Since the early 1900s, the National Collegiate Athletic Association (“NCAA”) has regulated the collegiate sports world in the United States and the student-athletes within it. Momentum for changes to that regime has increased in recent years, and in the past few weeks the NCAA, various states, and the U.S. Supreme Court have all acted to expand the accessibility of education-related benefits and the ability of student-athletes to profit from their names, images, and likenesses (“NIL”). The ruling by the Supreme Court permits institutions to provide student-athletes with benefits, such as scholarships for graduate school and study-abroad programs. NIL legislation and executive actions have been undertaken in various states, and the NCAA has responded by releasing new guidelines acknowledging the new state laws and authorizing schools in states that do not have student-athlete publicity laws going into effect to draft their own rules allowing student-athletes to profit from their NIL. Where the student-athlete was once a source of income only for the institution he or she attended and its partners, some student-athletes now stand to earn significant compensation while still in college. Additionally, companies who seek to partner with student-athletes can now enter into sponsorship and other agreements in a manner similar to other athletes and celebrities.
Historically, the NCAA has prohibited student-athletes from receiving compensation while participating in a sporting activity at a member school. This included prohibiting student-athletes from profiting from their NIL. In recent decades, as college sports have become multi-billion-dollar enterprises, the NCAA’s amateurism model has come under criticism. The NCAA has long limited “compensation” for student-athletes to the cost of attendance and strictly regulated the kinds of money-making activities student-athletes are permitted to undertake. While the NCAA was being compensated millions of dollars for licensing the student-athletes’ publicity rights for marketing and entertainment purposes, such as through the long running EA Sports’ NCAA Football series, the student-athletes themselves did not share this revenue. In 2014, EA Sports settled with various former and (at the time) current student-athletes for previously using their NIL without compensating them for such use. This settlement effectively ended the years-long relationship between the NCAA and EA Sports, with the last EA Sports-produced video game focused on college sports being NCAA Football ’14.
In September 2019, California became the first state to pass a law permitting student-athletes to profit from their NIL without being penalized by the NCAA. Several other states followed suit with similar legislation, with Florida setting the earliest effective date of July 1, 2021, two years earlier than California’s law is scheduled to take effect. However, the NCAA did not quickly react, and by the time Florida’s statute was about to take effect, the NCAA had permitted a situation to arise where Florida’s law was poised to be in direct conflict with NCAA regulations. On June 21, 2021, the Supreme Court held that the NCAA was subject to anti-trust laws and permanently enjoined enforcement of the NCAA’s restrictions on education-related benefits to student-athletes. In his concurrence, Justice Kavanaugh turned to the remaining student-athlete compensation related issues in the NCAA and stated, “The NCAA’s business model would be flatly illegal in almost any other industry in America.”
The NCAA, which has become notorious for its glacial approach to change, was typically slow to react. Finally, on June 30, 2021, the NCAA released new guidelines, effective the following day, that responded to the Supreme Court decision and the legislation in Florida, California, and elsewhere. Under the new guidelines, ALL student-athletes are now allowed to benefit monetarily from their NIL, as well as engaging agents and legal counsel to assist them in negotiating such deals. Further, any member school that is located in a state that does not have student-athlete publicity laws can draft its own policy detailing the kinds of endorsements student-athletes are allowed. However, schools remain expressly prohibited by the NCAA from directly or indirectly compensating the student-athlete for endorsements, as a recruiting incentive, or for participating in the college-sponsored activity.
The Illinois Student-Athlete Endorsement Rights Act
The Illinois Student-Athlete Endorsement Rights Act (Public Act 102-0042) became effective on July 1, 2021, and details the restrictions on compensation to collegiate student-athletes in Illinois in connection with endorsement deals. Much like the NCAA guidelines, the Illinois act permits student-athletes to profit from their NIL and to engage agents and/or attorneys to negotiate on their behalf and protect their interests. However, student-athletes in Illinois will be prohibited from endorsing certain types of disfavored goods and services, such as controlled substances, cannabis, tobacco, alcoholic beverages, gambling, performance-enhancing supplements, and adult entertainment. Further, in a step beyond the NCAA guidelines, Illinois explicitly prohibits boosters’ involvement in NIL agreements either directly or through third parties.
Under the Illinois statute, any NIL agreement with a student-athlete for more than $500 must be in writing, the student-athlete must be adequately advised of their rights, and the collegiate institution in which the student-athlete is enrolled must be notified of the engagement. Further, no company may engage or provide any compensation to a student-athlete prior to the student’s enrollment.
Moreover, any endorsement deal executed while the student-athlete is participating in collegiate sports may not extend beyond the student-athlete’s participation in the collegiate sport. For example, if Aurelio’s Pizza contracts with the next star of Loyola Basketball to endorse its pizza, the company may only do so for as long as the player is playing basketball at Loyola. If Aurelio’s intends to continue the endorsement relationship afterward, it would have to negotiate a new contract reflecting the athlete’s changed status after the student’s participation in collegiate athletics has ended.
Student-athletes have already begun to capitalize on their newly granted rights. Notably, some of the first major endorsement deals were with women athletes and athletes enrolled in HBCUs (Historically Black College or University). Hanna and Haley Cavinder of Fresno State’s basketball team have signed on to be spokeswomen for Boost Mobile, and five members of the Jackson State Football team have signed an endorsement deal with Kings Grooming Products. On July 6, 2021, American Top Team, an MMA and Jiu-Jitsu gym franchise in Miami, Florida, offered every University of Miami scholarship football player $500 per month to promote their training facilities. And in February, EA Sports announced a new deal with the NCAA. EA Sports will have exclusive rights to depict the names, stadiums, uniforms, mascots, and traditions of over 100 NCAA member institutions in the relaunch of its college sports video games. While the EA deal did not include any student-athlete NIL rights, the new NCAA guidelines appear to open the door for EA to attempt to license such rights in connection with its video games.
As mentioned above, collegiate institutions will have room to craft rules that limit the kinds of companies with which student-athletes are permitted to enter into endorsement deals. For example, an institution may enact a rule prohibiting student-athletes from entering into an endorsement deal with Vans because the school already has a conflicting sponsorship agreement with Sketchers, a competitor. Further, student-athletes may be prohibited from using their respective collegiate institutions’ intellectual property, including school names and logos, without permission. Companies should be mindful that even if the student-athlete is a star player at a Division I powerhouse, the company will not be able to directly profit from the school’s reputation and goodwill. Moreover, certain companies and industries will be barred from participating in the new regime altogether. Student-athletes will want to ensure their representatives are not negotiating deals inconsistent with their statutory rights, as well as the rights that remain with their institutions.
Finally, any student-athlete or collegiate institution looking to capitalize on the next big wave of profitable rights should do so with caution. All agents or legal representatives of student-athletes must continue to comply with both state law, the NCAA regulations, and the federal Sports Agent Responsibility and Trust Act. For example, both the NCAA regulations and the Illinois Student-Athlete Endorsement Rights Act prohibit any agency or endorsement contracts that purport to continue after the student-athlete has left the collegiate institution. Any collegiate institution or student-athlete looking for guidance on these issues should consult with counsel to ensure that any proposed contract passes muster under applicable law.
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