By Erin E. Butcher and Kasey Nielsen, of Bricker & Eckler
(Editor’s Note: The following in NIL Institutional Report, a periodical co-published by Hackney Publications.)
Almost a full year after the NCAA was essentially forced to permit college student-athletes to financially benefit from their NIL, beginning July 1, 2021, the NCAA will release recommendations on a way forward in college NIL. The NCAA’s recommendations or guidance will matter, but, with the emergence of powerful NIL collectives, they will matter not as much for the future of NIL, as for the future of the NCAA.
It’s no secret that the NCAA will release a report in April 2022 examining how NIL has impacted (if at all) transfers, academics, mental health and college choice and guidance in June 2022 on NIL. It’s also no secret that the NCAA has been reeling to find its identity in the face of unfavorable court decisions,[1] all while battling a popularity problem among some larger D1 conferences.[2]
While the NCAA has been undoubtedly reassessing its future, since July 1, 2021, countless student athletes have already entered into contracts with third-party businesses or, the growingly popular, NIL collectives.
NIL collectives are entities – sometimes set up as non-profits and sometimes profiting from subscription fees – usually made up of business people, VIPs, boosters, and/or fans. For those that are created to benefit a specific college or team, they are not directly connected to that college or team but raise money for and/or facilitating deals for that specific college or college team. Think of them kind of like super Political Action Committees (“PACs”) and political campaigns – they clearly back a side or interest, but are not directly sponsored by or funded by the candidate or issue they support (you know, the TV spots around elections with the “paid for by the committee to…”). It seems like every day a new NIL collective is created, a collective-brokered deal is signed, or a new VIP member is named to the board of an NIL collective.
But the really interesting component to NIL collectives is actually not the $8 million-dollar-deal contracts[3] or team-wide offers themselves, it’s the impact on recruitment efforts for colleges and improper inducements…that are not directly connected to colleges.
Take for example, ahead of the transfer portal when Coach Steve Sarkisian publicly commented that his team was in need of offensive line recruits.[4] Within the week, a nonprofit NIL collective (one of several for UT), Horns with Hearts, popped up in town and offered $50,000 to any potential recruit to a position of offensive lineman to Texas for participation in charity work (no structure to this by the way).[5] And, like a miracle, suddenly Texas had seven top commitments from offensive linemen for the 2022-2023 season by February 2, 2022.[6] While this may look and smell like improperly inducing recruitment, neither the University of Texas nor Coach Sarkisian directly brokered this deal or were even arguably involved. This underscores that uneasy relationship between NIL collectives and their colleges and the recruiting impact arms race they can create. And, this separation between colleges and their programs and the NIL collectives is crucial and may have painted the NCAA into a corner.
From the perspective of some student athletes – especially those with the opportunities to benefit from these NIL deals – it’s completely understandably why they would want to make professional athlete-level money off their skills as early as they can and before potential career-ending injuries. Similarly, many excellent student-athletes do not have a professional sport to transition into or, even if one exists, make a living from what they can now potentially attain through NIL. There are certainly those fans, colleges, college programs, and student-athletes that just want collegiate sports for enjoyment and on an even playing field –for some sports, especially in D1, those days may be over (to mention the impacts of sports betting and gambling).[7]
Not only have businesses, colleges, and student-athletes now had a taste of what can be with NIL unfettered by the NCAA, but also, the NCAA could be in a legal quandary if it tries to enforce new guidelines (whatever they may be), or further threaten its own existence.
As discussed above, NIL collectives are, by their creation, not directly related to the colleges or college programs they rally around and, even if colleges wanted to curb the impact of NIL collectives and deals, it is unclear how the NCAA could expect colleges to effectuate this within the confines of the law. Specifically, colleges cannot interfere in the contracts of student-athletes with third-parties. Like NIL laws currently, contract interference is a state law issue. As we’ve seen with NIL laws, the 50 states each have their own ways of doing things.
Largely because the NCAA has been behind the eight ball on this, if the NCAA decides to come out now and enforce new guidelines (whatever they may be) on the colleges or student-athletes directly, the NCAA could find itself defending contract interference cases across the country (let alone the various other types of state law claims that could arise). Setting the colleges and student athletes aside (sadly), just think how much money, exposure, and influence the emerging economy around NIL deals provides for collectives, agents, and businesses (again, not to mention sports betting and gambling entities).[8] It is unlikely that stakeholders in this new NIL economy are going to watch it implode over NCAA guidelines without a legal fight (or many, spread throughout the country).
Further, as mentioned above, the NCAA has a popularity problem with some of the same conferences that include teams with large NIL deals – and that matters when colleges can, and have been thinking about, opting out of the NCAA. Certainly, appearing to interfere with the NIL economy is not going to raise the popularity of the NCAA with certain colleges and student-athletes that have embraced NIL and grumbled about the NCAA in the past. But failing to regulate NIL with any teeth may also alienate colleges, programs, and student-athletes that do want regulation and, more importantly, leave colleges wondering what the NCAA is for, if not regulation.
So now, the NCAA continues to find itself in an unenviable position. If it tries to regulate NIL with any real impact, the NCAA is certain to tie itself up with lawsuits from NIL stakeholders, including the powerful NIL collectives. If defending itself from lawsuits across the country doesn’t batter down the NCAA, the revolt and possible exodus of some of the big conferences may also follow. If the NCAA doesn’t move forward with recommendations with any impact on NIL, the NCAA further paints itself into the role of being unnecessary in the NIL landscape and possibly regulation in general. Under any of these scenarios, NIL is alive and well, but the NCAA’s future is uncertain.
[1] See NCAA v. Alston, No. 20-512, 594 U.S. __ (June 21, 2021) (effectively striking down the NCAA’s amateurism rules for compensation to student-athletes); see also, e.g., O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015) (affirming, in part, finding the NCAA’s compensation rules were subject to antitrust scrutiny and plaintiffs suffered injury as a result of compensation rules).
[2] See Pat Forde, Explosive Weekend Raises Doubts About Whether the NCAA Can (and Should) Survive, Sports Illustrated (Aug. 2, 2020), https://www.si.com/college/2020/08/02/ncaa-doubts-survive-explosive-weekend-power-5-breakaway (detailing the Power 5 Conference’s leader’s discussions about staging a breakaway from the NCAA fall championships, shortly after the Pac-12 football players announced a proposed boycott of the NCAA, underscoring preexisting tensions exacerbated by NCAA decisions during COVID-19).
[3] See Madeline Coleman, Report: Class of 2023 Football Recruit Signed NIL Deal Potentially Worth Over $8 Million, Sports Illustrated (Mar. 12, 2022), https://www.si.com/college/2022/03/12/five-star-recruit-signed-nil-deal-8-million.
[4] For example, see quote from Coach Sarkisian, “We’ve got to improve our depth on the offensive linemen.” Brian Davis, Quarterback, pass, rush, offensive line depth, injury: Plenty of issues ahead for Texas Longhorns, Hook’em.com (Nov. 22, 2021, 4:48 PM), https://www.hookem.com/story/sports/football/2021/11/22/texas-longhorns-football-coach-steve-sarkisian-offseason-plenty-issues-ahead/8726720002/.
[5] See Wescott Eberts, Horns with Heart to pay Texas OL $50,000 annually for charity work, Burnt Orange Nation (Dec. 6, 2021, 1:37 PM), https://www.burntorangenation.com/2021/12/6/22820911/horns-with-heart-texas-longhorns-offensive-line-nil.
[6] See Cami Griffin, Full look at Texas’ stellar offensive line class for the 2022 recruiting cycle, Longhorns Wire (Feb. 2, 2022, 9:56 AM), https://longhornswire.usatoday.com/lists/texas-recruiting-class-longhorns-2022-signing-day-offensive-line-devon-campbell-kelvin-banks-kyle-flood/.
[7] Admittedly, the field was not “even” before, given the size, funding, and legacy of certain teams, but relatively speaking, the disparities are about to get worse (even setting aside the consequences of gambling and sports betting – a huge topic for another day).
[8] E.g., Sean Gregory, As College Athletes Finally Start Cashing In, Entrepreneurs Big and Small Also Look to Score, Time Magazine (Sept. 10, 2021, 2:29 PM), https://time.com/6094842/college-sports-nil-operndorse/; Dennis Dodd, Inside the world of ‘collectives’ using name, image and likeness to pay college athletes, influence programs, CBS Sports (Jan. 26, 2022, 1:03 PM), available at https://www.cbssports.com/college-football/news/inside-the-world-of-collectives-using-name-image-and-likeness-to-pay-college-athletes-influence-programs/.
