2022

By: Kylie T. Jennings

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.

By: Andrea N. Perez

At the end of June, Congress took a big step toward passing anti-money laundering regulations that will profoundly affect the art and antiquities market. The bipartisan-proposed Establishing New Authorities for Businesses Laundering and Enabling Risks to Security Act (the “ENABLERS Act”) was approved to be included in the annual National Defense Authorization Act, which provides the budget for the Department of Defense. By backdooring the ENABLERS Act into the National Defense Authorization Act, Congress will likely enact it later this year as part of its approval of the Defense Authorization Act.

The creation of the ENABLERS Act is rooted in the Anti-Money Laundering Act of 2020 (the “AMLA”) that went into effect on January 1, 2021. AMLA provides massive updates to the 52-year-old Bank Secrecy Act and is the largest overhaul of money laundering regulations since the Patriot Act. It vastly expands the reach of the Bank Secrecy Act by applying to many more types of companies, persons, and intermediaries in hopes of cracking down on money laundering. For the first time in the United States, the list of parties subject to these regulations include art and antiquities dealers.

In November of 2021, Paula Trommel, Compliance and Sanctions Consultant for Christie’s and Deputy Director of Corinth Consulting in London, joined me to speak about the AMLA and provide our predictions on how this new act would impact the art and antiquities markets. But since the implementation of the AMLA, Congress has provided little guidance on the exact regulations to be imposed, leaving significant uncertainty among those in the art and antiquities markets. While the ENABLERS Act helps clear the fog a little, there continue to be more questions than answers.

If the ENABLERS Act passes, any person or company engaged in the trade and sale of works of art, antiquities, or collectibles – specifically including dealers, advisors, consultants, custodians, galleries, auction houses, and museums – will be deemed to be “financial institutions” and must comply with certain portions of the Bank Secrecy Act. This list of impacted parties in the art and antiquities markets is incredibly larger than originally proposed in the ALMA. Not only will international auction companies like Sotheby’s and Christie’s now be subject to the Bank Secrecy Act, but also small galleries that may only have one to two employees.

The ENABLERS Act will effectively require all art, antiquities, and collectibles dealers, advisors, consultants, custodians, galleries, auction houses, and museums to comply with four due diligence requirements described in more detail in Section 5318 of the United States Code: (1) report suspicious transactions, (2) establish an anti-money laundering program, (3) establish due diligence policies, procedures, and controls, and (4) identify and verify account holders (i.e., individual buyers and sellers). If the ENABLERS Act is passed, these compliance requirements will become effective on or after June 24, 2024, providing some time for those impacted to prepare.

Though these specifics shed light on the reporting requirements intended to combat money laundering in art, antiquities, and collectibles transactions, there are still crucial issues that remain unresolved. Like the AMLA, the ENABLERS Act fails to define what dollar value of art, antiquities, or collectibles transactions will be subject to disclosure to the federal government as well as what constitutes “art, antiquities, or a collectible.” It is frustrating that these vital financial protections are not only unclear, but also thus far unimplemented. That said, we remain hopeful that the progress will continue, and we will soon have robust and well-defined regulations in place to ensure appropriate transparency in the marketplace.

By: Jason M. Katz

The NCAA’s suspension of its name, image, and likeness rules in 2021 created new opportunities for college athletes.   The gist of the shift in this decision by the NCCA is that college athletes may now profit from their name, image, and likeness.  However, one of the biggest issues since the loosening of the NIL policy is the lack of guidance from the NCAA other than stating that its interim policy issued in June 2021 would remain in place until federal legislation or new NCAA rules were adopted.  The NCAA recently released some guidance that schools, third‑parties, prospective student-athletes, and student-athletes need to understand – most importantly that third-parties may be defined as boosters.  Given this implication, both prospective and current student-athletes that are choosing a school or entering the transfer portal need to be wary in dealing with NIL agreements when interacting with schools and potential transfer destinations.

One of the current trends is the formation of collectives by individuals associated with specific schools to arrange and broker NIL opportunities for athletes at that school.  “Collectives” is the term now used to describe pools of boosters, fans, and donors that are raising funds to provide student-athletes with NIL deals across the country.  These collectives are typically school-specific, and some are even sport and/or position-specific, and they vary in levels of sophistication, amount of funds, and services provided. There are over 70 different collectives and many others of all shapes and sizes are being established throughout the country in the wake of NIL.

The NCAA guidance does not specifically refer to collectives by name, but it is clear that the NCAA is sending a message loud and clear to third-parties that fall under the NCAA’s definition of a booster: it is improper for a third-party booster to induce prospective and/or current student-athletes to enroll in a school in exchange for a NIL deal, and each NIL agreement must be based on an independent, case-by-case analysis of the value that each athlete brings to an NIL agreement.  Specifically, a third-party group that qualifies as a booster may not:

• Engage in recruiting conversations with a prospective student-athlete;
• Communicate with a prospective student-athlete for a recruiting purpose or to encourage the enrollment at a particular institution;
• Guarantee a name, image, and likeness deal or promise contingent on initial or continuing enrollment at a particular institution;
• Work with institutional coaches and staff to arrange meetings with prospective student-athletes; or
• Offer prospective student-athletes compensation or incentives for enrollment decisions (e.g., signing a letter of intent or transferring), athletic performance (e.g., points scored, minutes played, winning a contest), achievement (e.g., starting position, award winner), or membership on a team.

The NCAA guidance also refers to certain existing specific Division I Legislation: NCAA bylaw 11.1.3 (representing individuals in marketing athletics ability/reputation), NCAA bylaw 13.10 (publicity), NCAA bylaw 12.1.2.1 (permissive recruiters), NCAA bylaw 13.02.14 (definition of recruiting), and NCAA bylaw 13.2.1 (offers and inducements).  The NCAA guidance signals that it expects current NCAA bylaws related to recruiting and pay-for-play to be followed.  Any institution, booster, or player that violates these existing NCAA rules could face NCAA infractions.  Based on the recent NCAA guidance, the story is just beginning to be written on NIL issues.  The NCAA guidance reflects the NCAA’s intention to crack down on any third-party booster and/or school that violates recruiting and pay-for-play rules that are currently in place.  Given the very public demands of high-profile players around the country and open discussion of collectives and affluent boosters associated with certain schools, there will certainly be an adjustment period for all involved to make sure the rules that are in place are followed.  One thing is clear – if a school or organization affiliated with a school, induces players to come to enroll in that school using promised compensation and NIL deals, there will be penalties handed down by the NCAA.

Given the NCAA guidance, an open question is: how, if at all, can a third-party such as a collective enter into NIL with athletes without implying an expectation that the student-athlete attends the school associated with the collective?