NCAA’s NIL Troubles Continue

Photo of Jack D. Hepburn
Jack D. Hepburn
Associate, Corporate Department
Published: McLane Middleton
November 7, 2023

Effective July 1, 2021, the NCAA adopted its new “interim” name, image and likeness (“NIL”) policy. The policy, in accordance with applicable state legislation, allows prospective and current collegiate student-athletes to receive compensation for the use of their NIL (usually through marketing and promotional endeavors) without jeopardizing their NCAA eligibility. This marked a dramatic shift in the NCAA’s “amateurism” model, under which student-athletes could not receive compensation without risking their NCAA eligibility.

Despite this NIL policy, the NCAA continues to face legal trouble involving restrictions on student-athletes’ ability to receive compensation from the use of their NIL. Last week, two significant legal developments put the NCAA on the defensive.

Bewley Twins v. NCAA

On November 1, 2023, twin brothers Matthew and Ryan Bewley sued the NCAA in the United States District Court for the Northern District of Illinois. In the lawsuit[1], the Bewleys argue that they were denied NCAA eligibility because they received compensation for their name, image and likeness while playing basketball at Overtime Elite Academy (“OTE”), a sports academy in Atlanta.

The Bewleys allege that the NCAA violated its own interim NIL policy, federal antitrust law and the Illinois Student-Athlete Endorsement Rights Act in reaching its eligibility decision. The Illinois law states, “Compensation from the use of a student-athlete’s name, image, likeness, or voice may not affect the student-athlete’s scholarship eligibility, grant-in-aid, or other financial aid, awards or benefits, or the student-athlete’s intercollegiate athletic eligibility.”

The NCAA’s position is that OTE compensated the twins as professional athletes, akin to a player salary. Because of this, any payments made to the twins above and beyond “actual and necessary expenses” (meals, transportation, lodging, etc.) would be impermissible pursuant to NCAA bylaws. The twins argue, however, that their compensation was related to their NIL, which the NCAA’s interim policy purports to protect.

This lawsuit likely hinges on the language of the OTE contracts. As we have written previously, it is imperative to review[2] NIL contracts thoroughly to understand, among other things, the compensation structure of the deal.

House v. NCAA

On November 3, 2023, Judge Claudia Wilken of the United States District Court for the Northern District of California certified the damages classes in House v. NCAA. Judge Wilken’s decision to certify the classes makes more than 14,000 current and former collegiate student-athletes potentially eligible to claim damages if the NCAA loses the case.

The crux of this lawsuit is the NCAA’s alleged violation of antitrust laws by restricting student-athletes to certain NIL activities and prohibiting the sharing of broadcast revenue with student-athletes. In addition to seeking monetary damages, the plaintiffs are asking the court to strike down all current prohibitions on NIL for student-athletes, including the restriction that prohibits conferences from paying student-athletes. Notably, Judge Wilken previously presided over two major cases involving the NCAA, O’Bannon v. NCAA and NCAA v. Alston. Both of these cases had unfavorable outcomes for the NCAA.

Judge Wilken’s decision puts the NCAA at risk for potentially billions of dollars in damages. The plaintiffs are targeting the NCAA’s media rights revenue, which involves the use of players’ names, images and likenesses for commercial purposes. This case could have profound ramifications for the economics of NCAA athletics should the plaintiffs prevail.

The Bewley and House developments are the two latest examples of the paradigm shift that is occurring in NCAA athletics and the evolution of NIL rights for student-athletes. These two cases are worth watching, as their rulings could have crucial impacts on student-athletes’ NIL rights and collegiate sports as a whole.