding another NLRB complaint against the NCAA, the Pac-12 Conference, and the University of Southern California, alleging that those three entities have been joint employers of the student-athletes because the NCAA and Pac-12 had control over the athletes' working conditions and "administered a common labor policy" with USC regarding those conditions. See Steve Berkowitz, NCAA, Pac-12, USC Trial Begins with NLRB over Athletes' Employment Status, USA Today (Nov. 7, 2023) https://www.usatoday.com/story/sports/college/2023/11/07/ncaa-pac-12-usc-student-athlete-misclassification-trial/71483085007/. If the NLRB prevails, then it could open the door to all student-athletes being classified as employees and covered by the National Labor Relations Act (NLRA) because, although the NLRA only applies to private employers, under the joint employee theory, the NCAA and conferences—both private organizations—would be employers of all student-athletes, regardless of the public or private status of the athlete's college or university.
This issue regarding student-athletes' classification as employees could serve as the next big issue in the NIL landscape, with potentially only a federal legislative solution resolving the issue once and for all.
The Supreme Court's decision in Alston and the NCAA's subsequent guidance on NIL worked a sea change in college sports. The proliferation of donor-funded collectives has further complicated the NIL landscape. College sports will continue to evolve as stakeholders and regulators continue to refine their policies and regulations.
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