The Future of NIL Collectives

A name, image, and likeness (NIL) collective is an entity that serves as a bridge between student-athletes and revenue-generating opportunities for those student-athletes. There are currently over 225 NIL collectives dedicated to Division I universities. While these NIL collectives are dedicated to universities, they are not controlled or legally connected to the universities. While the primary purpose of an NIL collective is to help student-athletes locate and execute NIL deals, many legal experts now argue that many NIL collectives are providing NIL compensation to student-athletes without receiving a fair market service in return for that compensation. In other words, some people are saying NIL collectives solely use the donations they receive from boosters and donors to buy student-athletes that will help make the boosters’ and donors' favorite sports teams more successful. If that is the case, those who value the integrity of college sports may argue that was not the intent of allowing student-athletes to be compensated for their NIL. That is the view that Charlie Baker and the NCAA have, and that is why Baker has proposed a model that would potentially eliminate third-party collectives from buying certain student-athletes to enhance the skill level of their favorite sports teams. Baker is not the only one who would like to eliminate this method of NIL activity and that is why this article discusses the potential future of NIL collectives. Part I of this article discusses how collectives were first created and their initial intended purpose. Part II discusses the future of NIL collectives.

Part I: The Creation of NIL Collectives

After multiple states began to enact legislation to allow college athletes to profit off their NIL, those with deep pockets and beloved sports teams began to envision ways they could use their money to help make their favorite teams more successful. Then, in August 2021, a new entity called the “Gator Collective” was announced. A few years later, there are now over 225 collectives that are finding unique methods to transfer funds to the most talented and well-known student-athletes across the country. Many individuals, including myself, claim that NIL has been revolutionary for college sports and has brought substantial wealth to student-athletes and it was well deserved. Many would say it was wrong for the NCAA to restrict student-athletes from using their NIL to be compensated. Why should a music student be able to provide musical lessons to a child and be compensated for it, but an NCAA basketball player cannot provide lessons to a child without losing their eligibility? Or how come a student at a university who does not play sports could perform a promotional video for a business and be paid for it, but once again, if they were an athlete they would lose their eligibility?

This is why California passed the first NIL law that allowed student-athletes to be paid for NIL deals just like all the other students on campus and not risk losing their eligibility. After California passed its bill in 2019, it opened the floodgates to numerous other states passing similar legislation, which led to forcing the NCAA to create an interim NIL policy that allowed student-athletes to be compensated for their NIL. These NIL laws were built on the idea that athletes should be given the option to utilize the free market and their constitutional rights while continuing to play college sports. Collectives initially portrayed that same purpose. However, it did not take long for collectives to take advantage of the new regulations put in place and use their money to attract talent.

Part II: The Future of NIL Collectives

For those who believe donor-driven NIL collectives are damaging the integrity of college sports, there are two outcomes to attempt to solve this issue. The first is the likely outcome of Charlie Baker’s proposal that was sent to more than 350 Division I schools in December 2023. Baker’s new proposal would most likely have the effect of legally combining the collectives with the universities they are representing. The other outcome could be collectives remaining as separate entities from their universities, but the NCAA or Congress places a substantial number of regulations over the collectives in an attempt to eliminate the aspects of collectives that are damaging the integrity of college sports.

Charlie Baker’s Proposal

In December 2023, Baker sent a letter to over 350 Division I schools that proposed the idea of creating a new tier of Division I sports. The model would allow Division I schools that chose to contribute $30,000 into an educational trust fund to at least half of their athletes (while abiding by Title IX) to do three new things, (1) enter directly into NIL deals with their athletes; (2) provide student athletes with any level of enhanced educational benefits the university deems appropriate; (3) unite with other member institutions of the new tier to create unique rules regarding scholarship commitment, roster size, recruitment, transfers, or NIL.

By allowing universities to enter directly into NIL deals with their athletes, there would be no purpose for a donor-driven collective. Currently, collectives are the middlemen concerning the funneling of money to student-athletes to create the incentive to play for that university. If universities are allowed to directly enter into such deals with their athletes, it eliminates the need for the middleman (i.e., the collective).

While Baker’s proposal could eliminate donor-driven collectives might be attractive per se, the proposal may not eliminate the problems that come with such collectives. For those who disfavor donor-driven collectives, it is usually because they are using money to induce the most talented athletes to play for their teams. If the collective became a part of the university, what is to stop the university from using NIL to induce these talented athletes? If anything, the athlete would likely feel more comfortable accepting an NIL deal directly from a university rather than from a third party. While the NCAA could place a restriction that prevents using NIL as an inducement, that may violate antitrust law, which is currently being disputed in Tennessee v. NCAA. On February 23, 2024, the federal district judge presiding over the Tennessee case, granted a preliminary injunction to suspend the NCAA’s rules on NIL, allowing collectives and other third parties to use NIL as inducements. If Tennessee prevails in the lawsuit, Baker’s plan to bring collectives within the university to uphold the integrity of college sports may become moot since restricting them from using NIL as an inducement would be a violation of antitrust law.

The Federal Government

If Baker’s plan is not implemented or a scenario where a court destroys his plan by declaring a restriction on NIL as an inducement is an antitrust violation, the answer could be the federal government. Congress could do multiple things to eliminate the conduct that collectives perform that damages the integrity of college sports. Congress could create legislation that grants the NCAA an antitrust exemption, or legislation that prohibits collectives or universities from using NIL as an inducement and creates an agency or uses an existing agency to enforce such prohibition.

While federal legislation has been rare regarding college sports in its tenure, there currently appears to be more interest from Congress than before. While it is challenging to pass uniform legislation in Congress, it is becoming more necessary in college sports due to the patchwork of state laws. With states allowing their universities to be involved in certain conduct that universities in other states cannot be engaged in, and the NCAA having its rules be deemed as antitrust violations, there has become a lack of uniformity. Schools that are playing each other with the same rules on the field, court, track, and pool, have different rules outside of competition because they are regulated by different state laws. Legal experts such as Tom McMillen predict that while it may not be this year, it is likely that we will see federal regulation to create uniformity in college sports.

There are currently seven pieces of legislation that are being floated around in Congress. Each bill seeks to regulate NIL deals but has different means for achieving that goal. Many of the bills prohibit using NIL as an inducement and create some form of regulating body to enforce such prohibition. The justification for prohibiting NIL as an inducement stems from the concept that if a university has more donor funds or a collective has more donor funds, then it will be able to offer more money to prospective athletes. And since at the college level you may choose the university you attend, rather than being drafted (as done in the professional leagues), the student-athletes will choose to attend the universities with the higher NIL deal, which will result in unfair competition. Some argue that this resembles the free-market concept that the United States has been built on. Others argue that it damages the integrity of college sports, will result in violations of Title IX regulations, and decrease viewer demand since the same teams will continue to be successful, because success leads to more money, and money leads to better talent under this NIL model. For those that take the latter argument, they pride themselves on the idea that in a tournament such as March Madness, what makes it “madness” is you see Cinderella stories such as Sister Jean and the 2018 Loyola Ramblers, or the 15th seed Saint Peter’s Peacocks in 2022, or the 1985 Villanova Wildcats. If NIL is used as an inducement, could Cinderella stories still exist?

My Prediction

Regardless of your passion for Cinderella stories and seeing the little guys win on the football field, the concept of NIL collectives and their future can be broken down into a simple concept. NIL collectives currently serve as the middleman to funnel donor funds to student-athletes, whether it be directly or through the concept of using collective employees to create a marketplace for student-athleteshave or educating athletes on how to capture NIL deals. The direct NIL deals between collectives and athletes have the potential to damage the integrity of college sports and change it completely, therefore, leaders whether it be the NCAA or the federal government are likely to create regulations to restrict these types of NIL deals. The most efficient way to restrict this behavior will be to require the collectives to be legally intertwined with their university to provide uniformity and efficient guidance. This will allow the university to directly revenue share with their student-athletes, who rightfully deserve a portion of the revenue that they generate for their university. The NCAA or federal government will then implement policies that regulate how NIL can be used between universities and their student-athletes. While the logistics of these regulations will take years to implement, enforce, and amend to find the proper regulations, this is one of the most likely methods to preserve college sports, grant student-athletes the rights they deserve, and abide by other regulations such as Title IX. While it currently seems almost impossible that the NCAA will attempt to place more restrictions on its members right now, due to the number of antitrust lawsuits piling up, I predict that regulations are coming from either Congress or the NCAA because either the NCAA can ride the coattails of Congress’ regulations, or the NCAA could be backed into such a deep hole, that it is either create more uniform regulations, or risk becoming extinct.

Conclusion

Collectives came in and completely disrupted the college sports space in 2021. Whether it be the marketplace collectives that achieve the initial purpose of NIL, or the donor-driven collectives that may be damaging the college sports space, there is no doubt that collectives have made a major impact. The future of collectives is certainly not set in stone, but based on the initial purpose of NIL, the statements from legal experts, President Baker, and Congressman, and the direction that courts appear to be leaning, I believe collectives will be brought within their universities and further NIL regulations will be implemented by the NCAA or Congress. However, even if this change were to occur, it would take lots of time to develop. Therefore, as of now, collectives have the freedom to gain as much capital as possible from their donors and do whatever it takes to bring high-level talent to their universities. As universities get further and further from each other regarding skill level, the NCAA lawsuits begin to be published, and college sports continue to raise major legal questions, the more disrupted college sports will be. And as a result, the more likely the NCAA or Congress will be to take action.

Logan Hughes is a third-year law student at Ohio Northern University Claude Pettit College of Law. You can follow him on Twitter @loganchughes23 and LinkedIn (Logan Hughes).