Sunsets on the SEC

What is the impact of Sunset Clauses on NIL contracts? While most states have similar laws

governing student-athletes monetizing their NIL, seven states differ from the rest. Texas,

Oklahoma, South Carolina, Tennessee, Louisiana, Mississippi, and Illinois implement a

mandatory Sunset Clause to govern the length of all NIL contracts. Six are within the purview of

the SEC.

As a former high-level Division One student-athlete, I know what players experience daily. The

opportunity to earn life-changing money is real, but so is the chance of unfair exploitation. The

purpose of the law is to balance the playing field, bringing both parties to neutral grounds. It is not

meant to place one party at a significant disadvantage in negotiations and future transactions.

Sunset Clauses are clauses in a statute, regulation, or contract that expire automatically on a

specified date. It provides for an automatic end once the Sunset Date arrives, voiding the contract.

An advantage is that both parties will no longer have obligations once the Sunset Date arrives. It

provides easy outs since there are no formal actions either side must take to trigger termination.

Normally, both sides negotiate the clause upfront and know the exact end date, making drafting

and execution effortless. However, in these seven states, the exact Sunset Date is unknown, and

parties cannot negotiate the statutorily established Sunset Clause. This leads to confusion and

predatory acts.

A party can use the provision to combat changing market conditions by delaying their performance

until the clause is triggered, leaving the other party without legal recourse. So, in an NIL context,

if the offeror knows of the Sunset Clause’s existence and the athlete does not, they could spring

the end of the contract on the unsuspecting athlete.

The objective of Sunset Clauses is to limit the length of NIL contracts and force expiration when

a student-athlete stops competing in collegiate sports. A commonality between all seven states is

a potential “game-changing” loophole stemming from the word participation. The statutes

basically articulate that “the contract cannot extend beyond a student-athlete’s participation in the

athletic program at a college.” Yet, none of the seven states define the term participation, raising

several important questions.

First, what does participation mean? After all, participating in a sport can have several different

meanings—if not clearly defined. Does participating mean being on the team, playing in games,

or “dressing” for games? Participation could mean any of those definitions. Both sides could

broaden and narrow the definition of participation to escape contracts. If a player suffers an injury

that keeps them from participating, can offerors terminate the contract? Technically, the injured

player is not participating in the program. If this qualifies as not participating, then offerors gain

significant leverage by using this loophole to terminate contracts with sidelined players of little

NIL value.

When a player is suspended by the team, school, or NCAA, their marketability takes a hit. So,

when suspension periods begin does that count as not participating and trigger the Sunset Date?

Suspensions range from practices and games to entire seasons, creating chances for offerors to end

contracts with suspended players by citing how the athlete is not participating in the program.

Even though the athlete is suspended and has violated rules unrelated to the contract, this potential

escape is unfair to the athlete. What happens if the athlete takes a leave of absence from the team?

The student-athlete in both scenarios likely entered the NIL contract with the intention of it lasting

until their playing career ended.

Expanding off the participation loopholes are questions surrounding when the Sunset Date

commences. Does the Sunset Date end the contract when the student-athlete plays their last game

for the school? Or does it last until graduation?

Would the contract void if the player declares for the draft and then returns to school? Here, Sunset

Clauses provide leverage to the player. To illustrate, if the Sunset Clause voids the contract when

players declare, they can renegotiate better terms because they are likely coming off a successful

season.

What happens if players transfer? When transferring to another program, their participation in the

initial program—the one they were with when they signed the NIL deal—would be considered

over. Brands could use this to terminate the contract. However, players would argue that they are

still participating in an athletic program, just not the athletic program they were in when the deal

was made.

Ambiguously worded Sunset Clauses in NIL statutes will lead to expensive litigation and

inefficiency if every deal only lasts one to six years. Opportunities presented to college stars who

don’t turn pro will dwindle because Sunset Clauses force an automatic end and renegotiation of

any contract. The leverage the offering party possesses after the Sunset Date is difficult for the

former student-athlete to counter. This will lead to athletes entering underpaid contracts based on

arguments that their marketability decreased because they are no longer competing. Brands could

also be placed at a disadvantage when negotiating with superstars possessing bright professional

futures. These players can then secure huge paydays and escape contracts they signed as budding

college players. The renegotiation process would consume valuable time and resources, delaying

the inevitable partnership. These problems could be fixed if Sunset Clauses are clarified or

removed.

The first option for solving the Sunset Clause issue is to remove them and allow parties to negotiate

an agreed-upon end date. These clauses create more issues than benefits and are unfairly one-sided.

Leverage is removed from student-athletes, earning opportunities for athletes are capped, and the

current statutes create unintended loopholes. Sunset Clauses should be eliminated from NIL

contracts altogether, allowing each side to freely negotiate the length. If a player and brand find it

equally enticing to agree upon a length beyond a player’s collegiate career, this should not be

precluded. Players should be allowed to bet on themselves and plan several years ahead when

negotiating. Brands will also benefit because they could establish partnerships with players that

could create greater returns. With both sides profiting from the removal of Sunset Clauses, the

legislation of these seven states should abolish Sunset Clauses within NIL statutes.

The second option is to preserve them in the statute but define participation. By clarifying this

term, unfair escapes will be prevented and both sides will fully understand what it means to

participate in an athletic program. Offerors cannot argue the Sunset Date commenced when a

player is injured, suspended, or takes a leave of absence. The definition of participation in NIL

contracts should be when a student who is a player on the team engages in all team activities.

Participation ceases only when a player is kicked off the team and dismissed from the athletic

program entirely. Being injured, suspended, or on a leave of absence does not impact a player’s

participation in an athletic program. Student-athletes cannot prolong participation by becoming a

staff member upon the end of their playing career because they are no longer athletes at this point.

Declaring for professional drafts and returning to school does not impact one’s participation in an

athletic program. Further, transferring to a new school does not end participation as long as the

player continues to play the same sport.

Option three is to enact a clear Sunset Date. The best decision is to end the contract on student athletes'

graduation date.

I strongly support the abolition of Sunset Clauses within NIL contracts. They are unnecessary,

outdated, unfair, and ambiguous. Texas, Oklahoma, South Carolina, Tennessee, Louisiana,

Mississippi, and Illinois should join the rest of the country and remove Sunset Clauses from their

statutes. Fewer restrictions are better for everyone involved because parties do not have to worry

about tiptoeing around unclear end dates. If Sunset Clauses are removed, confusion and ambiguity

surrounding the meaning of participation cease. The uncertainty of Sunset Dates will also be

solved. Further, serious litigation will be avoided because loopholes will no longer exist. Money

will be saved, brands and players will be placed on even grounds free to negotiate in good faith,

and both sides will be in prosperous positions. Abolishing Sunset Clauses is the best approach for

solving uncertainties surrounding these statutes while protecting student-athletes.

By following the legal recommendations provided, the Sun will not Set on the SEC.

Dan Henry is a former Division 1 Men’s Basketball Player for Saint Francis University and

a current law student at Stetson University College of Law. He has experience in the sports and

entertainment industry. You can follow him on Twitter @dan_henry3.