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The NIL Paradox for NCAA Athletes—Enforce or Recruit?

June 27, 2022, 8:00 AM

Following the Supreme Court’s ruling in NCAA v. Alston, the National Collegiate Athletic Association and states began enacting rules and laws allowing student-athletes to receive compensation for the nascent name, image, and likeness (NIL). More than a year into the experiment, the legal and regulatory landscape is as clear as mud.

Recently, the NCAA has attempted to bring some clarity by issuing updated guidance that reaffirms certain restrictions on boosters. It is still not clear, however, how and to what extent the NCAA rules and state laws will be enforced.

While the guidance reaffirms the prohibition on using NIL deals as inducements for prospective athletes to sign with a particular school, the NCAA has shown no appetite for enforcing that prohibition.

No Action on Deal Rumors

To be sure, rumors have circulated about seven-figure deals used to entice highly sought-after players, but there has been no indication that the NCAA is taking action or even investigating. For example, University of Alabama coach Nick Saban and Texas A&M coach Jimbo Fisher recently highlighted these rumors and lack of understanding surrounding the NCAA guidance.

Saban in a speech to business leaders claimed Texas A&M was using NIL deals to recruit players, and the next day Fisher responded that Saban doesn’t understand the rules and his team was compliant.

While Saban did not specifically say Fisher and A&M were breaking the NCAA guidance, and in later statement claimed he never said any rule was broken, the statements caused Fisher to clarify that all NIL deals were “independent” of the school and thus did not break rules.

This argument drew national attention. What lurked in the background was a fundamental misunderstanding of the NIL rules based on the divergence in responses, not of the coaches and the schools, but of collectives—a group that collects money to create deals, like Alabama’s High Tide Traditions and A&M’s the Fund.

High Tide Traditions all but stayed silent on the argument, avoiding any additional scrutiny, however attorneys who have worked with A&M’s the Fund claimed that because the collective is separate from the school it cannot violate rules and bylaws—which is simply not true. A collective that induces an athlete to attend a school regardless of the separateness from the school violates NCAA rules.

But, even with a public squabble like the Saban/Fischer feud, the NCAA has not showed any interest in a public investigation or enforcing its rules.

Similarly, while certain state laws prohibit a wide range of conduct, there have been no state enforcements of NIL laws against a school, donor, or player. For example, if the Pac-12 were to create more restrictive NIL rules, it would have to comply with the laws of its member schools’ states.

Some states, such as Arizona, allow for compensation to the extant allowed by NCAA rules. However, California law specifically prohibits a conference from preventing “a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, likeness, or athletic reputation.”

Again, neither of these state laws have been enforced or legally interpreted, therefore the ability of a conference—like the Pac-12 that includes schools in Arizona and California—to restrict NIL compensation is dependent on future state enforcement of their laws.

Athletic Conferences

If the NCAA and states refuse to enforce NIL rules, it may fall on the athletic conferences to develop and enforce their own rules. Indeed, during recent conference meetings, some athletic directors have previewed the idea of conference rules on NIL. There are, however, potential impediments to this idea.

First, conference NIL restrictions could theoretically violate antitrust laws because they could be construed as an undue restraint of trade. This outcome, however, seems unlikely because individual conferences do not have the requisite market power necessary to establish an antitrust-violating monopoly.

Although courts may not conclude that an individual conference is a monopoly, the threat of challenges (which would be costly to defend) may have a chilling effect on conference-level action.

Second, conferences are made up of schools in multiple states. Thus, the conference must work within the confines of the varying NIL laws enacted by each state in which its member institutions are located.

Some of those laws include language that prevents entities—such as conferences or the NCAA—from enacting rules that prevent a student-athlete from receiving compensation through NIL. California and Colorado are two examples. These types of laws make it difficult for a conference to draft rules that are consistent with each state’s laws, leaving the conference vulnerable to state enforcement actions.

Third, if a conference were to enact stricter NIL rules, it is unlikely they would do so without a commitment from other conferences to do the same. Conference-level NIL restrictions may adversely impact the conference’s constituent schools’ ability to recruit student-athletes.

A conference would not want to put its constituent schools at a recruiting disadvantage by enacting (and enforcing) strict NIL rules, and a coordinated effort between the various conferences may not be a workable solution.

If the conferences coordinated their NIL rules, they would undoubtedly be susceptible to allegations of a different antitrust law violation: collusion between competitors. The big question in avoiding a claim of collusion is whether any conference, or any school, is willing to be put at a competitive disadvantage by enacting NIL rules that other conferences or schools do not have in place.

No Clear Path to Uniform Enforcement of NIL Rules

Because of these challenges, there is no clear path toward uniform enforcement of NIL rules on any level. Of course, enforcement of these types of rules has never been easy. While there is no clear answer as to who will be the first to enforce NIL rules/laws, it is clear that enforcement is coming and challenges to that enforcement are soon to follow.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Derin B. Dickerson is a partner in Alston & Bird’s Litigation & Trial Practice group, where he concentrates his practice on higher education and complex litigation matters.

Trenton Hafley is an associate in Alston & Bird’s Litigation & Trial Practice group. He focuses on providing a wide array of clients antitrust services including merger clearance, litigation, and counseling, and also advises college collectives on NIL issues.