November 3, 2022

NCAA Clarifies Stance on Permissible NIL Activities

Holland & Knight Alert
Tyrone P. Thomas | James D. Smeallie | Michael Fiorillo

Highlights

  • The National Collegiate Athletic Association (NCAA) on Oct. 26, 2022, offered new guidance on Name, Image and Likeness (NIL) activities of universities, student-athletes (SA) and other entities supporting the NIL industry. In short, NIL relates to the commercial use of the publicity rights of student-athletes.
  • The new rules continue to prohibit pay for play or for performance, which is an essential tenet to the NCAA's definition of amateurism. The proliferation of NIL deals and lack of regulation has created a need for the NCAA to clarify how institutions, SAs and NIL entities may operate within this space.
  • Because this is an evolving area with additional clarifications likely to come in early 2023, legal counsel is essential to avoid entering arrangements that may be harmful to the university's compliance status, the SA's eligibility and the enforceability of a specific NIL arrangement.

The National Collegiate Athletic Association (NCAA) on Oct. 26, 2022, offered new guidance on Name, Image and Likeness (NIL) activities of universities, student-athletes (SA) and other entities supporting the NIL industry. In short, NIL relates to the commercial use of the publicity rights of student-athletes. The new rules continue to prohibit pay for play or for performance, which is an essential tenet to the NCAA's definition of amateurism. The proliferation of NIL deals and lack of regulation has created a need for the NCAA to clarify how institutions, SAs and NIL entities may operate within this space. The October guidance emphasized the educational purpose of institutions, the separation of institutions in their supporting roles from businesses in NIL roles and the continued prohibition on pay-to-play adjacent activities within the NIL space.

Background: NCAA's Interim NIL Policy and May 2022 Guidance

The NCAA issued its interim NIL policy on July 1, 2021, in the midst of a changing antitrust landscape, a lack of federal NIL laws and a number of state laws and executive orders on NIL that conflicted with then-existing NCAA rules. The interim NIL policy stated that the NCAA would defer to any laws or executive orders governing NIL in the state of the university attended by the SA. For states without legislative or executive guidance, the policy provided that athletes could be compensated for NIL deals by third parties (i.e., entities other than their universities, university staff or professional teams in their sport of competition) while remaining eligible to compete.

In May 2022, the NCAA published additional guidance to clarify how NIL deals affect boosters, which the NCAA defines generally as an entity that promotes an athletic program by providing benefits to SAs or their families. At the time of the May 2022 guidance, it was suspected that many entities seeking to create NIL deals with SAs fell within this definition. The May guidance focused on prospective SAs (PSA), reaffirming that boosters cannot participate in recruiting nor may institutions facilitate a relationship between the booster and PSA. For current SAs, the May guidance emphasized that any NIL deals cannot compensate SAs for enrollment decisions, athletic performance or achievement, or membership on a team. The deal instead must by based on the "value that each athlete brings to the NIL agreement."

October 2022 Guidance

In its latest guidance, the NCAA offered a nonexhaustive list of do's and don'ts for institutions, SAs and the NIL entities. The main theme was how institutions may support SAs and NIL entities while continuing to promote amateurism and education. These do's and don'ts fall into two categories: distribution of information and education by institutions, and institutions acting as supporters not agents.

The recent guidance emphasizes distribution of information by permitting institutions to hold educational sessions for any person within the NIL sphere: SAs, NIL entities, boosters and PSAs. For SAs, these sessions may include topics such as financial literacy, taxes, entrepreneurship and social media. The guidance promotes distribution of information by banning any type of relationship between the SA and the institution where the institution would benefit from the SA's NIL deal, share revenue with the SA or compensate the SA for athletic department promotion. In sum, even with the advent of NIL, many of the traditional restrictions on business relationships between SA and institution remain the same.

The new NCAA NIL guidance applies the same focus on distribution of information and education to the relationship between donors, the institution and the NIL entities: sponsorship agreements are permissible between NIL entities and the institution, but the institution may not subscribe to the entity nor donate cash to the entity. Similarly, while the institution may provide donor information to an NIL entity, or even request a donor to provide funds to an NIL entity, the institution cannot incentivize a donor via tickets to or a suite at an athletic contest to provide funds to an NIL entity.

Other do's and don'ts within the guidance establish institutions as supporters not agents. For example, institutions may engage with NIL entities to create a marketplace or inform SAs of opportunities – a supporting role. Support might include retweeting a SA for NIL purposes, allowing a meeting space on campus for SAs and NIL entities, or providing stored photos, videos or other media to SAs and NIL entities. Conversely, institutions may not advocate or negotiate on behalf of SAs regarding specific SA deals with NIL entities, "proactively assist" in the implementation of any individual SA's NIL activity, nor provide support services for NIL activity such as graphic design, tax preparation or contract review that are not available to the general student body. These activities move away from support and move toward acting on behalf of the SA.

Conclusion and Takeaways

By its own admission, the NCAA's latest NIL guidance does not fill all of the gaps on what is – and is not – permissible NIL activity. Because this is an evolving area with additional clarifications likely to come in early 2023, legal counsel is essential to avoid entering arrangements that may be harmful to the university's compliance status, the SA's eligibility and the enforceability of a specific NIL arrangement. Holland & Knight will continue to actively monitoring the these developments, and while the NCAA Division I Board of Directors has directed its enforcement staff to seek actions in this area related only to egregious policy violations occurring before the guidance, it has also signaled the enforcement staff will be more assertive with violations occurring after the guidance. The authors or other members of Holland & Knight's Sports Law Practice are available to answer your questions and concerns to avoid unintentional violations.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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