Making Sense of Incoming NIL Compensation Rules
June 29, 2021
As many know, various states have added laws--most set to go into effect July 1, 2021--opening the door for student-athletes to ink deals with third parties to get paid for the use of their name, image, and likeness. For short, we refer to this as NIL compensation.
While journalists, public advocacy groups and athletes have been pushing for ways to allow student-athletes to capitalize on their likenesses for a couple decades at least, momentum really started building over the past 10 years. Beginning with O'Bannon v. NCAA, the NCAA has been handed a series of losses that pave the way to permanently ending the NCAA's strict limitations on athlete compensation. Seemingly accepting this defeat, the NCAA is expected to finally pass interim rules specifically allowing NIL compensation this week.
Here at Spilman, several of us have followed these developments closely. I have written a series of articles for a sports media website for the past 18 months doing just that. We expect the NCAA to answer many questions imminently. The most critical question is this: can student-athletes earn money for the use of their NILs? That answer is almost assuredly (after Wednesday) yes.
Deals must be inked within some important boundaries, and we have done the work of learning the rules and limitations. For example, the NCAA's current draft, which soon will be adopted, prohibits any person from using NIL compensation deals, or the promise of them, in recruiting. Limitations exist on whether a company may make a deal contingent on a certain level of performance or continued enrollment at a certain school. There are also issues surrounding the use of school colors, logos, and other property trademarked and copyrighted by schools, conferences, and the NCAA.
These rules will matter a great deal when companies, athletes, lawyers and agents begin to structure NIL compensation deals. In some ways, we also will learn as we go. These are interim rules after all (the NCAA continues to hope Congress steps in and draws "better" lines in this sandbox). We are familiar with what these rules look like and have studied closely the various state laws, federal legislative proposals and NCAA draft rules. As a result, Spilman lawyers can offer meaningful advice as the various interested parties move forward with NIL compensation deals.