Businesses Can Cautiously Proceed with Student-Athlete Sponsorship Deals

July 16, 2021 | J'Naia L. Boyd | Corporate

Businesses have been champing at the bit for a chance to collaborate more with college athletes for years. Until recently, however, those collaborations were not possible because college athletes were prohibited from profiting off their name and likeness and entering into sponsorship deals under the rules of the National Collegiate Athletic Association (NCAA).

Over the past couple of years, the NCAA had been considering a change to its name, image, and likeness (NIL) rules as state legislation across the country was taking shape to address NIL-based compensation for student-athletes.[1] Then on June 21, 2021, the United States Supreme Court made a landmark ruling in Nat’l Collegiate Athletic Ass’n v. Alston, where it held that the NCAA violated federal antitrust law by imposing rules restricting the education-related benefits that student-athletes may receive, such as post-eligibility scholarships at graduate or vocational schools.[2] Nine days later, the NCAA went a step further and adopted the Interim NIL Policy, allowing college athletes to receive NIL-based compensation.[3] This new policy and a raft of new NIL state laws have now made it possible for companies to engage some college athletes into sponsorship agreements.

Already, several notable athletes have announced endorsement deals. Twin sisters Haley and Hanna Cavinder, star guards on the California State University, Fresno women’s basketball team, have endorsement deals with Boost Mobile and Gopuff.[4] Hercy Miller, incoming basketball player with Tennessee State University and son of mogul and rapper Master P, signed a four-year, $2 million endorsement deal with tech company Web Apps America.[5] According to reports from ESPN, local partnerships are also heating up in robust sports cities and towns.[6] Many college athletes are already social media stars and are now looking for ways to monetize their accounts, which creates a perfect avenue for businesses, large or small, to work with athletes who have a following and fanbase.

Although this new landscape provides a treasure trove of opportunities for businesses, it is important to be aware that new state laws are in the works or on the books concerning NIL. In some instances, there may be a state law roadblock to what otherwise looks to be a great business opportunity.

Supreme Court’s NIL Decision Spurs Rule Changes

Notably, the Supreme Court in Alston did not rule on the NCAA’s remaining compensation rules, including those that restrict student-athletes from receiving compensation from endorsement deals, because the plaintiffs in the case did not seek review of their “across-the-board challenge” to the NCAA’s compensation rules.[7] Justice Kavanaugh, in a concurring opinion, questioned whether any of the NCAA’s compensation rules could pass antitrust scrutiny.[8] Those serious questions may not ever be answered by the Court as the NCAA’s Interim NIL Policy suspended NIL-compensation rules for all incoming and current college athletes in all sports.[9]

The NCAA’s Interim NIL Policy specifically provides:

  • Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.
  • Individuals can use a professional services provider for NIL activities.
  • College athletes who attend a school in a state without an NIL law can engage in NIL activity without violating NCAA rules related to name, image and likeness.
  • State law and schools/conferences may impose reporting requirements.[10]

NCAA rules concerning pay-for-play and improper inducement for enrollment into schools are still in effect.[11] As noted by the policy, college athletes must abide by the NIL laws of their state.[12] Indeed, the state legislative response to allow college athletes to exploit their name and likeness has been swift and widespread.

Alabama, Colorado, Florida, Georgia, Illinois, Kentucky, Mississippi, New Mexico, Ohio, Oregon, and Texas have NIL legislation that went into effect on July 1, 2021.[13] NIL laws in Nebraska, Ohio, and Pennsylvania went into effect immediately.[14] Eleven other states have NIL laws going into effect between this year and 2025.[15] Several other states have NIL bills on the floor, and legislators in Wisconsin have not yet proposed a bill but are currently considering it.[16] The new state laws are not as open-ended as the NCAA’s Interim NIL Policy, and many specifically ban college athletes from endorsing alcohol, tobacco, and adult entertainment.[17] Other states, like Florida, prohibit student-athletes from entering into a contract where a term of the contract conflicts with a term of their team contract.[18] While the NCAA has not yet imposed reporting requirements, some of the new state laws require athletes to report any NIL-related contracts to their respective schools.[19]

Also, keep in mind that the NCAA’s Interim NIL Policy does not, generally speaking, apply to high school athletes. For instance, some states with large college sports programs, like Texas, Florida, Georgia, and Ohio, have rules on the books that restrict high school athletes from profiting from their name and likeness;[20] however, these same states have newly enacted NIL laws favoring college athletes. High school athletes in New York are similarly barred from “[c]apitalizing on athletic fame by receiving money or gifts of monetary value.”[21] The Executive Director of the National Federation of State High School Associations (NFSHA), Dr. Karissa L. Niehoff, emphasized this point about high school athletics by releasing a column on the NFSHA’s website, which explains that “[c]urrent high school student-athletes CANNOT earn money as a result of their connection to their high school team” and that “state associations have rules in place that prohibit student-athletes from receiving money in any form that is connected to wearing their school uniform.”[22] On the other hand, the California Interscholastic Federation allows high school athletes to profit from their name and likeness, with certain restrictions relating to use of their high school’s name or marks.[23]

Prospective college athletes appear to fall under the auspices of the new NCAA policy,[24] but they are still technically high school athletes, and it is unclear how a violation of a state high school association’s bylaws on NIL will affect eligibility at the collegiate level.

Stay Tuned to Evolving Laws

The new NCAA NIL rules may be fluid until federal legislation or new NCAA rules are adopted.[25] Couple that with the myriad of new state laws and NIL rules that may be adopted by individual schools and conferences, there may be challenges to navigate before moving forward with inking a deal.

If you are looking to engage college athletes for endorsement and sponsorship opportunities, consider reaching out to an attorney who can help your business navigate this new opportunity.

[1] See Taking Action, Name, Image, and Likeness, NCAA, https://www.ncaa.org/about/taking-action (last visited July 14, 2021); Alan Blinder, College Athletes May Earn Money From Their Fame, N.C.A.A. Rules, New York Times (June 30, 2021), https://www.nytimes.com/2021/06/30/sports/ncaabasketball/ncaa-nil-rules.html (last visited July 14, 2021).

[2] See Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141 (2021) (Kavanaugh, J., concurring in result)

[3] See Taking Action, Name, Image, and Likeness, NCAA, https://www.ncaa.org/about/taking-action (last visited July 14, 2021).

[4] See Robert Kuwada, Fresno State Twins with Huge Tik Tok Following Sign Another Endorsement Deal, The Fresno Bee (July 2, 2021), https://www.fresnobee.com/sports/college/mountain-west/fresno-state/article252541708.html (last visited July 13, 2021).

[5] See Mike Organ, How Tennessee State’s Hercy Miller, Son Of Rapper Master P, Will Spend His $2 Million NIL Deal, Nashville Tennessean (July 6, 2021), https://www.tennessean.com/story/sports/2021/07/06/master-p-son-hercy-plans-spend-2-million-endorsement-deal-tennessee-state-ncaa/7873411002/ (last visited July 13, 2021).

[6] See Dan Murphy, Let’s Make A Deal: NCAA Athletes Cashing in on Name, Image and Likeness, ESPN (July 1, 2021), https://www.espn.com/college-sports/story/_/id/31738893/ncaa-athletes-cashing-name-image-likeness (last visited July 13, 2021).

[7] 141 S.Ct. at 2154.

[8] See id. at 2167.

[9] See Taking Action, Name, Image, and Likeness, NCAA, https://www.ncaa.org/about/taking-action (last visited July 14, 2021).

[10] Id.

[11] See Name, Image, and Likeness Policy, Question and Answer, NCAA, https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_QandA.pdf (last visited July 14, 2021).

[12] See Taking Action, Name, Image, and Likeness, NCAA, https://www.ncaa.org/about/taking-action (last visited July 14, 2021).

[13] See Tracker: Name, Image and Likeness Legislation by State, Business of College Sports (July 2, 2021), https://businessofcollegesports.com/tracker-name-image-and-likeness-legislation-by-state/ (last visited July 14, 2021).

[14] See id.

[15] See id.

[16] See id.

[17] See, e.g. S.B. No. 381. 205th Gen. Assem., 2021 Sess. (P.A. 2021) (Pennsylvania law prohibiting NIL compensation for college athletes in connection with “adult entertainment products and services,” “alcohol products” and “tobacco and electronic smoking products and devices”).

[18] See Intercollegiate Athlete Compensation and Rights, C.S.C.S.S.B. 646. 26th Leg., 2nd Sess. Ch. 2020-28 (F.L. 2020).

[19] See id. (mandating disclosure of NIL-based contracts to “to the postsecondary educational institution at which she or he is enrolled, in a manner designated by the institution.”); S.B. 1385. 87th Leg., (T.X. 2021) (same).

[20] See S.B. 1385; Constitution, Subchapter M. Eligibility, University Interscholastic League, https://www.uiltexas.org/policy/constitution/general/eligibility (last visited July 14, 2021); Amateur Bylaw Resource Center, Ohio High School Athletic Association https://www.ohsaa.org/Eligibility/Amateur (last visited July 14, 2021); Name, Image and Likeness Update for Florida High School Student-Athletes, Florida High School Athletic Association (July 8, 2021), https://fhsaa.com/news/2021/7/8/name-image-and-likeness-update-for-florida-high-school-student-athletes.aspx (last visited July 14, 2021); Constitution and Bylaws 2021-2022, Georgia High School Association, https://www.ghsa.net/sites/default/files/documents/Constitution/Constitution21-22completecx1.pdf (last visited July 14, 2021).

[21] NYSPHSAA Handbook, New York State Public High School Athletic Association, http://www.nysphsaa.org/Portals/0/PDF/Handbook/2020-21/NYSPHSAA%20Handbook%20002.pdf (last visited July 14, 2021).

[22] Dr. Karissa L. Niehoff, NIL Rulings Do Not Change for High School Student-Athletes, National Federation of State High School Associations, July 7, 2021 https://www.nfhs.org/articles/nil-rulings-do-not-change-for-high-school-student-athletes/ (last visited July 12, 2021).

[23] See 2021-2022 CIF Constitution and Bylaws, California Interscholastic Federation, https://www.cifstate.org/governance/constitution/index (last visited July 14, 2021).

[24] See Name, Image, and Likeness Policy, Question and Answer, NCAA, https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_QandA.pdf (last visited July 14, 2021).

[25] See id.

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