Q: I want to start an NIL business. What do I do first?
A: In June 2021, the U.S. Supreme Court issued its landmark NCAA v. Alston decision, ruling that restrictions imposed on NCAA member schools limiting educational benefits provided to student-athletes violated anti-trust law. Following Alston, student-athletes may profit from their name, image, and likeness, or “NIL.” The right to earn NIL compensation is not unrestricted, however, and the landscape is a patchwork of rules and regulations. The NCAA’s Board of Directors has approved an NIL policy, and some states have passed legislation to address NIL-related issues. Certain NCAA member schools have adopted their own NIL policies.
Players, schools, coaches, boosters, and others presently navigate the NIL landscape because it offers a variety of interesting business opportunities. These activities range from traditional brand sponsorships to booster-funded insurance coverages, and involve various participants to make NIL deals happen. Starting an NIL business could mean a number of different things. Perhaps the business purpose will be to source NIL opportunities on behalf of student-athletes. Alternatively, the idea may be to consult for small businesses seeking to understand the NIL space and evaluate potential candidates for potential deals.
The first step should be identifying where the new business intends to conduct NIL-related activities. State NIL laws in effect are similar in many respects but not identical. A business should understand which restrictions may apply to its NIL activities. For example, a state-level NIL law usually prohibits use of an educational institution’s intellectual property as part of an NIL deal. Similarly, most (if not all) states with NIL laws prohibit so-called “pay to play” and similar NIL transactions, e.g., conditioning NIL compensation on attendance at a particular school or on-field performance. Some states prohibit earning NIL compensation from vice-categorized goods and services like alcohol, tobacco, and gambling. In the absence of state regulation, the NCAA’s default rules should serve as a business’ guide with respect to NIL activities. The business should also be aware that a student-athlete must comply with his or her school’s NIL policy.
The post-Alston world of NIL offers student-athletes, businesses, and others a variety of exciting and interesting opportunities. However, the type of NIL-related activities that a new business will engage in, and where such activities will occur, potentially implicates various restrictions. The principals should seek advice on which laws, rules, and regulations apply, or might apply, to an NIL based on their contemplated activities and business model.
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.