NCAA updated guidance on institutional involvement in NIL: An explainer
This article was originally published by the Sports Business Journal on November 4, 2022 and is republished here with permission.
On Oct. 26, the NCAA Division I Board of Directors released updated name, image and likeness regulatory guidance titled “NCAA Division I Institutional Involvement in Student Athlete NIL Activities.” This guidance is the third such missive from the NCAA on its NIL regulations, following its Interim NIL Policy released on June 30, 2021, and Guidance Regarding Third Party Involvement on May 9, 2022.
The updated guidance expounds on existing NCAA policies, including the NCAA Bylaws, and clarifies how those policies should be adhered to in practical terms. In particular, the guidance highlights specifically permissible and impermissible forms of institutional interaction with third-party NIL entities — namely, NIL collectives, third-party institutional rights holders, and third-party agents. In so doing, the updated guidance represents the NCAA’s most detailed attempt to outline clear and transparent regulations as the so-called “NIL Era” of college sports continues along in its second year.
The Updated Guidance
The updated guidance is divided into four parts: (i) Institutional Education and Monitoring; (ii) Institutional Support for Student Athlete NIL Activity; (iii) Institutional Support for NIL Entity/ Collective; and (iv) Negotiating, Revenue Sharing and Compensating.
In its Institutional Education and Monitoring section, the updated guidance confirms that colleges may provide educational resources to their student athletes, NIL collectives, boosters, and even prospective student athletes. Many colleges already offer training to their student athletes in financial literacy, tax, and entrepreneurship, but the updated guidance explicitly states that institutions can offer these resources to recruits, boosters and third-party entities.
In Institutional Support for Student Athlete Activity, the guidance provides key insights as to how institutions can and cannot support student-athlete NIL activity. In particular, this section gives institutions the freedom to work closely with third-party NIL entities, including directly engaging with those entities to administer NIL marketplaces and even arranging for such entities to market themselves on campus. Further, schools can provide promotional material and graphics for student-athlete use in the NIL marketplace. Still, the guidance prohibits institutions from working hand-in-glove with such entities, as colleges are prohibited from communicating contractual demands between student athletes and third-party entities or proactively assisting NIL activity between student athletes and third parties where such assistance is not offered to all students. Still, this section effectively allows schools to embrace openly third-party NIL entities where institutions had previously been understandably uneasy about engaging with them.
The third section, Institutional Support for NIL Entity/Collective, goes perhaps even further in clarifying a newly-permissive relationship between colleges and third-party NIL entities. The guidance explicitly permits institutions to assist NIL collectives in raising money, engage in bona fide sponsorship relationships with the entities, and even solicit meetings with college donors on their behalf. Although the guidance prohibits institutions from donating cash directly to NIL collectives or having athletic department staff work directly for them, this section expresses an admission that colleges and NIL collectives can, and already do, work together for the mutual benefit of all parties involved.
Finally, the guidance section entitled Negotiating, Revenue Sharing and Compensating contains important clarifications that a third-party rights holder or agent affiliated with a school may engage in NIL activity, but not on behalf of student athletes of that school. This section also expressly prohibits athletic department staff members and affiliated third party entities from representing student athletes in NIL deals, or athletic conferences from sharing broadcast or licensing revenue with student athletes.
Takeaways
The greatest beneficiaries of the updated guidance are likely to be NIL collectives and other third-party NIL platforms. Prior to its issuance, some colleges were apprehensive about engaging directly with third-party NIL entities, as it remained unclear how the previously vague NCAA regulations might be enforced. Now, institutions have the NCAA’s explicit consent to embrace NIL collectives with open arms in a number of ways, including sponsorship, licensing and vendor deals, as well as on-campus activation and outreach to university donors.
Additionally, institutions that have made arrangements with third-party marketing agencies or other entities to actively source and negotiate deals on behalf of their student athletes may have to rethink the structure of those relationships. The new guidance could be construed to prohibit this type of arrangement, unless these third-party entities are removed from the direct control of the university.
Finally, although the net effect of the updated guidance will likely be an increase in overall NIL activity, it must be noted that the NCAA’s regulations threaten to enforce significant prohibitions that could serve to constrain commercial opportunities of student athletes (e.g. prohibiting schools and rights holders from engaging in NIL activity on behalf of student athletes). Even common-sense regulations such as those outlined in the updated guidance could raise antitrust questions in the wake of the Supreme Court’s 2021 decision in NCAA v. Alston.
