By Kelleigh Fagan, Partner, Church, Church, Hittle and Antrim
NIL continues to be a daily topic of news and conversation in college sports. Each week, semester and year that passes, we see new business ideas, new NIL deals, new ways schools are leveraging NIL to attract and retain student-athletes. There are regular reports and calls for federal NIL legislation and in July, we saw three new proposed bills. As NIL has continued to unfold, so too has the NCAA’s approach to enforcement.
Every 6 months or so, the NCAA issues new or updated or clarifying guidance on NIL. In July 2021, the NCAA released their interim policy allowing for student-athletes to benefit from their NIL, while also reiterating that pay-for-play and improper recruiting inducements were still impermissible. As more and more collectives joined the landscape in May of 2022 the NCAA released updated guidelines addressing the role third parties play with NIL and how prospects, student-athletes, and schools can interact with these third parties. The NCAA released a Q&A in July 2022, providing more clarification around the prohibition of institutional involvement with boosters, NIL Collectives and prospective student-athletes. This still left questions regarding institutional involvement with enrolled student-athletes and their NIL activities. The October 2022 guidelines provided guidance on what support institutions can give to their student-athletes as it relates to NIL activities and how institutional staff members can interact with NIL entities. Most recently, on June 27, 2023, the NCAA issued a Q&A to member institutions. In that Q&A, it addressed several questions but two stuck out:
Question 1 stated that it is clear institutions may not compensate student-athletes for use of their NIL but asked if it is permissible for an entity closely associated with an institution to do so. The answer was “No.” The NCAA elaborated that if an entity is so closely aligned with an institution that it is viewed as an extension of the university, it is subject to the same NIL scrutiny as an institution. This begs the questions, what makes an entity “so closely aligned” and from whose vantage point is an entity “viewed as an extension of the university”? Most collectives are affiliated, or established to support, only a particular school. Some give benefits to members of the collective, or donors of the collective, much like a school’s booster club would. If a school educates and guides a collective in its set-up, does that make the collective “so closely aligned” or “an extension of the university?” Probably not. But if there is more of a connection than that? Maybe. It’s not clear yet. There have been no NCAA cases adjudicated and publicized on this NIL topic that provide any authority or guidance to member institutions.
Question 6 asked the NCAA’s position on some new or proposed state laws that prohibit the NCAA from enforcing its own rules. There are several states with actual or proposed legislation allowing schools to arrange NIL deals for student-athletes. Some states with sponsored or passed legislation, like Arkansas, Missouri, Montana, New York, Oklahoma, and Texas, have provision(s) in state law to block the NCAA from initiating investigations into NIL matters and/or enforcing rules like NCAA penalties for NIL violations. The NCAA addressed these state laws conflicting with NCAA legislation stating that unless and until the NCAA membership changes a particular rule, the NCAA will continue to enforce it. Interestingly, when the NCAA’s NIL Interim Policy was announced July 1, 2021, it stated that “NCAA Bylaws, including prohibitions on pay-for-play and improper recruiting inducements, remain in effect, subject to the following” which includes “For institutions in states with NIL laws or executive actions, if an individual or member institution elects to engage in an NIL activity that is protected by law or executive order, the individual’s eligibility for and/or the membership institution’s full participation in NCAA athletics will not be impacted by applications of NCAA Bylaws unless the state law is invalidated or rendered unenforceable by operation of law.” In other words, if a state has a law that conflicts with the NCAA rules regarding NIL and a student-athlete or a school complies with state law rather than NCAA rules, the student-athlete or school will not be negatively punished by the conflicting NCAA rules. However, if that state law is invalidated, then there could be a negative impact to the student-athlete or school. Read together, the NCAA’s response in the June 2023 guidance and its information in its interim policy in July 2021, which is still in effect, are in conflict themselves.
Like Question 1 above, we have yet to see how this conflict between a state law and NCAA rules plays out in these situations. This conflict will mostly likely come to a head when a member institution in a state with such a law has an investigation initiated by the NCAA or is found to have committed Level I or Level II NCAA violations and certain penalties are prescribed and that institution refuses to comply with those penalties. If and when that happens, if a state wishes to challenge the NCAA’s authority to prescribe penalties or conduct investigations, it could initiate litigation to enjoin those penalties from impacting the particular school or to stop an investigation or the NCAA could seek legal action attempting to invalidate the laws. Like many other collegiate sports issues, the courts will then decide the ultimate outcome. Generally speaking, where there is a conflict between a state law and federal law, the doctrine of preemption says federal law trumps state law. Here, though, there is a state law and a rule of a voluntary membership association. Schools choose to be members of the NCAA and therefore volunteer to comply with the rules of that organization. But the NCAA’s guidance, or at least interim NIL policy and follow up guidance, are arguably in tension on the impact of state laws on NIL.
If a state law was upheld that protected institutions from being subject to NCAA penalties or an investigation, it would create an unequal playing field – which is precisely the purpose of the NCAA. A school’s membership in the NCAA, and therefore the benefits it receives from being a member, could be jeopardized. Schools in states with such laws could potentially choose to abide by penalties even if a state law says it does not have to do so. A public institution doing so, though, would likely result in some disharmony amongst school and political leadership as public institutions are seen as arms of the state.
What the NCAA and member institutions say about these issues publicly and what guidance is published will likely be evidence in future litigation. Like other current NCAA issues, the legal implications are messy and unknown and could seemingly be enterprise-threatening, should a court rule that state laws can protect an institution from the rules of its voluntary association.