Since NIL came into effect in 2021, academic institutions, student-athletes, and practitioners alike have navigated a sea of relative uncertainty. Since then, both the NCAA and various states have adopted rules and laws to attempt to regulate this new frontier of major college sports. However, as the Gervon Dexter case demonstrates, several states adopting different laws have led to different standards which further complicate the space and make allowances for jurisdictional and statutory loopholes which, if left unfilled, will lead to greater exploitation of the very parties NIL legislation was meant to benefit: collegiate athletes. The problem is that much of this legislation draws from obsolete regulations enacted under the old regime meant to address a different landscape, with different parties, and a different set of issues. This article will examine the Dexter case and its attendant issues, and what might be done to close those loopholes which gave rise to the controversy.
In the spring after his sophomore year of eligibility, Dexter entered into an agreement with Big League whereby he would receive $436,485, in exchange for the performance of certain NIL-related services during his collegiate career, and payment of 15% of his lifetime NFL earnings, if any, after his collegiate career. The agreement, which more closely resembles a predatory lending contract than one for name, image and likeness, contained a mandatory arbitration provision and was governed by the laws of the State of Delaware which, critically, has neither the Uniform Athlete Agent Act nor NIL regulations. After signing the agreement and accepting the $436,485, Dexter, upon being drafted in the 2nd Round by the Chicago Bears in the subsequent NFL draft, sought to invalidate the agreement, while retaining the monies paid as consideration under the agreement. Based on Dexter’s second-round contract alone, Big League would be guaranteed $554,341.80, and potentially receive up to $1,008,559.80; a 27% and 131% return on investment, respectively.
Accordingly, on Sept. 1, 2023, Dexter brought an action in the Northern District of Florida Federal court seeking a declaration that the agreement was violative of both Florida’s version of the Uniform Athlete Agent Act (“UAAA”), codified under Fla. St. § 468.451-457, and Florida’s NIL Act, codified under Fla. St. § 1006.74, and thus void.
In response, on Oct. 23, 2023, Big League filed its Motion to Compel Arbitration, wherein Big League argued that the dispute was improperly before the Federal court, given the arbitration provision, which they assert should be evaluated under Delaware law. Notably, Big League’s response fails to examine the applicability of Delaware law to the gravamen of the Complaint: whether the agreement violated the principles of the UAAA or NIL regulations. Ostensibly, this was not mere oversight. Indeed, the acknowledgment that there exists no body of statutory law in Delaware to protect collegiate athletes from predatory exploitation might compel the Court to side with Dexter, in the interest of equity and public policy. Particularly in light of the fact that this is a case of first impression and, thus, potentially precedent-setting. Indeed, the Court’s ruling could not only invalidate the Dexter agreement but would potentially be deleterious to Big League’s entire business model.
On Oct. 27, 2023, Dexter’s counsel filed their opposition memorandum to Big League’s motion to compel arbitration, predictably, framing the issue as one of equity and public policy. They asserted that Dexter was “seeking relief under statutes that were drafted by the Florida Legislature with the sole intent of protecting people just like him”, to prevent Dexter from being exploited under an agreement they characterized as unconscionable, and thus unenforceable as a matter of Florida public policy.
While where the court lands on this potentially precedent-setting issue is yet to be determined, what is certain is that the patchwork of inconsistent regulations being observed by various academic institutions and states has given rise to loopholes allowing more sophisticated parties in the space to arbitrage in ways that undermine the overarching purpose of NIL: to create greater equity on behalf of collegiate athletes. Essentially this framework allows for similar, and sometimes worse exploitation of the student-athletes, only by different means, and by different parties.
One major reason for this is that the current NIL regime either is based upon or relies upon the UAAA, which was meant to serve a totally different purpose under much less complex circumstances. The University of Florida’s NIL regulations, for instance, hold that no NIL deal can be violative of the UAAA. What then can be done in situations such as Dexter’s, where the party contracting with the athlete argues that the UAAA is inapplicable, in that both the UAAA and NIL regulations are non-existent under the law of their forum of choice? The problem is that the UAAA was meant to address two issues: 1) collegiate institutions or boosters acting on behalf of collegiate institutions illicitly paying high school athletes as an inducement to come to the school; and 2) so-called “street agents” i.e. unlicensed individuals with grassroots access to the athletes, paying student-athletes as an inducement to sign representation contracts with potentially unscrupulous NFL agents. Under this regime, there was no anticipation of some of the more complex issues facing the current landscape, where major corporations and other, more savvy parties with sophisticated legal counsel are employing the same shrewd tactics utilized in their dealings with other, similarly situated parties. Although the advent of NIL, conceptually at least, represents a major step toward debunking the sham of “amateurism” as the guiding principle in major college sports, the current regime does not afford the collegiate athletes the resources necessary to navigate some of the more complex issues which arise, thus preventing many of them to transact at arm’s length. In essence, college athletes are now expected to navigate a space that is every bit as fraught with potential for exploitation as their professional counterparts face, without many of the resources and protections afforded to professional players. To remedy this, NIL needs both uniformity and some of the same safeguards already in place in the professional realm. More specifically:
- The UAAA should be done away with, altogether, in favor of federal NIL legislation which reimagines and rearticulates some of the concepts of the UAAA in terms more suitable to the current, more complex, landscape. This will prevent the forum shopping that occurred in the Dexter case and create uniformity and thus greater certainty. The federal legislation would ideally standardize the NIL rules regulating NIL deals while delegating interpretation and enforcement to arbitral tribunals within the individual states, such that they are better equipped to deal with state and institution-specific nuances which may arise.
- It should be mandatory that all student-athletes retain experienced professional representation to negotiate NIL deals and there should be a standard for certification and regulation of those representatives, including continuing education requirements. This will ensure that student-athletes enjoy representation on par with that of their counterparties, thus ensuring that they can transact at arms-length.
It will be interesting to see whether and to what extent the Dexter case compels movement toward greater uniformity and certainty within NIL. Indeed, both practitioners and the parties they represent should monitor these developments closely.
