Analysis
7/1/21
8 min read
Everything You Need to Know About NIL
After almost two years of discussions, debates and lots of questions, July 1 is here. July 1, 2021, has been a looming deadline for the NCAA, as Name, Image and Likeness (NIL) laws go into effect in 12 states.
After a failed attempt to quickly pass federal legislation before July 1 to preempt state legislation and avoid recruiting headaches, the NCAA had to take matters into its own hands. On June 30, the NCAA’s Board of Governors passed an interim NIL policy that will go into effect July 1 to ensure that all student-athletes -- whether their state has NIL laws in effect or not -- will be able to profit from NIL. This ensures more uniformity across the country and offers relief for schools from states that do not currently have NIL legislation enacted.
What is the NCAA Interim Policy?
The NCAA passed an interim policy on June 30 to ensure that all student-athletes will be able to be compensated for their NIL. This will allow student-athletes across the country to profit from things like autographs, endorsements and social media posts. The policy includes the following guidelines:
- Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities are responsible for determining whether those activities are consistent with state law
- College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to name, image and likeness
- Individuals can use a professional services provider for NIL activities
- Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school
The Board of Governors made it clear that these guidelines do not permit “pay for play” or inducements to attend a specific school.
How Will This Affect Recruiting?
Because this is only an interim policy, the NCAA is allowing schools and conferences to adopt their own policies as well. That means each school could have vastly different NIL rules and restrictions based on their school and conference guidelines. To add to the disparities, schools in states with legislation that has already gone into effect may be disadvantaged compared to schools that do not have enacted legislation. This is because many states with enacted legislation may have more restrictions than states with no enacted legislation.
For example, Texas’ NIL bill prohibits student-athletes from endorsing gambling or illegal firearms. While every college and university in Texas may have to follow this restriction, schools in a state like Michigan, which currently does not have any NIL legislation, could potentially have an advantage because they do not have any state-mandated restrictions (as of right now) and could endorse gambling companies.
It also means that schools with big national brand names like Notre Dame and Alabama could have a recruiting advantage over schools with less national recognition. Big national school brands can result in more lucrative opportunities for athletes.
There are also still questions about how this will affect high school sports. Since the announcement, many high school students have been posting on social media the NCAA's NIL announcement with the caption "DM's are open," insinuating they would be open to NIL opportunities. However, this could significantly jeopardize their “amateur” status and thus eliminate their eligibility to play in college. We will have to wait for more guidance from the NCAA and look to potential state and/or federal legislation.
How Will This Affect the NFL Draft?
Could NIL lead to fewer underclassmen declaring for the NFL draft? Some players that are projected as later-round picks may decide to stay in college longer – at least they can make a little money while they try to improve their draft stock. It’s a tradeoff many players may consider, particularly if they can improve their draft stock, and thus get more money, by staying in college.
That said, a player's draft stock could go down for teams depending on their social media usage. If a player seems to be more focused on what endorsements he is getting rather than how he is playing, this could be a factor that teams may and should take into consideration.
Why Is This Only An Interim Policy and Why Are These Guidelines So Broad?
The NCAA is still waiting for federal legislation (see below) that will ensure more uniformity across the country, which is why the current NIL policy is only an interim policy. They hope that Congress will either 1) create uniform standards for the schools to apply; or 2) give the NCAA antitrust immunity to allow them to create more restrictive rules.
On June 21, the Supreme Court found that the NCAA could not limit education-related benefits in NCAA v. Alston. While the decision itself was very narrow, Justice Kavanaugh wrote a concurrence, writing that many of the NCAA's rules and regulations could subject them to antitrust liability. Many saw his concurrence as an open invitation for student-athletes to begin litigation regarding the NCAA's compensation rules. In response, NCAA President Mark Emmert sent a memo to administrators in all three divisions stating that because of the Supreme Court's opinion, "existing and new rules are subject to antitrust analysis, and we should expect continued litigation, particularly in the area of 'pay for play.'"
The Supreme Court case is not the first time the NCAA has been warned about antitrust laws. In January, the Division I, II and III Councils were preparing to vote on potential NIL laws. However, the Department of Justice sent a letter to the NCAA saying they were "closely monitoring their enaction of NIL rules to ensure their rules do not limit compensation." With this warning, the NCAA halted the vote in fear of violating antitrust law.
Because of these antitrust worries, the NCAA cannot create strict or specific guidelines. If they were to develop stricter and more specific guidelines, they would violate antitrust law, resulting in lots of potential litigation. By going to Congress, they can either be granted antitrust immunity -- which will allow the NCAA to enact stricter and more specific guidelines without having to worry about antitrust violations -- or Congress can pass the rules themselves and make them as specific as the NCAA can persuade them to be.
How Much Money Will Student-Athletes Actually Make?
We’ll find out the answer to this question soon as July 1, when athletes will be able to officially endorse and promote products on social media, retain agents, sign autographs, etc. The first few months will be illuminating in terms of athlete compensation. In fact, in anticipation of this date, several athletes began to make business decisions to promote their brand. For example, Wisconsin quarterback Graham Mertz filed a trademark on a personal logo just a few days ago.
What about State Legislation?
Ten states -- Alabama, Florida, Georgia, Illinois, Kentucky, Mississippi, New Mexico, Ohio, Oregon, Texas -- have legislation that went into effect on July 1. At this point, most states have at least introduced NIL bills into their state legislature. Until Congress can pass a federal bill regarding NIL, more and more states will continue to enact legislation, creating more discrepancies in NIL policies between schools.
What is Taking so Long in Congress?
A total of six bills have been introduced in Congress with a variety of different provisions. While every bill ensures that student-athletes are entitled to be compensated for their NIL, the bills have varying degrees of restrictions on whom student-athletes can be compensated from. Several bills also include various provisions that go far beyond just NIL rights. How broad or narrow the bill will be is ultimately the crux of the issue.
Republicans want a very narrow bill that focuses solely on NIL. Democrats prefer a bill that encompasses NIL as well as things like long-term health care and expanded scholarships. Republicans have stated they would be more open to expanding the bill to include things like health care and expanded scholarships. However, they would want assurance that these provisions would not hinder less wealthy schools. In a Congressional hearing on June 9, Emmert acknowledged that wealthier programs could share revenue with less wealthy institutions to help pay for provisions outside of NIL.
Congress hopes to have a bill by the end of the year, but when and exactly what the bill will include are still left open questions.
How Will Schools Ensure Compliance?
Schools will have to monitor student-athletes’ social media to ensure NCAA compliance and conference and school-specific compliance. On top of that, schools will have to ensure compliance with federal law and agencies, particularly with agencies like the Federal Trade Commission (“FTC”). The FTC regulates things like disclosures in social media posts that promote and endorse brands in exchange for compensation. Therefore, student-athletes will have to explicitly disclose any posts that promote and endorse a brand that is paying them.
This monitoring could be accomplished in various ways, including hiring employees to specifically monitor student-athletes’ social media accounts and ensure compliance or hiring companies that will monitor this compliance for the schools. Wake Forest has chosen the latter to deal with compliance. They recently hired “Spry," a company that monitors and reduces NIL risks.
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There are still many questions that remain regarding NIL. The landscape will be confusing and hard to navigate for the first few years. However, one thing is clear: The NCAA as we know it will never be the same.
