NCAA Issues New Guidance Clarifying NIL Rules for Institutions

The NCAA’s Division I Board of Directors issued new guidance to member schools on Wednesday to clarify institutional involvement in name, image, and likeness (“NIL”) activities of enrolled student-athletes. The new guidance includes a non-exhaustive list that addresses permissible and impermissible institutional involvement in an enrolled student-athlete’s NIL activities.

“The NIL landscape is constantly evolving, and the Board of Directors decided it was important to offer further guidance with respect to a number of key questions that have arisen recently,” Jere Morehead, Chair of the Board and President of the University of Georgia said in a statement. “As we continue to reinforce current NCAA rules, we expect to offer further guidance in the future on what should and should not be done when engaged in these activities. We are committed to fostering a fair and appropriate NIL environment that supports our students and complies with our rules.”

The guidance was largely broken down into three distinct areas related to institutional involvement: (i) education and monitoring; (ii) school support for student-athlete NIL activities (which also addressed school involvement with collectives and other NIL entities); and (iii) negotiating, revenue sharing, and compensating.

Education and Monitoring

The guidance provides that schools are generally permitted – and are encouraged – to provide education to its current student-athletes on NIL. Specifically, the guidance mentions financial literacy, taxes, social media, and entrepreneurship as potential topics for NIL education.

The guidance also states that schools can educate collectives and other NIL entities, boosters, and prospective student-athletes.

Furthermore, if permitted by state law, schools can – and should require – athletes to report NIL activities to the athletics department. The Board of Directors also received a report about the benefits and challenges related to the use of an independent, third-party administrator to collect student-athlete NIL disclosures, but declined to take action on this item at this time.

School Support for Student-Athlete NIL Activities

The guidance next provides clarifications on a school’s support for student-athlete NIL activity. Notably, the guidance prohibits schools from the following activities:

• Schools cannot provide free services (e.g., graphic designers, tax preparation, contract review, etc.) to student-athletes unless those same services are available to the general student body. For example, if a law school clinic provides pro bono legal services for NIL contracts for athletes, it will need to provide those same services to the general student body.

• Schools cannot offer equipment (e.g., cameras, graphics software, computers, etc.) to student-athletes to support NIL activities, unless that equipment is also available to the general student body.

• Schools cannot allow student-athletes to promote their NIL activity while participating in required athletics activities (e.g., pre- and post-game activities, court celebrations, news conferences).

The guidance, however, does clarify situations in which schools are permitted to support student-athlete NIL activity. Several examples of permissible activities for schools include the following:

• Schools can inform student-athletes about potential NIL opportunities and can engage an NIL service provider (e.g., Opendorse, INFLCR, MOGL, MarketPryce, etc.) to administer a “marketplace” that connects student-athletes with potential NIL opportunities without involvement of the school.

• Schools are permitted to provide stock photos, videos, or graphics to either a student-athlete or an NIL entity.

• Schools can promote a student-athlete’s NIL activities, provided there is no value or cost to the school (e.g., retweeting or liking a social media post). Schools can also promote the student-athlete’s NIL activities provided that the student-athlete or NIL entity pays the going rate for advertisement (e.g., collective pays for an advertisement on a video board).

School Involvement with Collectives and Other NIL Entities

Collectives have been a hot button topic thus far in the NIL era. Many athletics department officials and coaches have expressed concerns that collectives are using NIL as improper recruiting inducements. According to a study by LEAD1 Association, a group that represents athletics directors of the 130-member schools of the Football Bowl Subdivision, 90% of athletics directors surveyed described themselves as “concerned” (73% of the respondents being “extremely concerned”) that NIL payments from collectives are being used as improper recruiting inducements, both for high school athletes or college transfers.

The section of the guidance that focuses on school support for student-athlete NIL activity provides several clarifications on collectives and other NIL entities. Subject to certain conditions, the guidance provides several examples of permissible activities for schools with respect to collectives and other NIL entities:

• School personnel (including coaches) can assist an NIL entity with fundraising through appearances or by donating autographed memorabilia but cannot donate cash directly to those entities, nor can school staff members be employed by or have an ownership interest in an NIL entity. For example, Ryan Day, the head football coach at Ohio State, and Chris Holtmann, the head men’s basketball coach at Ohio State, both attended a fundraising event this past summer for The Foundation, a 501(c)(3) NIL collective that supports Ohio State athletics. The coaches’ attendance and participation at this fundraising event is permitted under the new guidance.

• Schools are also permitted to request that donors provide funds to an NIL entity, as long as the schools do not direct funds to be used for a specific sport or student-athlete.

• School may provide contact information of a donor or an NIL entity to student-athletes, introduce student-athletes to representatives of an NIL entity, and arrange for meeting space for an NIL entity and a student-athlete on campus.

• Schools can provide tickets or suites to NIL entities through sponsorship agreements, as long as the terms of those agreements are the same as for other sponsors. However, those assets (e.g., tickets, suites) cannot be provided to a donor as an incentive for providing funds to the NIL entity.

Negotiating, Revenue Sharing, and Compensating

Finally, the last section of the guidance provides scenarios in which schools are not permitted to represent student-athletes in securing or negotiating NIL deals. Notably, the guidance provides that athletics department staff members cannot represent enrolled student-athletes for NIL deals, including securing or negotiating deals on behalf of the student-athlete. This prohibition on representing enrolled student-athletes in NIL deals also extends to third party individuals or entities acting on behalf of the athletics department (e.g., third party rights holders, third party agents).

As a result of this prohibition on securing or negotiating NIL deals, some schools may need to reevaluate their in-house and external NIL services and potentially unwind relationships with third parties. For example, South Carolina entered into a partnership with sports marketing agency Everett Sports Marketing (ESM) to broker NIL deals for Gamecock athletes and created an in-house NIL initiative called Park Avenue, a subsidiary of ESM, that provides Gamecock student-athletes with brand support, content development, and deal procurement and negotiations. Another example includes USC’s partnership with media agency Stay Doubted, which established a subsidiary named BLVD LLC to operate as an agency and media company exclusively serving USC athletes for NIL opportunities. Depending on the legal structure and details of these arrangements, South Carolina and/or USC may be in violation of the section of the guidance that prohibits schools or third party agents acting on behalf of schools from securing or negotiating NIL deals.

Schools and their personnel are also prohibited from entering into contracts with athletes for the sale of product related to the athlete’s NIL. The school and its staff members, however, may purchase items that are de minimis in value and for the same rate available for the general public. This likely means that schools will need to engage third parties, such as group licensing agencies like The Brandr Group, to offer co-branded NIL products. The guidance also clarified that coaches and other staff members are prohibited from providing NIL deals to athletes through their own businesses.

Conference and student-athlete broadcast and NIL revenue sharing is also not permitted under the new guidance. However, this prohibition will likely be – and currently is – subject to legal challenges. In House v. NCAA, NCAA student-athletes are alleging that the NCAA and its member schools, as well as the Power Five conferences, have violated antitrust laws through amateurism rules by denying players economic opportunities to profit from their NIL. The plaintiff student-athletes are seeking substantial monetary damages, potentially worth billions of dollars, related to lost NIL revenue, which is broadly interpreted to include already-paid broadcast revenue, in addition to injunctive relief.

Student-athletes are also prohibited from receiving compensation directly or indirectly for promoting an athletics competition in which they participate.

What Does the New NIL Guidance Mean?

The new NIL guidance does not change the NCAA’s existing NIL rules. Instead, the new guidance aims to clarify those existing rules for institutional involvement. Although the guidance does not cover every possible scenario regarding school involvement in NIL activities, it does provide a fairly comprehensive list of permissible and impermissible activities for schools.

In light of this new guidance, schools should reevaluate the NIL services they offer both internally and externally through third parties as such services, particularly those that involve securing or negotiating NIL deals, may be in violation of the new guidance. The Board of Directors also adopted a proposal for new allegation and conclusion standards regarding potential NIL violations. The proposal places a heavy burden on schools to demonstrate that any allegation of impermissible conduct is in line with existing NIL rules. The Board provided the following summary of the proposal: “When information available to the enforcement staff indicates impermissible conduct occurred, the enforcement staff and Committee on Infractions will presume a violation occurred unless the school clearly demonstrates that the behaviors in question were in line with existing NCAA rules and the interim policy.”

The Board of Directors, however, did reiterate its previous position that “the focus of its NIL guidance is not intended to question the eligibility of enrolled student-athletes.” Furthermore, the Board said that “[f]or any violations that occurred before this additional clarification, the board directed the enforcement staff to review facts of individual cases but pursue only cases that are clearly contrary to the interim policy.” In other words, the new guidance is not directed at player eligibility, nor punishing schools for violations of the guidance prior to its adoption, unless such violations are clearly egregious. Rather, the guidance is intended to level the playing field for schools by clarifying permissible and impermissible activities.

Ryan Whelpley is an Associate at Morse in Waltham, Massachusetts, where he is a member of the firm’s Corporate Practice Group. He is a graduate of Albany Law School and Union College. At Union, Ryan was a member and three-year captain of the Men’s Basketball Team. You can connect with him via Twitter (@Whelpley_Law) and LinkedIn.