NIL law changes face of college athletics

Two years after the U.S. Supreme Court decided that college athletes can be compensated for the use of their name, image and likeness, lawyers who handle NIL cases are still defining the specifics of practicing in that field. 

NIL law effectively became a field of practice after the court’s unanimous decision in NCAA v. Alston. The 2021 case noted the “highly profitable” and “professional” nature of college athletics, particularly basketball and football.  

The decision was much to the chagrin of the NCAA, which has long pointed to “amateurism” — a term inconsistently defined by the organization — in contending that paying student-athletes could erode the distinction between collegiate and professional sports. As the high court noted, American colleges and universities have always “had a complicated relationship with sports and money.” The Supreme Court’s ruling in no way addresses every associated issue — courts are also considering whether student-athletes are employees, for example — but did find that NCAA rules limiting education-related compensation violate the Sherman Antitrust Act.  

Attorneys are clear that despite the nuances associated with new NIL regulations and law, it is not a new area of law, per se.  

“I feel like it ties into so many different areas of law,” said Jessica Visser, a partner with Varnum in Grand Rapids, Michigan, who co-chairs the firm’s NIL practice. “IP (intellectual property) attorneys are definitely important in this space, contract attorneys. … If you’re representing student-athletes, I would say a trust and estates attorney would be a really good person to contact. … I think it’s really very unique and doesn’t fit neatly into any other existing area of law.”  

Michael Rueda, partner and head of U.S. sports and entertainment at Withersworldwide in New York, agreed, saying he gets a little suspect when he hears someone refer to themselves as a “NIL lawyer.”  

“That’s not really a thing. … There are different elements to every deal,” Rueda said. “It’s highly dependent on how a deal is structured. … It’s an intersection of contract law, intellectual property law. … It can involve other things such as forming new entities. Securities laws could be at play. You could be an IP lawyer, a corporate lawyer, a commercial lawyer; there are different elements to every deal.”  

In other words, there are no new principles at work in NIL law, only a difference in application.  

NIL defined 

Once upon a time, student-athletes were not allowed to accept even a dollar for their autograph or an appearance. Today, while many NIL deals are for nominal amounts of money or goods, upper-tier athletes can make hundreds of thousands of dollars. In the United States, “NIL rights” is a slang term for the right of publicity, which prevents the unauthorized commercial use of an individual’s name, image, likeness or other recognizable aspects of their persona. It bestows the exclusive right to the individual to license the use of their identity for commercial purposes. These rules allow student-athletes to profit from their personal brands through certain services and products using social media, personal appearances, sponsorships, autographs and endorsements, among other avenues.  

As Rueda put it, NIL is not a novel concept, simply “the right for an individual, in this case, a college athlete, to monetize their publicity rights.” 

Payments authorized  

After the Alston decision, the NCAA enacted an interim NIL policy allowing student-athletes to be compensated. Today, Rueda said, that guidance is loose.  

“It sort of punts a lot of rulemaking authority and control over the situation to individual schools and conferences and states,” he said. “It allows for more disparity among the rules and the lack of consistency could lead to problems. That’s why initiatives are being pushed in Congress for more comprehensive rules, which I think is challenging.”  

So far, more than a dozen bills have been proposed, but none has so much as received a debate among a full Senate or House committee, the initial step in the process of becoming law. William Palmer of Kaufman & Canoles in Norfolk, Virginia, said that the push for legislation is important because the lack of uniformity across states has created problems for multistate entities such as collegiate conferences and NCAA enforcement efforts.  

“A few bills were recently introduced in July,” Palmer said. “It is unclear if, and in what form, they will survive, but most authorities think it is just a matter of time before Congress passes something addressing NIL.”  

Before college student-athletes could profit from their NIL, Curry Sexton was an all-Big 12 wide receiver at Kansas State University. Today, he is an attorney with Seigfreid Bingham in Kansas City, Missouri, who works heavily with Division II conferences and institutions, providing them with valuable insight into NIL practices.  

Sexton called the NCAA’s interim policy a bare-bones one that essentially prohibits two things: being paid to play for a school or receiving financial incentives to sign with or remain at a school. While some states, such as Kansas, have no NIL laws, others, including Missouri, make concerted efforts to pass the most progressive laws.  

“The NCAA has indicated that they may implement some more extensive NIL laws in the near future, while at the same time making a strong push for uniform federal NIL legislation,” Sexton said. “Despite several federal NIL deals being presented over the last two years, federal legislation doesn’t appear to be on the immediate horizon.”  

To date, more than 30 states have enacted laws. They include South Carolina, where Attorney General Alan Wilson said in 2021 that the state’s legislation on NIL “… ensures fairness to our athletes, which is a very good thing. The law should immediately go into effect. This law provides guardrails to protect student-athletes so they can benefit financially without being taken advantage of.”  

In North Carolina, Gov. Roy Cooper issued a three-page executive order one day after the NCAA rule change went into effect. He noted in part that allowing student-athletes to receive compensation for their NIL will be particularly beneficial to student-athletes of color, helping “alleviate racial inequity in intercollegiate sports” and “prevent the State of North Carolina from being at a competitive disadvantage in regard to enrollment at postsecondary educational institutions within the state.”  

Playing their position 

At Withersworldwide, Rueda’s sports and entertainment practice focuses on advising athletes, entertainers, influencers and artists on issues such as brand management, contracts and investments.  

“These types of deals are things we do all the time,” Rueda said. “When it became possible for student-athletes to exploit their own rights, my biggest concern was making sure that these student-athletes got as much information about what these opportunities are like and what the risks are.”  

Rueda added that there has been a great emphasis — and rightly so — on helping student-athletes build their own brand and market themselves, but not as much on educating them on how to protect themselves, negotiate, understand how deals and agents work, and what to be aware of.  

“My point of view is more making sure that student-athletes are getting as much information as possible to become educated consumers in this new marketplace for themselves,” he said.  

Mit Winter, an attorney with Kennyhertz Perry in Kansas City, Missouri, and a former Division I basketball player at the College of William & Mary, said that student-athletes often sign contracts without consulting an attorney or even another adult. He does not recommend that even for deals with low monetary compensation because even those deals can have serious, long-term consequences for the student-athlete.  

“For example, many deals offered to athletes have very broad exclusivity provisions, term lengths and other provisions that often aren’t in the athlete’s best interest,” Winter said. “Some of these provisions can limit the types of deals an athlete could enter into in the future, even if they end up as a professional athlete.”  

Winter said that NCAA rules prohibit most schools from providing legal services to their student-athletes, but that some organizations are working on solutions that will include free legal services for college athletes.  

Palmer of Kaufman & Canoles said seeking out legal services is important because of the novelty and rapidly changing standards governing NIL in college and high school.  

“Even after NCAA v. Alston and the passage of Virginia’s NIL legislation, we are witnessing all kinds of unique approaches and offerings for use of NIL,” Palmer said. “Many of these approaches and entities like NIL collectives have found ways to operate in the gray area between state law and rules promulgated by enforcement bodies like the NCAA and VHSL (Virginia High School League).”  

Many NIL deals are set up through collectives or third-party businesses usually formed by schools’ fans or boosters. These collectives create and support NIL opportunities for student-athletes, helping expose them to a variety of brands.  

Visser said that her practice group at Varnum focuses on representing those collectives, higher education institutions and boosters. 

“I would say the ‘NIL lawyer’ focuses on entity formations, forming collectives and the compliance aspect … as well as doing training for athletic department staff and coaches so when they’re presented with questions by student-athletes or boosters, they feel a little more comfortable answering those questions,” she said. “It’s also very heavy in contract law … just drafting NIL agreements between collectives, boosters, and companies and student-athletes.”  

Visser, former in-house counsel with the University of Toledo’s athletic department, noted that she also spends a fair amount of time ensuring compliance with NCAA bylaws and recent guidance established by the Internal Revenue Service.  

“Most collectives were formed as 501(c)(3)s in the beginning of NIL, and in some cases that might work, but in most cases, a collective isn’t going to fall into that exempt area,” she said. 

Lawyers as role players 

Where so many individuals and entities have an interest in NIL — from student-athletes to coaches to institutions and conferences — and where guidance is bare-bones and often not uniform, Sexton believes that lawyers are necessary in the relatively new and ever-changing world of NIL.  

“Because of the differing laws and regulations at play, as well as the nature of the industry, I think it’s vital that conferences, institutions and athletes consult legal counsel to ensure that all NIL activity is in compliance with applicable laws, regulations and policies,” he said. “We keep them apprised of all relevant legal and regulatory developments, discuss best practices and provide other insights into the NIL space.”  

William “Corky” Klett III of Burr & Forman in Charleston and Columbia, South Carolina, said that while the NCAA’s amateurism regulation has changed, the legal concept of NIL remains the same. As such, the change in NCAA amateur rules has simply opened a new category of potential licensors of student-athletes’ NIL.  

“The good news for college athletes is that the world of NIL is not new at all, and attorneys have been handling the issues that the athletes, schools, collectives and endorsers are facing for decades,” Klett said. “College athletes and the various parties to their NIL deals benefit from the fact that we have been counseling in NIL transactions for many years, and there is, by and large, nothing different about these deals in the collegiate sports context.”