Novel legal issues to address for colleges, universities

For years advocates for collegiate athletes’ rights have argued that there should be compensation allowed for their participation in intercollegiate athletics.

At the very least these advocates have insisted that the athletes should be able to benefit from the use of their name, image and likeness (NIL). In September 2019, California enacted the first law granting NIL rights to collegiate athletes with an effective date of July 1, 2021. A month later the NCAA Board of Governors unanimously agreed it was time to address its NIL regulations.

Subsequently, 27 states have joined in enacting NIL legislation, including 15 that have become effective since July 1. The remaining dozen will become effective between now and 2023. Three other states have pending bills with a similar focus.

During the last two years, the NCAA has waffled and been virtually impotent. Ultimately, on June 30 it issued a general temporary waiver of its amateurism rules for NIL activity. Congress has several bills pending, but passage anytime soon is unlikely.

Since July 1, it has been a Wild West environment for athletes, agents, compliance officers, boosters and business entities. There are published reports of a few significant deals for some high-profile athletes and many smaller opportunities for others.

In this context, “high-profile” has multiple meanings; it would include both highly talented and accomplished athletes and athletes with significant social media influence.

It is important to understand that there are opportunities throughout collegiate sports, not just for athletes at Power 5 schools. NAIA athletes were granted NIL rights nearly a year ago. While there are reports of many schools adding staff to deal with NIL, Division II and III schools will face unique challenges with NIL because they typically have fewer resources, particularly in compliance.

The compliance and reporting requirements of the various state statutes do not differentiate between Division I schools and the others. Each state law has its own nuances, but there are some common threads.

Most states require disclosure of contracts entered into by the athletes; thus, record keeping will be essential. Most of the states prohibit deals with entities related to the gambling industry, alcohol or tobacco products, adult entertainment, performance enhancement supplements and controlled substances. Some of the laws protect schools by barring deals which would conflict with existing sponsorship contracts.

There are decisions that the schools will need to make related to NIL.

Will financial literacy education be provided? Some of the state laws require such education.

Will an athlete be allowed to appear wearing or using the school logo or school colors? What will the impact of contracts be on an individual athlete’s financial aid and what is the school’s responsibility for counseling? What role does the school want to play in assisting the athletes to procure opportunities? What added level of booster monitoring will be required, even at Division II and III schools?

There are already reports of athletes in various sports, male and female, securing six- and seven-figure contracts.

Twin sisters Hanna and Haley Cavinder, starting guards on Fresno State’s women’s basketball team, have apparently cashed in on their Tik Tok fame. Bryce Young, the quarterback for Alabama’s football team, who has yet to start his first game, is said to have deals worth close to seven figures. And Paige Bueckers, star player on UConn’s women’s basketball team, is projected to make more than a million dollars this year. She has actually filed for a trademark for her nickname, Paige Buckets.

Most athletes, however, will not be able to monetize their NIL rights at that level. It will be essential for the athletes and their representatives to read all potential agreements very carefully. There are some early examples of athletes agreeing with certain vendors or sponsors for the use of their NIL in perpetuity. Such arrangements would generally not be advisable for anyone. This is the sort of issue that good financial education programs would bring to the attention of the athletes.

Several university athletic departments have already put together group licensing programs for their athletes.

Such arrangements can streamline NIL opportunities for these athletes and minimize the time and attention individual athletes might otherwise devote to securing contracts or sponsorships.  There are also several organizations which have recently been formed to represent athletes in securing group licensing opportunities. One of the organizations is actually a joint venture among two professional sports labor unions and a private equity firm that invests in sports ventures. These organizations, while not unions, have the potential to provide support for group licensing much like the existing professional sports law unions.

The NIL landscape is in its infancy and will undoubtedly be very volatile for the next year or so. There are likely to be many questions and compliance issues that are not even on the horizon at this point. It is clear from media reports that there are already some deals and relationships that are skirting the edges of both state law and NCAA regulations.

Where those will go remains to be seen. Colleges and universities are well advised to give careful consideration to the policies to be developed internally, the resources to commit and the responsibilities they have to their athletes.

Peter Goplerud is an of counsel attorney at Spencer Fane in the firm’s St. Louis office. His practice specialties are higher education and sports law. He is a frequent lecturer and is widely published in the sports law area, including serving as co-author on one of the leading textbooks on the subject. He has extensive accreditation experience, particularly within legal education, having served as chair of numerous ABA Site Evaluation teams.