Game Changer: Understanding the NCAA’s New NIL Policy

Early reports suggest that student-athletes are already generating millions of dollars through deals, endorsements, and business endeavors. Although the interim NIL policy is unquestionably a boon for student-athletes, the NCAA’s new approach presents myriad compliance concerns for institutions working to stay within the bounds of applicable state laws and athletic conference policies.

Background on the NCAA’s Interim NIL Policy

Student-athletes and the NCAA have clashed over the association’s NIL policy for decades.¹ Only recently, the tide began to turn in students’ favor. In 2019, California enacted the Fair Pay to Play Act, becoming the first state in the nation to allow college athletes to benefit financially from their NIL and to enter into licensing contracts.² In response, the NCAA threatened to make all fifty-eight of California’s NCAA schools ineligible to participate in the association’s competitions. Despite these threats, the majority of U.S. states soon followed suit. To date, twenty-nine states have enacted legislation or signed executive orders permitting student-athletes to monetize their NIL, and several others have bills pending.

Last summer, the U.S. Supreme Court added fuel to the fire with its unanimous ruling in Alston v. NCAA that certain NCAA rules limiting the receipt of education-related benefits produced significant anticompetitive effects in violation of the Sherman Act.³ Days later, the NCAA proclaimed its support for a federal, nationwide solution for NIL. Congress heeded the NCAA’s call, resulting in the introduction of several bills in both the House and the Senate. The proposed legislation allows college athletes to earn money off their NIL with minimal restrictions, though the bills take a wide variety of approaches. Provided the varied approaches to NIL compensation under consideration in Congress, it is unlikely that a federal law will be enacted in the near future. As a result, the NCAA announced an interim policy that will govern until the NCAA announces a final policy or Congress passes a law.⁴

Adopted by all three NCAA divisions on July 1, 2021, the NCAA’s provides the following guidance to college athletes, recruits, their families, and member institutions:

• Student-athletes can engage in NIL activities that are consistent with the law of the state where the institution is located. In other words, a state law or executive order regarding NIL supersedes NCAA rules.
• Student-athletes who attend an institution in a state without a NIL law can also engage in this type of activity without violating NCAA rules.
• Student-athletes can use a professional services provider for NIL activities.
• Student-athletes should report NIL activities consistent with state law or school and conference requirements to their institution.

Furthermore, the NCAA clarified that prohibitions on pay-for-play⁵ and improper recruiting inducements⁶ remain in effect, and that the NCAA would not monitor compliance with state law.

Maintaining Compliance: Challenges Facing Colleges & Universities

Due to the rapidly changing legal landscape, colleges and universities face increasing challenges to ensure compliance with applicable state laws and NCAA policies — or in states without laws governing student-athletes’ use of NIL, to formulate and announce their own policies. Noncompliance with NCAA policies may result in significant sanctions for an institution’s athletic programs. In particular, colleges and universities must keep the following in mind as they develop their NIL policies and procedures:

1. Compliance with NCAA Policies. An institution’s NIL policy must ensure that no prospective student-athlete receives an “improper inducement”⁷ during recruitment and no current student-athlete receives an “extra benefit.”⁸ “Improper inducements” are compensation contingent on enrollment at a particular institution, and “extra benefits” are compensation for athletic participation or achievement (i.e., “pay-for-play”). Examples of extra benefits or inducements include: cost-free goods and services, discounts not available to the general student population, preferential treatment based on a student’s reputation as a student-athlete, and payment for athletic participation. Although the NCAA’s interim NIL policy gives institutions broad latitude in allowing student-athletes to engage in NIL activities, the NCAA has made clear that these two NCAA policies must still be adhered to.
2. Use of Institutional Intellectual Property. State laws regarding NIL are largely silent on student-athletes’ use of intellectual property owned by the institutions for which they play. Institutions can either (1) clearly establish what intellectual property (e.g., logos, colors, uniforms) they will allow student-athletes to use in NIL activity, and develop both an approval process and a remedial process for alleged violations, or (2) rely on current intellectual property laws and exceptions such as “fair use” that may lead to uncomfortable situations where the institution has to decide whether to send a cease and desist letter to a star athlete whom they believe is violating the school’s trademarks or copyrights.
3. Industry Limitations. Many state laws — though not all — explicitly limit student-athletes’ NIL activities in certain industries, such as adult entertainment, gambling, alcohol, tobacco, and weapons. In addition, individual institutions can opt to go further than applicable state laws in barring partnerships with specific entities. As such, both states and individual institutions have a role to play in ensuring compliance with applicable NIL policies.
4. Student Safety. Given the proliferation of small businesses cropping up to aid young student-athletes with NIL activities, institutions should create structures to ensure student-athletes are not taken advantage of. A related concern is helping student-athletes avoid running afoul of the IRS, as all income generated from NIL activities will likely need to be reported as taxable income.
5. State and Federal Legislation. Finally, institutions should ensure continuing compliance with applicable state and federal legislation. Although there is presently no federal NIL law and not all states have active NIL laws, institutions will need to monitor new legislation and revisit and update their policies as necessary.

As the NIL legal landscape continues to evolve, institutions should engage with competent counsel for assistance with developing NIL policies and procedures and ensuring compliance with applicable state laws and NCAA policies.

¹ See, e.g., O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015) (Division I men’s basketball players challenged the NCAA’s use of former athletes NIL for commercial purposes and court ultimately held that the NCAA’s long-held practice of barring payments to athletes violated antitrust laws).

² Cal. S.B. 206 (Sept. 30, 2019),

 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB206.

³ Alston v. NCAA, 594 U.S. 1 (2021).

⁴ Michelle Brutlag Hosick, NCAA adopts interim name, image and likeness policy, NCAA (June 30, 2021), https://www.ncaa.org/about/resources/media-center/news/ncaa-adopts-interim-name-image-and-likeness-policy (NCAA President Mark Emmert remarked, “With the variety of state laws adopted across the country, we will continue to work with Congress to develop a solution that will provide clarity on a national level.”).

⁵ The NCAA bars compensation for athletic participation or achievement. New Interim Policy Key Takeaways, NCAA (July 2021), https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_PolicyKeyTakeaways.pdf.

⁶ The NCAA prohibits NIL compensation contingent on enrollment at a particular institution. Id.

⁷ See, e.g., NCAA, 2021-22 NCAA Division I Manual, Bylaw 13.2.1,  available at https://web3.ncaa.org/lsdbi/reports/getReport/90008.

⁸ Id. at Bylaw 16.02.3.