What follows is a conversation with Brian Kappel of Lightfoot, who leads the firm’s NIL discipline.
Question: How has your firm adapted its sports law practice to address the rapid evolution of NIL regulations and enforcement at both the state and NCAA levels?
Answer: Lightfoot has long been at the forefront of massive shifts in the collegiate sports universe. With respect to NIL, our first step was helping institutions identify likely modifications (formal and informal) to the NCAA’s regulations based on our extensive knowledge of the industry and the competing incentives among the various stakeholders, our experience with the NCAA’s historical enforcement patterns, and information from the outside actors seeking to enact transformative changes. We then focused on assisting universities and athletics departments in quickly adjusting to those changes as they occurred (or even before).
This kind of foresight and practical, goal-oriented approach is what Lightfoot has always brought to the table as part of our practice advising athletics departments on NCAA and regulatory compliance. So, we haven’t adapted the core of our practice to meet these new times. That said, like everyone else, we’ve felt an increasing need to be quick, decisive, and innovative in how we counsel institutions in responding to changes. Our advice has also adapted to the rapidly changing NIL world, first by helping institutions and other parties understand what were initially a set of unclear guardrails for what they could and could not permissibly do under the operative bylaws and authoritative NCAA guidance, and, more recently, by assisting universities and their internal and external organizations in developing creative methods to maximize revenue generation and distribution amongst their student-athletes.
The emphasis on NIL has also given us new opportunities to grow our practice. As a litigation-first firm, we have extensive experience arbitrating claims under all sorts of circumstances. Accordingly, we’ve been preparing to assist our clients in the event the Collegiate Sports Commission denies or reduces an NIL agreement, identifying market rate experts, social media comparators, and other helpful evidentiary benchmarks. We have also monitored — and where necessary assisted — in eligibility cases challenging different aspects of the NCAA’s waiver regime.
Finally, NCAA enforcement itself has changed significantly in this new age of NIL. Although our approach to infractions cases remains the same, we see far more tampering and gambling cases now in addition to the usual CARA and coaching limits cases. Impermissible benefits and inducement cases have predictably waned as direct payments to student-athletes were legalized. This part of our practice remains strong despite an initial reduction in enforcement efforts following NIL adoption, and we anticipate significantly more work as penalties in the tampering sphere ramp up.
Q: What are the most common legal risks or pitfalls you see for universities, collectives, or athletes in NIL deals today, and how do you help clients mitigate them?
A: With so many questions unanswered about how the NCAA and CSC will enforce their rules, how penalties will be imposed, and what those penalties may be, legal risks and pitfalls abound. We are particularly focused on financial overexposure on the part of all stakeholders in the industry. This includes institutions, associated rights holders, and collectives who promise more than they can deliver, either due to fundraising underperformance or the threat of CSC intervention in their agreements with student-athletes. It also includes student-athletes who, for whatever reason, fail to understand or appreciate their financial commitments to parties (like institutions or third-party rights holders) in the event that the student-athlete wants to break a contract or transfer to a different institution. Mitigating these risks is a matter of strategic planning and foresight. On the institutional side, financial forecasting is crucial — this requires careful and consistent budgeting, communication (internal and external), and follow-up with the applicable stakeholders. Lightfoot can help institutions develop strategies for accomplishing these essential tasks. In addition, we assist institutions and associated entities in developing important contractual protections to ensure that the agreements reached serve institutional goals to the greatest extent possible.
Q: How is your firm advising clients on the intersection of NIL with emerging issues like employment status, revenue sharing, and antitrust concerns?
A: The implementation of the House settlement has merged a lot of NIL and revenue sharing issues. We are working with institutions on creative ways of maximizing the impact of revenue sharing alongside third-party or related entity NIL agreements. This includes innovative contract ideas as well as helping to identify outside entities available to supplement institutional revenue sharing payments. We can also help universities in deciding how best to allocate their revenue share within the existing cap set by the settlement terms.
With respect to employment status and antitrust concerns, we continue to monitor the landscape with an eye toward a proactive response to new developments. Clients generally seem inclined to resist employment status for student-athletes at this time due to the myriad unknowns of how such a decision would impact college sports globally. With respect to antitrust law, there are certainly claims that would support the goals of our institutional and individual clients, and we are prepared to provide analysis and guidance on how those claims can be used to our clients’ benefit.
Q: What differentiates your firm’s NIL practice from others in the market, particularly in terms of services, client base, or approach to compliance and deal structuring?
A; Lightfoot’s litigation foundation means that all of our college sports attorneys are well versed and experienced in civil litigation and arbitration, and we put those skills to use in our NCAA practice. In short, we bring a tradition of zealous advocacy that other firms lack. At Lightfoot, there is no need to teach trial attorneys how the NCAA operates — we already know. And instead of NCAA practitioners facing a courtroom or an arbitration panel for the first time, Lightfoot attorneys can boast ample experience in both. We provide a unique, one-stop experience for clients who want or need that kind of assistance. But Lightfoot’s approach to NCAA compliance and enforcement is also practical. We pride ourselves on maintaining positive and productive relationships with individuals at all stages in college sports governance, the better to assist institutions and other clients in avoiding conflict unless absolutely necessary. Our flexibility is a key attribute, as is our ability to back up our words with courtroom action if it comes to it.
