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NCAA Rules to Be Aware of Before Reaching an NIL Deal

The National Collegiate Athletic Association (NCAA) recently issued new guidance regarding name, image, and likeness (NIL) endorsement deals with college athletes. The NCAA’s most recent guidance aims to provide clarity on NIL rules and is important for all businesses entering NIL deals with collegiate athletes, as well as colleges and universities subject to NCAA rules.

The NCAA’s Past Guidance

In July 2021, the NCAA released its Interim NIL Policy. The Policy recognized some states were enacting laws permitting college athletes to enter NIL deals, and permitted NIL activity that complied with those state laws. For student athletes in states without NIL laws, the Policy indicated they would not automatically lose their eligibility to compete as amateurs for entering NIL deals.

The NCAA provided further guidance in November 2021, when it released a NIL Question and Answer document. The Q&A clarified that NIL deals are permissible only if based upon a true quid pro quo arrangement. The NCAA prohibited NIL deals that are contingent upon an athlete’s enrollment at a certain school or upon athletic performance.

In May 2022, the NCAA released interim guidance regarding third-party involvement in NIL deals. This guidance introduced a requirement that the legitimacy of each NIL deal be based on a case-by-case analysis of the value a given athlete’s endorsement would bring.

The NCAA’s October 2022 Guidance

New guidance, issued on October 26, 2022 (the “Guidance”), provides a non-exhaustive list of permissible and impermissible activities divided into four categories:

Institutional Education and Monitoring

The Guidance clarifies that it is permissible for schools to require student athletes to report NIL deals to their institution. It also indicates that schools are allowed to provide student athletes, boosters, and other entities with NIL-related educational sessions.

Institutional Support for NIL Activity

The Guidance clarifies what support schools can provide student athletes who enter NIL deals. Schools are allowed to inform student athletes about available NIL deals and are allowed to create a “marketplace” that can be used to match student athletes with NIL opportunities. Schools can promote a student athlete’s NIL activity when there is no cost (for example, sharing a post from a school’s official social media account). Schools can even promote a student athlete’s NIL activities on the school’s own paid platforms – as long as it requires the student athlete to pay the “going rate” charged to others who advertise on those platforms.

The Guidance prohibits schools from providing access to services, such as contract review and tax preparation, and equipment (like cameras and computers) needed to support NIL activity, unless such access is available to all students. The Guidance also prohibits student athletes from promoting their endorsements at practices, postgame activities and press conferences.

Institutional Support for NIL Entities and Collectives

The Guidance clarifies the involvement schools are permitted to have with NIL entities, such as “Collectives” that have been established to help provide student athletes access to NIL opportunities. The Guidance allows schools to ask donors to make contributions to NIL entities and facilitate meetings between NIL entities and potential donors.

Negotiating and Revenue Sharing for NIL Deals

The Guidance addresses rules for NIL negotiations, clarifying that members of a school’s athletics department cannot act as agents for enrolled student athletes. The Guidance specifies that schools are not allowed to enter contracts with student athletes to purchase products that student athletes endorse in their NIL agreements.

Takeaways for Businesses Considering Endorsements

Businesses entering NIL endorsement deals with student athletes should be cognizant of these key considerations:

The overarching goals of the NCAA: The NCAA remains committed to the elimination of pay-for-play arrangements. Businesses must be cautious about entering into NIL agreements that may appear intended to entice athletes to attend or remain at a particular institution.

The market value of the athlete’s endorsement: Even otherwise compliant agreements may violate the NCAA’s rules if the compensation provided does not match the value of an athlete’s endorsement. Unjustifiably high compensation can make an agreement look like it was actually provided in exchange for an agreement to come to a certain school. Businesses should be able to justify each NIL agreement using objective factors, such as the frequency of endorsements an athlete will provide, or the range of consumers the endorsement might reach given the athlete’s social media presence.

The evolving legal landscape of NIL laws: Because there is no federal law governing NIL deals, and because the NCAA’s Interim NIL Policy permits athletes to engage in NIL activity that complies with applicable state law, each NIL deal should be reviewed to ensure compliance with any applicable state law.

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