Bennett Speyer & Robert Boland, of Shumaker
Drawing a Blurred Line
In the eight months since the National Collegiate Athletic Association (NCAA) issued its supposedly clarifying October 26, 2022, Institutional Involvement in A Student Athlete’s Name, Image, and Likeness Guidance (October NIL Guidance) we at Shumaker have been fielding questions from institutional clients, legislators, collective organizers, perspective donors, and coaches and administrators asking, “just what can we do in the NIL space, and whom can we do it with?”
The answers seem less clear now and a trap lurking in every direction. The risks of doing too little in NIL are clear, as there is the constant drumbeat that some other school is always doing more. But losing an advantage in the recruiting game is almost the least of any institution’s worries arising from NIL. With the NCAA stating that it will engage in greater and more vigorous enforcement of NIL and legal challenges looming under federal law, especially, Title IX and Title VI of the Civil Rights Act of 1964, shows that institutions remain targets. Given the great attention paid to it, missteps in the NIL space must be of equally great concern.
We know now that third parties are a fact in NIL, but the closer a collective is to an institution in coordination and access and use of institutional assets, the more likely it is to be found to be legally an alter ego of the institution both for purposes of Title IX and Title VI. The more distant a collective is, the more likely it is to be in direct competition with that institution’s own efforts, especially philanthropically, and still pose risks regarding misconduct since it is operating out of the view of the institution. Can institutions rely on state laws that allow more direct help for athletes in NIL when the NCAA still says, no?
In prior issues of NIL Institutional Report, we have examined how institutions should interact with the collectives, work with state legislators, and how the October NIL Guidance surprised many by establishing role of collectives in the NIL process while still limiting what institutions can do to support NIL. All those issues are relevant right now, and it is hardly surprising that the NCAA’s three attempts at NIL clarification have been inconsistent.
Education Offers the Answer
The immediate and permissible path forward, however, is a simple one. But it requires getting beyond the many “the sky is falling” reactions that have characterized NIL. It is, in a word, educate. Education is still what universities do best. The October NIL Guidance makes clear that education is both broadly permissible and highly encouraged. This is true, not just for student-athletes, but for coaches, alumni, multimedia rights holders, potential sponsors alike. As NIL has affected all these groups and areas, education is permitted and needed for all.
When the gun sounded to start NIL schools took many postures driven by external information rather than engaging in the holistic process of considering what NIL may look like for this campus and what competitive advantages are here? The start of any race is usually less smooth than the rest of the race and NIL should be no different.
So, the first step in navigating back from the last two years of confusion, is to educate all institutional stakeholders as to what the institutional goals and expectations for NIL are, what parties are critical to these goals, and what each’s respective roles are in this process?
The NCAA has made educational activity permissible, with little limitation, regarding all stakeholders. Take that permission and run with it. If there are collectives related to your programs, engage with them. Educate them to your Title IX and Title VI and institutional third-party contractor oversight realities. Anticipate that they will almost certainly be legal alter egos for the institution and work forward from there.
Involve your multimedia rights holder (MMR) in this process. Their business has been dramatically affected by NIL, and while many MMR holders were initially reticent to engage in NIL reflecting institutional fears, that time is passed. Discuss with them what categories might create new opportunities because of NIL and what benefits might multimedia rights corporate partners enjoy in a world where NIL is here to stay. As their space is transforming use this opportunity and better education will make this more manageable.
Limitations on Activity Under the Flag of Education
If an activity is done under the flag of education where might limits apply? There are some, two most clearly appear. The first is when the interaction is specific to an individual athlete’s NIL activity, or to her specific needs, as opposed to more generalized levels of coordination. The second is when the institution provides services directly for their student-athletes thus falling into an extra-benefit analysis.
This second limitation applies to the provision of services which the October NIL guidance lists as, tax preparation services; contract review; graphic or digital design. In the days of pre-NIL amateurism, way back in 2021, NCAA bylaws favored the institutional provision of services. Logically, these represented playing-field levelers. Bylaw 16.3, is a great example, laying out a range of services institutions can provide from tutoring to career counseling to life skills. If they were done as a service, they were fine.
But based on the October NIL guidance when an educational initiative becomes a service, that line may now be crossed. This is a contrast with long-standing NCAA practice but is illustrative of a new reality created by NIL. So, now connecting student-athletes to an existing law school transactional clinic to review contracts or having business school faculty lecture on tax strategy or LLC formation may both be perfectly permissible. But starting an NIL clinic to review contracts or giving athlete’s specific tax advice likely would not be.
Fishing Lessons
If that seems overly technical, perhaps the old saw, “give someone a fish and feed them for a day, teach them to fish and feed them for a lifetime,” helps shed some light on the difference between what is an impermissible service and what is a permissible educational activity. If the educational activity can reasonably be described as a fishing lesson, it is offered without specificity and without regard to the recipient’s race or gender, it is likely to be permissible, legal, and very much needed.
Does this mean there aren’t still conflicts between current state laws and NCAA guidance? Not a chance. There are still increasing conflicts between state law and NCAA policy. In fact, current NCAA guidance may fly directly in the face of existing state laws but as we have seen this is a quickly evolving space and save that looming conflict for another day and the next iteration of NIL development. For now, more education is the answer.
Bennett Speyer, Partner & Hospitality, Leisure & Sports Sector Co-Chair, at Shumaker, Loop & Kendrick, LLP, and Robert Boland, Of Counsel at Shumaker, Loop, & Kendrick, LLP, and Assistant Professor at Seton Hall University Law School
