Historically, student-athletes have been prohibited from being compensated for their play in any form outside of scholarships covering the cost of attendance at their school. While the NCAA generates billions of dollars in revenue annually, NCAA rules have consistently restricted student-athletes’ ability to receive compensation. The NCAA begrudgingly voted to loosen some of its restrictions on student-athlete compensation in June 2021 after a unanimous loss before the U.S. Supreme Court in NCAA v. Alston. It has now been a little over a year since the NCAA adopted an interim policy to allow student-athletes to be compensated for use of their name, image, and likeness (“NIL”), and while the NCAA Division I Board of Directors issued a statement in May 2022 offering broad guidance targeted at boosters in an effort to crack down on potential violations, the NCAA has still not issued further detailed guidance in hopes that Congress will adopt federal legislation instead.
While the interim policy does allow student-athletes to receive compensation from third parties in exchange for use of their NIL, the interim rules continue the NCAA’s prohibition on pay-for-play and improper recruiting inducements.
The NCAA interim policy still does not allow student-athletes to receive any compensation from their school, and the athlete may only be paid for actual services rendered that utilize their NIL (e.g., signing autographs, making personal appearances, posting promoted social media posts, etc.). The NCAA NIL policy continues to prohibit anyone – including institutions and unrelated third parties – from paying student-athletes for athletic participation or achievement. Athletes and recruits are also strictly prohibited from being paid during their recruitment process as an improper inducement to attend, and compete for, a particular school.
In addition to the NCAA policy, there are currently twenty-nine states that have adopted laws governing NIL. Schools, student-athletes, and unaffiliated third parties in those twenty-nine states must comply with their relevant state law as well as the NCAA policies. In any case, where state law conflicts with the NCAA rules, state law supersedes.
Texas, for example, is one of the stricter states with regard to NIL regulations. The Texas NIL law (SB 1385) allows student-athletes to be paid for use of their NIL when the athlete is not engaged in official team activities. The Texas law requires athletes to attend a financial literacy and life skills workshop at the beginning of the athlete’s first and third academic years at their school in an effort to provide student-athletes guidance on how to manage money and navigate other practical issues that may arise from the athlete’s compensation from NIL deals.
Texas, like many other states, also restricts a student-athlete’s ability to enter into a contract for the use of their NIL if compensation is provided in exchange for an endorsement of alcohol, tobacco products, e-cigarettes or any other similar device, anabolic steroids, sports betting, casino gambling, a firearm the student-athlete cannot legally purchase, or a sexually oriented business. In addition, SB 1385 prohibits student-athletes from entering into any contract that conflicts with any institutional contracts or policies of the student’s school or team.
An important practical point for student-athletes and their families to note is that the NCAA NIL policy, as well as the Texas law, allows for student-athletes to engage professional services providers, such as attorneys, agents, and accountants, to assist with any permissible NIL activities. In order to ensure compliance with the rules, it is likely best practice for schools, sponsors, and student-athletes to engage professionals to take a detailed review of both potential NIL contracts and the school or team’s contracts.
The law also requires the athlete to disclose any proposed contract for the use of their NIL to their school. In addition to complying with the biggest piece of NIL regulation – ensuring that any NIL deals do not violate the “pay-for-play” rules – familiarity with both institutional contracts and NIL agreements is going to be a key component for all parties to a NIL deal to make sure they are staying within the confines of the rules.
Given the importance of compliance with both NCAA and state rules, schools and student-athletes would be wise to engage professional advisors in connection with any NIL programs or deals. Student-athletes and their families would benefit from, and should consider, having an experienced attorney or other professional review any agreements that the athlete may sign before entering into any NIL deals. The NIL space is sure to further evolve and grow as more people want to get involved, and both NCAA and state regulations will likely follow. Carrington Coleman’s Sports Law Practice Group will continue to monitor developments and provide updates as the industry changes.