By G. Zachary Terwilliger and Grant Newton, of Vinson & Elkins
Last year’s college football offseason drama came to a head with coaches levying allegations1 that impermissible name, image, and likeness (NIL) payments were made to prospective student athletes to persuade them to attend a certain university. The latest NIL saga is similar, but with a twist. Reports recently surfaced surrounding ex-University of Florida quarterback signee Jaden Rashada and the combustion of his alleged agreement with a Florida NIL Collective. While NCAA rules clearly prohibit NIL Collectives – entities established to create financial opportunities for student athletes at a specific university – from inducing a player to attend a specific school, rumors continue running rampant that such arrangements are ongoing.
The early weeks of this year confirm a well-founded hunch. A lack of clarity from everyone involved – states, Congress, and the NCAA – should contribute to yet another year of rapid developments in the NIL landscape. Here are three trends you should be aware of heading into 2023.
The Proliferation of the Transfer Portal (and Its Potential for Abuse)
There are 2,868 college football players who entered the transfer portal in 2020, while 4,084 college football players cast their name into the transfer portal a year later. That number is expected to rise yet again in 2022 when the data is revealed and continue in 2023, which begs the question: Why are so many players eager to enter the transfer portal? Traditionally, a student athlete might consider transferring due to coaching changes, not advancing up the depth chart, a desire to return closer to home, or perhaps a family emergency. Today, it seems apparent that financial considerations are now playing a role because student athletes now analyze whether transferring schools could improve their ability to profit off of their NIL.
The prospect of profiting from a student athlete’s name, image, and likeness has completely altered the collegiate sports landscape in a very short window of time. While NCAA guidance expressly prohibits a university, or its affiliates, from luring a prospective student athlete from the transfer portal to its campus under the guise of NIL funds, industry experts speculate that such arrangements have become the norm.
Perhaps as a result, the NCAA has informed member institutions that it is investigating “potential abuses of NIL transactions,” which includes NIL Collectives improperly contacting prospective (non-enrolled) student athletes to offer compensation in exchange for the student athletes’ commitment to enroll at their university. Whether such investigations lead to enforcement proceedings against universities is yet to be seen. At a minimum, in light of the NCAA’s previous guidance, universities and NIL Collectives should be aware that the university could be held responsible for offering prospective student athletes in the transfer portal NIL funds for attending a specific university.
Whether the NCAA enforces its rules for alleged tampering in the Transfer Portal is certainly something to closely follow this year. It could potentially reshape the NCAA’s oversight of NIL rules moving forward.
High School Recruiting Battles Now Center Around NIL Deals
The Transfer Portal isn’t the only source of the NIL rumor mill. Current high school athletes, especially those with a large amount of market value, now consider potential NIL revenue when evaluating each of their college suitors.
Jaden Rashada, discussed above, serves as a prime example. According to Sports Illustrated, “Rashada allegedly signed an agreement with one of Florida’s third-party [NIL] collectives … [for] between $13 and 14 million”2 over four years to play for the Gators, before the NIL Collective sent a termination letter, destroying the agreement. Setting aside whether the alleged termination exposes the NIL Collective, or the university, to civil liability, it is clearly a troubling arrangement under the NCAA’s regime.
The NCAA has informed its member institutions that pledging NIL funds to prospective student athletes violates NCAA rules, and that the NCAA is currently investigating such arrangements, even when the arrangement comes from a university’s affiliated NIL Collective rather than the university itself. As recruiting competition amongst universities intensifies, such as the oft-publicized recruitment of LeBron James’s son Bronny James, incoming students, university counsel, and NIL Collectives should be aware that striking NIL deals while a student athlete is still “prospective” clearly raises serious questions and exposes all parties to potential exposure under NCAA regulations.
Thus, NIL Collectives and universities should be on high alert for developments in this space in 2023 because the NCAA’s lack of enforcement may not continue in perpetuity.
State and Federal Legislation Could Disrupt the Landscape Once Again
Originally, states enacted legislation to challenge NCAA rules and regulations by allowing student athletes to profit from their NIL. Now, however, some states are taking the inverse approach, eradicating previous NIL legislation because the NCAA rules and regulations have been largely repealed.
Further, states are considering protections and rights for student athletes beyond the current NIL regime. For example, a former student athlete and current state legislator in California has proposed a “revenue sharing” bill requiring universities that clear a certain athletics budget threshold to share revenue with its student athletes. If similar bills are adopted into state law, we may see another scenario where a smattering of state laws nationwide creates uncertainty and perhaps a gross disparity for universities and their student athletes depending on where they are located.
Finally, universities, coaches, conferences, and other stakeholders continue clamoring for federal legislation to assist in governing NIL in college athletics. The NCAA’s appointment of Charlie Baker, an experienced politician, could provide some momentum for the adoption of a federal law. At the NCAA’s convention in January, Baker “conceded that getting federal legislation passed is challenging, but not having it might not be an option.”3 Until such law is enacted, however, the chore of navigating multiple levels of legislation, rules, regulation and university policies remains.
NIL stakeholders across the board should prepare for another tumultuous year in college athletics, and universities, NIL Collectives, and prospective high-revenue sport college athletes should consider engaging competent counsel to assist in both navigating these turbulent waters and also building in robust compliance procedures to best insulate from spurious attacks on their reputation and the follow-on NCAA investigation.
1See Alex Scarborough, Alabama football coach Nick Saban says Texas A&M bought every player, questions whether current NIL model is sustainable, ESPN.com (May 19, 2022), https://www.espn.com/college-football/story/_/id/33942494/alabama-football-coach-nick-saban-says-texas-bought-every-player-questions-whether-current-nil-model-sustainable
2Richard Johnson, There Are No Winners in the Jaden Rashada Florida Saga, Sports Illustrated (Jan. 20, 2023), https://www.si.com/college/2023/01/21/jaden-rashada-florida-nil-saga-no-winners
3Ralph D. Russo, NCAA board approves recommendations for Division I reform (Jan. 12, 2023), https://apnews.com/article/sports-massachusetts-georgia-college-2469e6b77addc708f81cb5303c192c94