“Nobody Did Anything About it” or Did They?: NCAA Releases New NIL Guidelines Targeting University-Affiliated NIL Collectives

The guidance arrives as the one-year anniversary of the NCAA’s Interim NIL Policy nears. Although many university stakeholders spent the past year pleading for additional NIL guidance to belay compliance concerns, it is not immediately clear that these guidelines stave off such concerns. Recently, on May 18, Coach Nick Saban of the perennial NCAA Division I Football powerhouse University of Alabama, unloaded in public comments regarding alleged abuses of the NIL system at a handful of schools and stated, “I tell recruits the same thing: Our job is not to buy you to come to school here.”¹ At a minimum, however, the guidance puts universities on notice that they could be held responsible for the actions of their affiliated NIL Collectives.

Background

As we previously wrote, the NCAA’s Interim NIL Policy (“Interim Policy”), adopted July 1, 2021, modified NCAA legislation to permit student-athletes to profit off of their name, image and likeness. The Interim Policy provided the following guidance to student-athletes, recruits, their families, and member institutions:

1. 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.
2. 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.
3. Student-athletes can use a professional services provider for NIL activities.
4. Student-athletes should report NIL activities consistent with state law or school and conference requirements to their institution.

The Rise of the NIL Collective

This minimal guidance quickly proved insufficient for what some projections indicate will become a billion-dollar industry. Soon after the release of the Interim Policy, student-athletes began inking deals with various corporate entities, from nationally recognized brand names such as Cash App or Smoothie King, to more local and regional businesses, like car dealerships and regional restaurants.² As the fall athletic season gained steam, the scope of these deals quickly expanded with the onset of NIL Collectives.

NIL Collectives — stand-alone start-up companies (either for-profit or not-for-profit) established to create financial opportunities for athletes — accelerated the launch of the NIL market by providing a centralized hub for boosters, companies, and other interested parties to contribute financial resources to athletes of a specific school. After Nike founder Phil Knight launched Division Street as the official NIL marketplace of the Oregon Ducks, supporters of university athletic programs across the country took notice. Now, experts predict that every Power Five Conference school (comprising of over sixty colleges and universities) will have a NIL Collective by the Interim Policy’s one-year anniversary.³

NIL Collectives quickly captured the NCAA’s attention as the governing body garnered concern that the entities impermissibly use funds to “induce” players to attend a certain school in violation of the NCAA’s prohibitions on pay-for-play. Earlier this year, the NCAA began sending inquiries to universities questioning their relationships with certain collectives. Jon Duncan, Vice President of Enforcement at the NCAA, explained that these letters were sent to “dialogue with a school to get more information about whether violations have occurred.” Regardless of the NCAA’s intent, the inquiries reflect NCAA skepticism of the newly formed collectives and their relationships with universities.

The NCAA Responds with New NIL Guidance

With concerns mounting, in February of this year the NCAA’s Division I Board of Directors requested that the NCAA’s Division I Council Working Group (the “Working Group”) review the effects of NIL on student-athletes, and to clarify existing NCAA rules that university and university-collective relationships may be violating.

On May 9, 2022, the NCAA Division I Council Working Group issued Guidance Regarding Third Party Involvement to address compliance for universities with affiliated NIL Collectives. Specifically, the guidance states in bold lettering that many newly formed entities benefitting student-athletes under the guise of NIL — in other words, NIL Collectives — are subject to the NCAA’s rules regarding boosters:

It appears that the overall mission of many, if not all, of the above-referenced third party entities is to promote and support a specific NCAA institution by making available NIL opportunities to prospective student-athletes (PSA) and student-athletes (SAs) of a particular institution, thereby triggering the definition of a booster.

The guidance goes on to outline a few notable prohibitions that could be triggered by current arrangements between boosters (i.e., NIL Collectives) and potential student-athletes:

• Boosters may not have conversations (g., text, call) “for a recruiting purpose” with potential student-athletes, or those closely associated with the athlete;
• NIL arrangements may not be contingent or guaranteed based on enrollment at a particular school;
• University coaches and/or staff may not facilitate meetings between potential student-athletes and boosters or communicate with potential student-athletes on behalf of a booster; and
• NIL agreements must be based on a case-by-case analysis of the value a student-athlete brings compared to compensation or incentives for enrollment decisions, athletic performance or achievement, or membership on a specific team.

Next, the guidance reiterates that similar requirements exist for current student-athletes, specifically noting that continued enrollment at a particular institution cannot be conditioned on a NIL arrangement.

Finally, the guidance provides a non-exhaustive list of still-applicable NCAA legislative rules corresponding to provisions invoked by these relationships between NIL Collectives and student-athletes:

• Prohibition on university representation of student-athlete athletic ability or reputation;⁴
• Public comment on potential student-athlete limited to university’s recruitment of the individual;⁵
• Boosters may not recruit, defined as “any solicitation of a PSA or a PSA’s family members by an institutional staff member or by a booster for the purpose of securing the PSA’s enrollment …” on behalf of a school;⁶
• Boosters may not provide financial aid or incentives to potential student-athletes unless such benefit is “the same benefit [ ] generally available to the institution’s prospective students”;⁷
• Pay-for-play is still prohibited;⁸
• Universities are responsible for impermissible recruiting activities engaged in “by a representative of athletics interest.”⁹

Taken together, the NCAA’s new guidance conveys a three-part message. First, NIL Collectives, as many currently operate, must play by the same rules that traditionally applied to boosters, Second, many current NIL arrangements may run afoul of the NCAA’s Bylaws. And third, colleges and universities can still be held responsible for the actions of NIL Collectives taken on their behalf. What is less clear, however, is whether — and how — the NCAA will enforce its Bylaws against member institutions.

As part of Coach Saban’s tirade against the current state of NIL affairs, he stated that in at least one instance where an NIL opportunity was unfairly used to recruit: “It was in the paper and they bragged about it. Nobody did anything about it.”¹⁰ When a seven-time national championship coach sounds off, it generally reverberates far and wide and it is likely a good bet that it will result in increased pressure on, and an investigative inquiry by, the NCAA. It is during these periods of shifting guidance and enforcement that institutions are most at risk. Generally, someone must be the first to be held accountable, and claims of everyone else was doing it have about as much success as a seventy-yard field goal.

Next Steps for University Athletic Departments and University Legal Counsel

Given the current “wild west” atmosphere surrounding NIL, colleges and universities should be wary of the reputational and economic risks associated with NIL violations and the resulting NCAA enforcement action, and thus should pay close attention to the actions of affiliated NIL Collectives. The NCAA’s guidance makes clear that member institutions may be held responsible for the conduct of their boosters.

As the NIL legal landscape continues to evolve and the proverbial sheriffs show up to bring order, colleges and universities should consider engaging with competent counsel now for assistance with the development of NIL policies and procedures to ensure compliance with applicable state laws and NCAA bylaws. As every coach knows, a good game plan is critical for success.

¹ See 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.

² See, e.g., David Kenyon, The Biggest and Most Notable NIL Deals…, Bleacher Report (July 26, 2021), https://bleacherreport.com/articles/2946352-the-biggest-and-most-notable-nil-deals-in-college-football-so-far.

³ Eric Prisbell, ‘Every Single Power 5, Within a Few Months, is Going to Have a Collective’, On3 NIL (Jan. 28, 2022), https://www.on3.com/nil/news/every-single-power-5-within-a-few-months-is-going-to-have-a-collective/.

⁴ NCAA Bylaw 11.1.3 – Representing Individuals in Marketing Athletics Ability/Reputation.

⁵ NCAA Bylaw 13.10 – Publicity.

⁶ NCAA Bylaw 13.1.2.1 – Permissible Recruiters; Bylaw 13.02.14 – Definition of Recruiting.

⁷ NCAA Bylaw 13.2.1 – Offers and Inducements.

⁸ NCAA Bylaws 12.1.2, 12.1.2.1.4.1 and 12.1.2.1.5 – Athletics Eligibility.

⁹ NCAA Constitution 2.1.2 and 2.8.1; NCAA Bylaw 13.01.2 – Institutional Responsibility.

¹⁰ See Joseph Goodman, Nick Saban sounds scared in NIL rant, AL.com (May 19, 2022), https://www.al.com/alabamafootball/2022/05/nick-saban-sounds-scared-in-nil-rant.html.