Student-athletes wasted no time following the NCAA’s rule change in July 2021 permitting compensation for name, image, and likeness (“NIL”) in landing deals of all types and sizes. Now, sixteen months later, questions remain as to whether, and to what extent, institutions can be involved in the deal-making process, including by supporting, or arranging, team-wide deals or deals with collectives. Tracking the still-changing landscape, this alert summarizes: (1) the NCAA’s guidance regarding institutional involvement, including guidance issued at the end of October 2022 regarding permissible and impermissible institutional involvement; (2) the effort to certify a class of D1 student-athletes relating to NIL restrictions; and (3) the continued push to allow high school athletes to be compensated for use of their NIL. The status of state laws, as well as federal legislative efforts – some of which have been re-introduced in 2022 – can be found here.
What You Need to Know:
This alert summarizes:
- the NCAA’s guidance regarding institutional involvement, including guidance issued at the end of October 2022 regarding permissible and impermissible institutional involvement;
- the effort to certify a class of D1 student-athletes relating to NIL restrictions; and
- the continued push to allow high school athletes to be compensated for use of their NIL
NCAA NIL Guidance To Date Regarding Institutional Involvement
After adopting its interim NIL policy permitting student-athletes the opportunity to profit off of use of their NIL in July 2021, the NCAA issued a series of guidance documents clarifying institutional involvement with student-athletes’ NIL activities. In a Q&A document released shortly after the interim policy went into effect, the NCAA clarified the following as to institutional involvement:
- Institutions may not use NIL transactions to compensate student-athletes for athletic participation or achievement;
- Institutions should not compensate student-athletes in exchange for the use of their NIL; and
- Institutions cannot dictate how student-athletes use their NIL compensation (e.g. by requiring that NIL compensation be used for financial aid).
In May 2022, the NCAA’s DI council issued additional guidance that, although specifically aimed at third-parties that meet NCAA’s definition of boosters, also touched on institutional involvement. Specifically, that guidance provided that institutional coaches and staff may not organize, facilitate, or arrange a meeting between a booster and a prospective student-athlete, or communicate directly or indirectly with a prospective student-athlete on behalf of the booster related to any NIL opportunity. In July 2022, the NCAA’s DII council issued similar guidance. Both of these guidance documents, with their focus on boosters, stopped short of specifically addressing institutional involvement with NIL activities for currently enrolled student-athletes.
Most recently, on October 26, 2022, the NCAA’s DI Board issued additional guidance (the “October Guidance”) specifically addressing institutional involvement in currently enrolled student-athletes’ NIL activities. Before reaching that issue, however, the October Guidance makes clear that it is effective immediately, and that for violations that occurred prior to the publication of the guidance, the NCAA enforcement staff will review the facts of individual cases but pursue only those actions that “clearly are contrary to the published interim policy,” including “the most severe violations of institutional involvement or pay for play.” (Notably, the NCAA published a job posting for an NIL investigator in early October 2022). The October Guidance then goes on to provide a non-exhaustive list of permissible and impermissible institutional involvement in NIL opportunities when it comes to the following categories: (1) education and monitoring; (2) support for student-athlete NIL activities; (3) support for NIL entities/collectives; and (4) negotiating, revenue sharing, and compensation.
The guidance attempts to draw a bright-line rule regarding institutional involvement. Some of the notable impermissible activities specifically referenced in the October Guidance are: communicating with NIL entities regarding a specific student-athlete’s request for compensation; proactively assisting with development or creation of a student-athlete’s NIL activity like developing a product or promotional materials; and providing services like graphic design, tax preparation, or contract review, unless the same benefit is generally available to the institution’s students. The October Guidance cautions institutions to consult legal counsel regarding “other issues” that may stem from institutional involvement, providing contractual nonperformance, Title IX, and employment-related matters as examples.
Pennsylvania’s Amended NIL Law
Shortly after the NCAA’s October Guidance was published, Pennsylvania passed an amended NIL law, House Bill 2633, that aims to ensure student-athletes can benefit as much as possible from NIL compensation in the absence of national standards. Two notable changes in Pennsylvania’s amended law are: (1) the removal of language that prohibited institutions from “arranging” NIL deals with third-parties; and (2) a revision of the previous requirement that student-athletes provide a copy of their NIL contracts with the institution seven days before execution, instead requiring disclosure within 72 hours after signing the contract or before the next scheduled athletic event, whichever occurs first. Pennsylvania institutions should pay close attention to what is permitted under Pennsylvania’s amended law, as well as what is permitted and not permitted under the October Guidance.
Student-Athletes Seek Class Certification on NIL
On October 21, 2022, a group of NCAA athletes who sued the NCAA in July 2021 alleging antitrust violations asked a California federal judge to certify four classes of Division I student-athletes (football and men’s basketball; women’s basketball; additional DI sports; and an injunctive relief class) who are challenging the NCAA’s NIL restrictions (both prior to the July 1, 2021 interim rule and after) as anticompetitive, arguing that their antitrust allegations can be resolved on a class-wide basis. The complaint and recently filed class certification motion challenge, among other things, the NCAA’s rules that prohibit athletes from sharing in television revenue brought in by schools and conferences for their games. The student-athletes also seek damages going back four years for NIL deals that they were allegedly prohibited from doing.
The student-athletes claim that class certification is appropriate because they raise common issues, including whether Defendants (the NCAA, Pac-12 Conference, Big Ten Conference, Big Twelve Conference, Southeastern Conference, and Atlantic Coast Conference) conspired to restrain competition and whether such conduct caused members of the classes to receive less compensation than they would have in a truly competitive market.
In support of class certification, the student-athletes rely on a report from their expert, Daniel Rascher, who estimates that there are at least 6,280 members in the football and men’s basketball class, 856 in the women’s basketball class and 7,384 members in the additional DI sports class. Rascher also opines that the injunctive relief class has an even greater number of members because it includes all DI athletes across all sports and across all conferences.
Responses to the motion for class certification are due on February 10, 2023, with replies due April 14, 2023. A motion hearing is set for May 24, 2023.
States Continue to Expand the NIL Rights of High School Athletes
The rapidly changing status of NIL rights for collegiate athletes in recent years has prompted similar questions about the rights of high school athletes to profit off their NIL. There are two general ways to examine regulation of high school athletes’ NIL activities: (1) high school student athletes may be considered prospective collegiate athletes, and as such may be beholden to the NCAA regulations and relevant state laws discussed above; and (2) independent of any NCAA affiliation, high school athletes’ ability to monetize their NIL may be regulated by state law and applicable rules of state high school athletic associations and educational institutions. As such, stakeholders in this arena should consider the unique aspects of each high school athlete’s circumstances—recruitment status, geographic location, school and conference affiliation—to understand what rules and regulations are at play.
For high school athletes who qualify as prospective NCAA student athletes, interested parties should pay careful attention to contacts with colleges, universities, and NIL collectives that may qualify as boosters to ensure compliance with applicable regulations prohibiting improper recruiting inducements.
High school student-athletes who have not triggered prospective student-athlete status under NCAA regulations should be cognizant of the rules or regulations that may apply based on the state where they compete as well as the institution and athletic conference with which they are affiliated. This is a shifting target as key decision makers at the high school level across the country are weighing the pros and cons of NIL compensation for high school athletes and updating policies accordingly. For example, on Wednesday, October 12, 2022, the Pennsylvania Interscholastic Athletic Association (“PIAA”) board unanimously passed on the second reading an amendment to the PIAA rules that would allow NIL deals for high school athletes, with some parameters. The amendment, which must pass another vote in December before immediately going into effect, would allow for compensation for certain NIL activities but would prohibit high school employees or affiliates from arranging NIL deals or paying players directly, among other restrictions. Without federal intervention or an overarching regulatory scheme, it is likely that NIL rights for high school athletes will be governed state-by-state and conference-by-conference similar to the patchwork of regulations governing collegiate student-athletes.
