Q: What legal issues should New England student athletes and their parents be considering and aware of when pursuing an NIL opportunity and reviewing proposed NIL agreements?
A: Since the 2021 Supreme Court decision in NCAA v. Alston, the financial flood gates have opened allowing college and high school student athletes to profit from endorsement opportunities by licensing their name, image, and likeness (“NIL”) to businesses and products. However, the NIL legal landscape remains a patchwork. There is currently no federal NIL law creating a national standard for compliance. Instead, the guard rails surrounding NIL agreements are established by varying state laws and an NCAA policy that was updated as recently as October 26, 2022. The evolving NIL legal landscape makes it important for student athletes to stay up to date on best practices when pursuing an NIL opportunity and reviewing NIL agreements.
Presently, none of Massachusetts, New Hampshire, Maine, Vermont, or Rhode Island have a state NIL law. Therefore, most of New England student athletes are only protected by the guidance issued by the NCAA and the NIL policy of their specific academic institution. Below are three items that all student athletes pursuing NIL opportunities should be aware of before signing an NIL agreement with an endorser:
Pay-for-Play is Prohibited
While the NCAA’s guidance regarding NIL remains vague and unsettled in many respects, one aspect is clear—a legitimate NIL agreement must be based on payment in exchange for an athlete performing a service on behalf of the endorser. An athlete’s NIL agreement may not have compensation tied to individual or team performance in their respective sport. In addition, the compensation involved with an NIL agreement must be based on the fair market value of the services the student athlete provides to the endorsing business. The best way to determine if the compensation is for fair market value is to consult with legal counsel and an NIL agent.
Engage a combination of an Athletic Compliance Director, an NIL Agent and Legal Counsel
For years, engaging an agent was the third rail of eligibility in college sports. Today, this is no longer the case when pursuing NIL opportunities and reviewing NIL contracts. College athletes still may not hire an agent to explore professional sports opportunities while retaining their college eligibility. However, an agent can be hired for the sole purpose of exploring potential NIL deals on behalf of the athlete. Moreover, legal counsel can be engaged to review proposed NIL contracts with businesses. Engaging these types of professional is often the safest means to maximize NIL opportunities whiles also ensuring compliance with specific school and NCAA rules.
Furthermore, while the schools themselves may not be involved in facilitating NIL deals on behalf of their athletes, compliance professionals in the athletic departments of college programs are another recommended resource for student athletes pursuing NIL opportunities.
Categorical prohibitions by colleges and universities concerning athletes associating with certain brands or product types and limitations on uses of the institution’s intellectual property
Several academic institutions have policies that restrict student athletes from entering into NIL agreements as a sponsor on behalf of companies in certain industries including but not limited to alcohol, cannabis, and gambling. Many of the states that have enacted NIL laws have codified these brand specific restrictions for NIL agreements with student athletes.
It is also common for college and university NIL policies to not allow students to use the trademarks, logos, and other intellectual property of the institution when performing services under an NIL agreement. These are not always complete prohibitions. Academic institutions will at least generally require their consent be provided before an athlete can wear or display a school uniform or other apparel that bears a school logo, mascot, or other intellectual property of the school in the course of the athlete performing an NIL contract. In addition, there may be conflicts to consider between the endorser of student NIL agreement and the team or school wide sponsorship deals that are already in place. These situations need to be addressed on a case by case basis depending on the school, endorser, and state laws (if any) involved.
Know the Law is a bi-weekly column sponsored by McLane Middleton. Questions and ideas for future columns should be emailed to [email protected]. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.