June 2021 will be remembered by many as the most significant month in NCAA history. Two major events forever changed the way college athletes will relate to their universities.
The first was the landmark 9-0 decision by the U.S. Supreme Court in NCAA v. Alston. In Alston, the court held that the NCAA’s rules limiting the amount of education-related benefits provided to athletes, such as tuition waivers, living expenses, laptops, etc., violated federal antitrust laws.
Interestingly, the court did not forbid the NCAA from prohibiting athletes from earning money in other ways, such as by licensing their name, image, or likeness (NIL). The court felt these rules actually promoted competition by offering sports fans two distinct options:
Professional sports (where athletes are paid directly for their services) and amateur sports (where athletes are only paid through education-related benefits). However, as noted below, other factors led the NCAA to waiving its NIL rules.
The most important result of Alston is it sets the standard for how the court will view the “business” of college athletics going forward. The court rejected arguments by the NCAA that it should receive special antitrust treatment due to its role in promoting amateurism in college sports.
The second major event was the decision by the NCAA to waive its rules prohibiting college athletes from earning income via their NIL. The waiver was issued June 29 to address state laws going into effect July 1, which would have authorized athletes to license their NIL.
Failure of the NCAA to waive its rules would have created one of two outcomes: (1) the NCAA would only have allowed athletes in states with NIL laws to earn income from licensing their NIL; thereby, creating a clear recruiting advantage for teams in those states, or (2) the NCAA would have declared athletes who monetized their NIL ineligible to play, even in states with NIL laws. Either outcome would have generated significant litigation.
What’s the Impact?
So what does this mean for student athletes? Because of Alston, many will see their education benefits increase; a new laptop here, a higher-paid internship there. More importantly, college athletes in every state can now earn money directly from licensing their NIL.
Ironically, athletes in states with NIL laws may have less earning potential compared to athletes in states without those laws. Many of the state laws impose restrictions on the use of NIL.
For example, in Florida, an athlete cannot sign a contract with terms conflicting with terms of an existing university contract. For example, an athlete cannot appear in a Pepsi advertisement if their university is a Coca-Cola school.
Likewise, the athlete can only be paid “fair-market value” for their NIL. In states without a NIL statute, so long as an athletic program is not using NIL as a recruiting inducement or as a substitute for payment for athletic performance, it can decide what, if any, restrictions it will put on athletes’ NIL activities. This gives programs in these states the ability to impose little or no restrictions, making their program more attractive to recruits.
If this happens, we can expect states with NIL laws to modify or repeal their laws to eliminate this advantage.
What Should Athletes and Their Parents Do?
So how long will this jockeying for recruiting advantage last, and what should athletes and their parents do in the meantime?
The NCAA stated its waiver will be in place until federal legislation is passed creating a nationwide standard on NIL, or until the NCAA passes a new rule. Neither is likely to occur soon. Until then, it is important that college athletes and their parents:
- Take advantage of any university-sponsored programs on financial literacy and life-skills training designed to help athletes make good business decisions.
- Hire an attorney to review any proposed contract for NIL. The attorney should have experience with licensing deals and with NCAA and university rules and policies. A qualified attorney can negotiate contract terms to protect the athlete’s earning opportunities and reduce potential liability. They can also advise on how to avoid deals that are really payment for athletic participation or inducement, which can cause the athlete to lose their eligibility along with their earning potential.
- License NIL only to reputable businesses. It is impossible to put a price on one’s reputation. Associating with a shady business could hurt the athlete in obtaining future deals and their draft potential.
- Take advantage of university partnerships available to assist in navigating the NIL business and ensure compliance with NCAA rules. The university will have investigated the partner to ensure their reliability and expertise.
- Be careful of unsolicited offers of representation by agents or attorneys. Check with the athletic department and other college athletes with NIL deals to weed out unsavory characters.
There will be many issues for the athlete and sports program to consider in the next year. How will universities keep the vast majority of athletes who have no NIL earning potential from feeling like second-class citizens? What effect will having two classes of athletes have on team chemistry and player discipline? Will an athlete’s NIL business become a distraction during practice and competition? If the majority of income is received by men’s football and basketball players, how will that impact Title IX and gender equity?
The next year or two will bring some answers and a lot more questions. For now, the only thing we can predict with certainty is the business of college athletics will never be the same.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Scott Cole is a shareholder and leader of the Higher Education Team at GrayRobinson in Orlando, Fla. He has extensive experience providing legal advice, strategy, and problem resolution in unique and decentralized higher education environments.