If you’re a fan of college athletics, you probably have very strong feelings as to whether collegiate athletes should be compensated for their participation in the multi-billion-dollar enterprise. Regardless of which side you fall on in the debate, the rules as to player compensation have drastically changed with recent court decisions and the advent of the NCAA’s Name Image and Likeness policy, otherwise known as NIL.

Now that the dust has settled a bit, we’re going to take a deep dive into what the policy says, how it works, what it means for stakeholders and how to navigate it.

‍The Timeline

Sept. 30, 2019: California passes legislation introduced by Sen. Nancy Skinner that will, starting in 2023, prohibit schools from punishing athletes who accept endorsement money while in college.

Oct. 29, 2019: The NCAA's Board of Governors unanimously agrees that it is time to modernize its name, image, and likeness rules. The board then directs all three NCAA divisions to create rules, by January 2021,that allow athletes to earn endorsement money while maintaining “the collegiate model.”

‍June 21, 2021: In NCAA v. Alston, the U.S. Supreme Court unanimously ruled that the NCAA was violating antitrust law by placing limits on the education-related benefits that schools can provide to athletes. The decision allows schools to provide their athletes with unlimited compensation as long as it is in some way connected to their education.

June 30, 2021: The NCAA's Board of Directors adopts a temporary rule change that opens the door for NIL activity, instructing schools to set their own individual policies for what should be allowed, with minimal guidelines.

‍The Policy

As of July 1, 2021, NCAA athletes across all sports are allowed to accept compensation for use of their name, image, and likeness, to promote a brand, when they make an appearance, or when they sign memorabilia. However, there are two important things to note:

1. This is an interim policy that expires upon the passage of federal legislation addressing this issue which, despite progress, doesn’t appear to be imminent.
2. The NCAA Policy provides very little in the way of actual rules and is therefore a creature of state law. In short, the rules a student-athlete must ultimately abide by as it pertains to NIL depends on the state in which their college or university is located. As of this moment, 28states have NIL laws that have already gone into effect.

‍The NCAA’s policy provides only that:

1. An athlete cannot enter into a “pay-for-play” agreement; and
2. Athletes can use a professional services provider (i.e., agent, lawyer, financial advisor, or business/marketing manager) for NIL activities.

‍Common Threads

Nearly all state NIL laws include requirements for:

1. Student-athlete disclosure of deals to the institution,
2. Licensing, certification or registration requirements for agents and attorneys providing professional services, and
3. Preventing a reduction in scholarship or grant-in-aid based on earning NIL compensation.

 The Numbers

• Opendorse, a digital platform for connecting athletes and brands, estimates that over the first three months of NIL, nearly90% of the deals made on its platform were for posting content on social media.
• However, social media posting made up only 43%of NIL compensation, with athlete licensing rights (20%) and autograph signings(11%) accounting for large portions of the total amount of money changing hands.
• The average Division I athlete who made at least one deal earned $686 before taxes. In Divisions II and III, it was $68and $35 per athlete, respectively.
• Women’s sports only accounted for 31% of NIL Total Compensation with Women’s Volleyball leading the way, representing just8.4% of all NIL activities (Opendorse Deals, 11/30/21).
• Per the data available, less than half of all NCAA athletes appear to have made any NIL deal at all. t.ly/aQP6

‍Athletes & Parents Beware

• ‍Prohibited Categories. Some states prohibit student-athletes from entering into NIL deals in particular categories including alcohol, adult entertainment, tobacco, pharmaceuticals, and gambling.‍
• Taxes. For tax purposes, NIL compensation is, for the most part, considered to be ordinary business income. Taxes are not limited to the cash earned but can include things such as products, automobiles, and even trips. Therefore, athletes will be responsible for paying their income taxes (both federal and, for most, state), Social Security tax, and Medicare tax on all compensation.‍
• University Conflicts. Student-athlete endorsement deals that conflict with the university’s or athletic department’s existing contractual agreements are typically forbidden (i.e., you can’t sign an NIL with Adidas if your school reps Nike)‍
• Morals Clauses. A morals clause is a provision in a contract or official document that prohibits certain behavior in connection with a person's private life. Such clauses tend to deal with objectionable behaviors, such as sexual acts and drug use.‍
• Licensing. Unless an athlete licenses the rights to their institution’s logos or other trademarks, they often will not be able to use these logos for commercial purposes. So, while X Brand may have solicited you as an endorser because of your affiliation with Y University, you still need to license the use of the school’s marks and logos (including those on your university headshots) in order to endorse a product while wearing your team jersey.

Recommendations:

‍Hire Help. The ability to capitalize on your name, image, and likeness is a brand-new world and, in the absence of comprehensive rules from the NCAA and federal legislation, it can be complicated. Additionally, universities are limited by how and where they can help, so those with the greatest interest in helping their athletes are restricted. Our advice, hire help: an attorney, brand manager, tax advisor, or financial planner, to help you grow and manage your brand as well as your assets.

If you need help understanding your rights and responsibilities as it relates to anything and everything NIL, the intellectual property, branding and legal experts at Diplomatic Enterprises are willing and able to assist you. The consultation is free and we’re always willing to help. Good luck!

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