By Andrew Bondarowicz, Esq.
(Editor’s Note: The following in NIL Institutional Report, a periodical co-published by Hackney Publications.)
On February 3, 2022, Alabama Governor Kay Ivey signed Alabama House Bill 76, into law. The new law repealed Alabama’s law preventing restriction of student-athletes’ Name, Likeness, and Image (NIL) rights and the commercial opportunities emanating from them. This underlying legislation, itself, was enacted on April 20, 2021, as a tidal wave of NIL legislation was passed in state capitols nationwide.
Alabama originally jumped on the NIL bandwagon to stay competitive in college football recruiting for its major state universities. As other states were passing their own legislation, football-rabid Alabama legislators feared that the lack of NIL legislation would hurt their schools in recruiting and retaining top talent against schools located in states that had legislation authorizing NIL rights. Both Auburn University and the University of Alabama were supportive of the NIL Act’s passage at the time.
The key provisions of Alabama’s NIL law were:
- It prevented schools from offering direct NIL benefits or arranging for NIL deals on a student-athlete’s behalf.
- A student-athlete could not enter into an NIL contract in conflict with an institution’s contractual obligations (such as conflicting apparel sponsors).
- A student-athlete must disclose NIL contracts to the school
- A contract for a student athlete’s NIL could not extend beyond the student athlete’s participation in the sport at the educational institution.
- A student athlete could not use any of a school’s intellectual property without first obtaining written permission.
- Most importantly, a student athlete could not receive NIL compensation as an inducement to attend or enroll in or continue attending a specific educational institution.
- Schools could prohibit student-athletes could be restricted from entering into deals with restricted categories such as alcohol, gambling, or controlled substances.
Two key developments later in 2021 – after Alabama enacted its NIL law – made the NIL Act’s fate somewhat nebulous. First, the US Supreme Court unanimously ruled against the NCAA in Alston v. NCAA and struck down its caps on academic benefits for student-athletes. Reacting to the defeat in Alston, the NCAA acquiesced on name, likeness and image rights for student-athletes and initially removed all restrictions in light of the mounting number of states with NIL laws aimed at it. They adopted interim rules shortly after that, for the first time, permitted student-athletes to profit from exploitation of their name, image, and likeness and put only the most basis guardrails up as guidance for schools seeking to maintain compliance.
As a result of the new interim rules, Alabama’s NIL Act was actually viewed as more restrictive than the NCAA’s new NIL guidance. Schools in states without NIL laws benefit from more flexibility in tying NIL opportunities into their recruiting efforts. It was reported that Texas A&M boosters committed between $25-30 million to support the school’s recruiting class. Other Texas schools have seen their boosters organize for-profit as well as nonprofit collectives for funneling money to their student athletes. As one school compliance director put it, “Boosters could now do all of the things they did ‘under the table’ to funnel money to prospective student-athletes legally, so many of them are getting creating in pooling their assets and targeting high profile recruits in the transfer portal and signing day.”
With the NCAA’s defeat in the Alston case last summer, the NCAA’s interim policy on NILs is very high level and generic as there was hesitation to implement more stringent rules that may open new antitrust claims. The guidance to college athletes, recruits, their families and member schools:
- Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities (not the NCAA) are responsible for determining whether those activities are consistent with state law.
- College athletes who attend a school in a state without an NIL law can engage in deals without violating NCAA rules related to name, image and likeness.
- Individuals can use a professional services provider for NIL activities.
- Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.
Therefore, the NCAA largely left the door open to schools to regulate themselves within the bounds they have under either state law or conference regulations. For Alabama schools, the presence of the state law on NILs imposes a level of constraint that their competitors may not be subjected to. Some of these restrictions include restrictions on the types or categories of sponsors, disclosure requirements, use of collectives and other mechanisms that are flooding into the NIL marketplace. Having no state law in place allows Alabama schools more flexibility and adapting to the quickly changing marketplace rather than having to stay within the constraints of the state law. While Alabama’s law was not more restrictive than other states that passed NIL laws, it was still held that any state legislation would have the unwanted consequence of hampering Alabama schools in their student-athlete recruiting efforts.
While Alabama is the only state to so far repeal a state NIL law, this development will be closely watched by schools in other states who could apply pressure in their own state legislatures for similar repeals.
Andrew Bondarowicz, Esq. is an Adjunct Professor of Sports Law at Rutgers Law School in Newark and the Rutgers Global Sports Business Program in New Brunswick. He has also served as a legislative and public affairs professional for several trade associations and is a frequent guest panelist on sports law and legislative topics.
