Senators Taking Aim at NIL

Late last week, the Associated Press reported that Senators Tommy Tuberville and Joe Manchin have taken an interest in college students’ NIL rights, and have begun contacting key personnel within the industry to solicit opinions on what eventual federal legislation may look like. Currently, no federal legislation directly regulations NIL rights, and as we wrote last week, decisions from the Supreme Court also do not directly authorize students to profit from their names, images, or likenesses.

According to the AP, the senators say that their staffs have already started drafting legislation to address the comments they’ve received. It comes as no surprise that Senators Tuberville and Manchin have taken up the NIL cause; Tuberville, an Alabaman, and Manchin, a West Virginian, have major college sports programs within their constituencies.  Tuberville formerly coached at Auburn University (though we do not expect he will try to sneak a provision into the bill that says “Alabama may only play with 10 players every year in the Iron Bowl”).

Federal legislation could have a major impact on students’ NIL rights across the nation, but it does not necessarily have to. Any legislation could just as likely be narrow and unimpactful, especially once other legislators have an opportunity to weigh in, amend, and negotiate the proposed bill. And, it’s no guarantee that the senators’ bill will ever pass. Eight other bills have been proposed over the last four years, and none have progressed to become law.

But, if Senators Manchin and Tuberville are successful in passing legislation, then states, colleges, the NCAA, student athletes, and businesses interested in entering into NIL deals will have to determine the extent to which the federal law trumps their state’s laws. Under the Constitution’s Supremacy Clause, when a federal law covers a specific issue that state law also covers, the federal statute generally controls. But, often times, it is possible for state law to apply alongside federal law, and in some cases, a court may find that the federal and state laws do not actually conflict. This phenomenon–also known as preemption–is often a case-by-case problem.

Duane Morris continually monitors for developments in NIL legislation, and its attorneys and government strategies team aim to help their clients understand how legislation may affect them. If this (or any other NIL) moves forward, you’ll hear about it here.

One Year On, NIL Laws and Policies Leave More Questions than Answers

On June 17, 2022, The Ohio State University announced it had surpassed 1,000 name, image, and likeness (“NIL”) deals during the first year of the policy’s existence.  It was almost exactly one year prior—June 30, 2021—that the NCAA first suspended its NIL rules for student-athletes.  That means that, on average, 2.7 NIL deals are signed every day with Ohio State athletes.    Other powerhouse athletic programs—Georgia, Texas, Clemson, Southern California, Alabama, and all the others—cannot be far behind.

If you are not familiar with NIL, you are neither alone nor behind the times.  It is a rapidly changing area where sports, education, law, politics, and fanaticism for one’s chosen college team intersect.  At its most basic, “NIL” refers to a college student-athlete’s agreement to allow a third party—be that a car dealership, app developer, or energy drink producer—to use his or her name, image, or likeness to promote its brand.

Until last June, the NCAA did not permit any student-athletes to receive any compensation for the use of their names, images, or likenesses.  That meant that, despite appearing on live, televised games, archived game footage, sports video games, and other media, student-athletes could not be compensated as their likenesses were used, and even though they did not give consent to their use.  The change started several years before, when former UCLA basketball player Ed O’Bannon famously sued the NCAA and, around the same time, former Nebraska and former Arizona State and Nebraska quarterback Sam Keller sued both the NCAA and Electronic Arts, Inc. (a video game company), alleging that the defendants violated the Sherman Antitrust Act and other state publicity statutes and common law doctrines.

When it was decided in 2015, O’Bannon did not result in a holding that students are entitled to payment for use of their NIL.  In fact, the Ninth Circuit Court of Appeals held that the NCAA’s rules prohibiting compensation were valid insofar as student-athletes were not entitled to up to $5,000 in deferred compensation for their NIL rights, to be paid after graduation.  But the O’Bannon case was merely the first domino to fall, and when it did, it launched NIL rights into the wider college sports discourse.

State governments began to address the NIL debate.  In 2019, California was the first state to pass legislation on this issue.  California’s Fair Pay to Play Act provides that no postsecondary school, athletic conference, or organization with authority over collegiate athletics (i.e., the NCAA) may prevent a student-athlete from earning compensation for “the use of the student’s name, image, likeness, or athletic reputation.”  At least 25 other states have since passed laws on the same issue, while at least three governors have issued executive orders on NIL rights (one of which became statutory law).

In 2021, the U.S. Supreme Court decided NCAA v. Alston, in which current and former NCAA Division I football and basketball players again challenged the NCAA’s policies forbidding compensation under the Sherman Act.  Though the Supreme Court ruled in favor of the plaintiffs, Alston, like O’Bannon, did not itself hold that student-athletes must be allowed to received compensation for their NIL.  Yet, after suffering two losses in federal court and watching state legislatures take action to promote student-athletes’ NIL rights, the NCAA voluntarily adopted a policy that suspended the prohibition against student-athletes earning compensation for their publicity rights.

The NCAA’s relaxation of its NIL policy was intended to allow student-athletes to earn money, aside from their scholarships, for their appearance in ads, at events, and the like.  From the outset, the NCAA insisted it would nevertheless “preserve[ ] the commitment to avoid pay-for-play and improper inducements tied to choosing to attend a particular school.”

But in the intervening year since Alston was decided, the NCAA’s decision has resulted in a frenzy of activity over the past year that has blurred the lines between permissible NIL activity, pay-for-play, and recruitment.  Millions of dollars’ worth of deals have been negotiated with student-athletes (at the University of Texas alone, more than 150 student-athletes have signed NIL deals that, in total, surpassed $2 million).  Almost half of that amount is going to the school’s football players.  Donor “collectives” have sprung up to fund NIL deals for students in the six- and seven-figures.  Universities have enacted NIL policies in attempts to comply with both their NCAA obligations and state law.  States, meanwhile, have reportedly changed their laws to permit these “collectives” to openly cooperate with universities and athletic departments in what may be an arms race for empowering their colleges to attract the most sought-after recruits. The potential legal issues are limitless.

Duane Morris always has its ear to the ground for developments in sports law, this blog intends to follow the major legal developments in the NIL space while providing practical updates to colleges, students, and businesses who have an interest in this ever-changing body of law. As athletes return to campus, and as NIL begins its second year in full effect, the news is certain to keep coming, and you can track key changes right here.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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