By Peter Colin
A version of this blog was originally published by Thomson Reuters Legal Current
College sports and the legal system seem to be inexorably linked this summer as substantive legal changes reform how student-athletes may profit off their rights of publicity.
The Supreme Court, Congress, and state governments have all recently turned attention to NCAA amateurism rules. July 1st saw several states allow athletes to profit off their name, image, and likeness (NIL) rights, rights usually associated with intellectual property known as rights of publicity or personality rights. The Senate held two hearings as the NCAA lobbies Congress to enact a federal NIL statute that preempts the emerging patchwork of different state NIL laws. Separately, on June 21st, the Supreme Court unanimously ruled (https://www.reuters.com/lifestyle/sports/us-supreme-court-rejects-ncaa-defense-athlete-compensation-limits-2021-06-21/) in Alston v. NCAA (https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf) that the NCAA's strict caps on "non-cash education-related benefits" (think scholarships or technology) violated antitrust laws, opening up financial opportunities previously unavailable to student-athletes compared to other collegians.
This is a major paradigm shift. Student athletes can now monetize NIL through hosting camps, teaching private lessons, releasing their own apparel or merchandise (including NFTs), signing autographs, and appearing in commercials, sponsored social media content, podcasts, streams, and on platforms like Twitch, Cameo, and Patreon. These opportunities extend beyond big-time college football and men's basketball; Louisiana State University (LSU) gymnast Olivia Dunne (https://twitter.com/FOS/status/1410666476101586945) and Nebraska volleyball player Lexi Sun (https://twitter.com/GBRWarDaddyUp/status/1410672159693942788) were among the first athletes to strike notable NIL deals, thanks in part to their large social media followings. Hercy Miller (son of Master P) signed a $2 million deal with Web Apps America (https://twitter.com/FOS/status/1410965448385089541); he plays basketball at Tennessee State University, which last made the NCAA Tournament in 1994. This new frontier of NIL rights is the result of a lengthy tension between the NCAA's treatment under antitrust laws and the free-market realities of college sports and the massive money generated.
THE AMATEURISM ISSUE
Before July 1st, NCAA rules forbade student-athletes from receiving compensation for such participation, claiming that their amateur status was a unique and defining attribute of college sports. This applied to athletes in all university sports programs besides football or men's basketball, the two sports that generate the most revenue in ticket sales and broadcasting rights. The NCAA interpreted these rules broadly to bar student-athletes from endorsements or economic opportunities otherwise available due to a student's notoriety or success in college athletics. Other university students were not broadly subject to any similar amateurism prohibitions: for example, college musicians enrolled in a university orchestra can be paid to perform at a nightclub or local church, and college journalists are not forbidden to freelance with a newspaper. Yet the NCAA expressly forbade a college quarterback from earning money hosting a football camp or endorsing a local sports retailer. These constraints included social media opportunities for student-athletes to become influencers posting sponsored content. These prohibitions had prompted some high-profile high school athletes to forego college and compete overseas after graduation or in pre-professional leagues (like the NBA G-League or Overtime Elite (https://www.nytimes.com/2021/03/04/sports/basketball/overtime-league-high-school-pay.html)) before starting professional careers in the United States.
Athlete compensation prohibitions have been scrutinized against the lucrative broadcast rights packages signed by the NCAA and its Division 1 athletic conferences, like the SEC and the Big Ten (https://www.reuters.com/article/us-basketball-ncaa-cbsturner/ncaa-signs-10-8-billion-basketball-tourney-tv-deal-idUSTRE63L4FP20100422). These packages have exacerbated a divide between the football "Power 5" conferences and other NCAA conferences and schools (https://www.sportsbusinessjournal.com/Journal/Issues/2020/08/17/Colleges/Revenue.aspx). The difference in media rights payouts for Power 5 schools versus others can be tens of millions of dollars, with drastic payout disparities between, say, the University of Alabama compared to the University of Alabama-Birmingham. These media revenues have funded coach salaries, school facilities, and the NCAA itself (https://www.usatoday.com/story/sports/ncaaf/sec/2020/12/10/sec-contract-abc-espn-gives-league-more-resources-dominate/3884360001/), but none goes to athletes participating in NCAA sports (https://www.economist.com/the-economist-explains/2021/05/21/why-college-athletes-in-america-are-fighting-to-get-paid). For clarity, new NIL laws do not give athletes any revenues from these media rights packages.
In NCAA v. the Board of Regents (https://supreme.justia.com/cases/federal/us/468/85/), where the NCAA's football television plan violated antitrust laws, the Supreme Court held that the NCAA's eligibility rules, including that "athletes must not be paid", were procompetitive. Challenges to these rules ensued, most notably from Jeremy Bloom, an Olympian and professional World Cup skiing champion who was offered various endorsement deals and paid entertainment opportunities (including a chance to host a show on Nickelodeon). Bloom then enrolled at the University of Colorado (CU) and became concerned his NIL opportunities might interfere with his eligibility to compete in intercollegiate football. On Bloom's behalf, CU first requested waivers of NCAA rules (which were denied), and Bloom discontinued his endorsement, modeling, and media activities to play football for CU during the 2002 fall season. Bloom unsuccessfully sued the NCAA, asserting that his endorsement, modeling, and media activities were necessary to support his professional skiing career, something which the NCAA rules permitted (Bloom tweeted in advance of NIL laws enaction (https://twitter.com/JeremyBloom11) other cases like University of Central Florida football kicker Donald De La Haye who was declared permanently ineligible by the NCAA for having a YouTube channel, Aaron Adair who the NCAA determined was ineligible to play for the University of Oklahoma baseball team because he wrote a book about surviving brain cancer, and Brittany Collens, whose University of Massachusetts tennis career was erased by the NCAA because of a $252 accounting error).
Comparatively, it was the NCAA's NIL exploitation led to the seminal class action O'Bannon v. NCAA over athletes' rights to compensation for unlicensed NIL used in NCAA-branded video games (http://cdn.ca9.uscourts.gov/datastore/opinions/2015/09/30/14-16601.pdf). In O'Bannon, the Ninth Circuit affirmed a district court finding that NCAA rules and bylaws violated the Sherman Act as an unreasonable restraint of trade. In Alston, plaintiffs claimed caps on scholarships and other education-related benefits were also unreasonable restraints on trade. The Supreme Court agreed. While NIL rights were referenced in briefs and oral argument, Alston's antitrust violations were limited to education-related benefits. Justice Neil Gorsuch, author of the Alston opinion, seemingly alluded to NIL in writing: "The national debate about amateurism in college sports is important. But our task as appellate judges is not to resolve it." (https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf)
However, in a scathing concurrence that should galvanize pending litigation, Justice Brett Kavanaugh seemed to tackle the NCAA's entire amateurism model. "Everyone agrees the NCAA can require student-athletes to be enrolled students in good standing" wrote Kavanaugh, "but the NCAA's business model of using unpaid student athletes to generate billions of dollars in revenue ... raises serious questions under the antitrust laws." Kavanaugh ended his opinion, writing that the NCAA's traditional concepts of amateurism "cannot justify the NCAA's decision to build a massive money-raising enterprise on the backs of student-athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The NCAA is not above the law."
STATE AND FEDERAL LEGISLATION
There is no federal NIL law nor any federal rights of publicity statute. Unlike most IP, rights of publicity are not protected by any federal statute, with significant variance state to state, especially in postmortem rights of publicity often at issue in the estates of deceased celebrities (https://www.rightofpublicityroadmap.com/ and https://www.natlawreview.com/article/elvis-and-prince-personality-rights-guidance-dead-celebrities-and-lawyers-and). The NCAA has long promised to address NIL (https://www.legalcurrent.com/whats-in-a-name-the-battle-over-name-image-likeness-rights-for-ncaa-student-athletes-continues/), but after years without NCAA action (https://www.sportico.com/law/analysis/2021/ncaa-nil-justice-department-1234620030/), state legislatures began passing their own NIL bills for governors to sign. Starting July 1st (https://businessofcollegesports.com/tracker-name-image-and-likeness-legislation-by-state/), Florida, Georgia, Alabama, Mississippi, Texas, Louisiana, Illinois, Oregon and New Mexico have laws allowing athletes to profit off their names, images and likenesses (Kentucky and Ohio enacted theirs by executive orders effective July 1st). Other states' NIL laws will take effect over the next one to two years (as it stands currently, New York's NIL law will go in effect January 1, 2023). If the NCAA eventually does create NIL frameworks that conflict with a state NIL statute, athletes in states with NIL laws could have standing to sue the NCAA (or their NCAA-member universities) for violating state law. It is uncertain if the NCAA will file injunctions against states to prevent athletes from signing endorsements (https://twitter.com/SportsLawLust/status/1402656219987419148).
Both houses of Congress have introduced athlete-friendly NIL bills. Once state NIL laws began to pass, the NCAA amplified its Congressional lobbying efforts to pass a federal NIL bill to supersede the state laws and provide the NCAA an antitrust exemption. Congressional NIL action culminated in a June 9th hearing held by the Senate Committee on Commerce, Science, and Transportation, with NCAA president Mark Emmert advocating for a federal NIL statute (https://www.commerce.senate.gov/2021/6/ncaa-athlete-nil-rights). Many senators indicated that a federal statute should offer NIL rights as robust as any state law, taking aim at the NCAA's arguments. A second hearing was held on June 17th (https://www.commerce.senate.gov/2021/6/ncaa-student-athletes-and-nil-rights). However, when asked after the second hearing about federal NIL's passage, Committee Chair Senator Maria Cantwell (D-WA) said, "It's safe to say something isn't going to make it through the halls of Congress by [July 1st]." (https://twitter.com/RossDellenger/status/1405561646723047428)
On June 23rd, the NCAA's Emmert issued a memo to university administrators pushing for temporary guidance allowing athletes to monetize NIL as of July 1st, with athletes likely to be granted relief from existing NIL prohibitions (https://theathletic.com/news/ncaa-president-mark-emmert-pushing-for-interim-nil-guidelines-by-july-1/dhjDFPX93Sm9?source=twitterhq). Some see this as a strategic move where the NCAA avoids enacting rules that might be subject to lawsuits and delaying regulating NIL, while schools and states create their own frameworks (https://www.cbssports.com/college-football/news/ncaa-waiver-to-effectively-allow-name-image-and-likeness-rights-for-athletes-near-completion/). Jay Bilas, of counsel with Moore & Van Allen (https://www.mvalaw.com/people-JayBilas) and ESPN college basketball analyst, reacted to this move by tweeting "everything the NCAA said about needing a uniform, national standard for fair competition was total BS." (https://twitter.com/JayBilas/status/1408026435856576516) A final version of the NCAA's interim NIL guidance submitted to its Board of Directors June 30th was approved (https://theathletic.com/news/ncaa-drafts-interim-nil-policy-for-college-athletes-sources/msQIs5nnGf5z).
THE NEW NIL REALITY
July 1st saw a flurry of NIL deals announced, from the mega deals struck by Fresno State basketball players Hanna and Haley Cavinder (https://www.si.com/college/2021/07/01/hanna-haley-cavinder-twins-nil-deal-basketball-tiktok) with NIL pioneer Darren Heitner (https://twitter.com/DarrenHeitner) to Texas football player Casey Thompson's donating his Cameo profits to charity (https://twitter.com/aasdanny/status/1412084986329669638). Athletes and schools are leveraging third parties like Influencer, Match Point, or Opendorse to facilitate deals. Some have signed with agents and more have lawyered up.
However, unanswered questions remain, as NIL will remain largely unregulated even after July 1st. It appears that universities will not offer guidance and counsel to students in negotiating deals, with student-athletes negotiating contracts themselves or securing their own agents and attorneys. Athletes signing with agents previously signaled the end of their collegiate careers, but how will agents now fit into this new picture? Preexisting athlete agent law required disclosing to athletes that such deals may cause athletes to lose eligibility to compete in their sports. Oregon has modified its agent laws now that college athletes could sign marketing rep agreements and still maintain their eligibility (https://olis.oregonlegislature.gov/liz/2021R1/Downloads/MeasureDocument/SB0005/Introduced), but not all states have, and many state NIL laws lack language modifying this provision of an agency contract. This is not as relevant to football and basketball as it may be in other sports (notably golf), with additional amateurism rules outside the NCAA that NIL permissions could violate (https://www.si.com/golf/news/college-golfers-paid-amateur-status-with-usga-remains-unknown).
Among the thorniest issues lingering is how NIL rights apply to athletes before the students enroll in college. For now, this seems to depend on in what state the athlete lives. California, for example, allows NIL for high schoolers if they do not use the high school's name or marks, while Texas has express provisions in its NIL laws barring high school athletes from NIL exploitation (https://247sports.com/Article/High-school-recruits-name-image-and-likeness-NIL-rules-NCAA-allowed-state-guidelines-167322171/). Florida's law is silent on the issue, however, the Florida High School Athletic Association bylaws state that high school athletes need to preserve their amateur status to be eligible for scholastic sports (http://fhsaa.site/sites/default/files/1920_handbook_website_116.pdf). This appears to be the NCAA's position; high school athletes may be able to capitalize on NIL but should consult their state's secondary school athletic association. Yet as athletes begin to think about branding and business generation in advance of enrolling in college, this is likely the next frontier for NIL. However, since this will likely entail persons under 18, there are a host of separate legal concerns than for someone of legal age. Brands will have to comply with Federal Trade Commission (FTC) laws for influencers and endorsements, and the FTC has specific provisions regarding advertising to children. With high level Amateur Athletic Union basketball beginning for children as young as 11, pre-college NIL could become a complex legal landscape.
Other issues to consider include that eventual NCAA NIL activity could (and should) include group licensing options, which would allow NIL use in video games like those at issue in O'Bannon. EA Sports, which previously released NCAA-branded games, is already intimating their return (https://www.sportingnews.com/us/ncaa-football/news/ea-sports-ncaa-football-game-players-nil/i839ec0dcfs912c7846ay9ih3). Group licensing logically would be feasible if the NCAA or conferences become more active overseeing licensing themselves, but as of now there are no specific group licensing plans. Womens' athletics may have lucrative NIL opportunities both to teams and individuals (https://www.miamiherald.com/sports/college/acc/university-of-miami/article252381953.html), but Title IX compliance issues arise, as Alston's antitrust rulings open educational benefits for athletes and if NIL compensation is secured and paid for by universities on athletes' behalves. Further, one proposed bill in Congress would classify student-athletes as university employees to receive NIL compensation, impacting employment issues previously inapplicable (https://www.usatoday.com/story/sports/college/2021/05/27/bill-would-make-college-athletes-employees-allow-them-unionize/7465542002/).
For any athletes looking to capitalize on their NIL rights, best practices include the following:
• Trademark any personal logos or designs and have anyone creating these for you sign off that these are works for hire and they are not owners of the logos or designs. Your LLC can own the trademark. As applicable, make clear in your influencer deals that you or your LLC will also own the copyrights to any sponsored content you post to your own social media accounts.
• If you create content with other IP, such as university logos or colors, or other people's music or brands, make sure that you either license what you want to use or use it in a way that would likely constitute "fair use" under the law. Even the Supreme Court previously held that color will meet ordinary legal trademark requirements, so do your homework before appearing in University of Texas burnt orange or University of Tennessee big orange. This includes pictures of yourself taken by others, as the photographers (or their publications) own the copyrights to those photos and you don't want to be sued for posting a picture someone else took of you (https://www.law360.com/articles/1400863/dua-lipa-sued-over-instagram-photo-of-herself).
• Know with whom you cannot contract. If you are an athlete at a school with a Nike deal, your personal Adidas deal could create problems. Some states explicitly make NIL deals with sports betting operators illegal. Since Barstool Sports owns a sportsbook, you may not be legally allowed to make deals with its entities. Texas and Ohio's NIL laws specifically bar deals with casinos, sports betting, or adult entertainment, but gray areas will exist for NIL exploitation on platforms (think OnlyFans, colloquially known for sexual content but also provides a platform for non-sexually explicit creators).
• Read the contracts and know its limits. Do you really want to irrevocably sign your likeness away in perpetuity to make $30 promoting a smoothie store on Instagram? Not every deal is worth making.
• Understand that contracts identify what state's law applies to that contract. Make sure that your NIL deals are governed by the appropriate state, especially if you live in a state different from the university in which you enroll. Many states require agents to register in the state, so verify that your agent is so registered (and if you are an agent, have a marketing rep agreement that is compliant with state agent laws and NIL laws).
• You may be required to report details of your NIL deals to your school or comply with your state's statutory reporting requirements.
• This is adult stuff. Have a strong business team. Find those individuals or entities with proven track records and who are not exploiting you to elevate themselves. Conduct due diligence before you retain a agent, accountant, lawyer, marketer, or financial planner. Start your own LLC and get a business bank account. Every deal, every partnership, everything should be in writing. NIL laws will not eliminate the scammers that surround high level athletics. Pay taxes on your NIL revenues and make sure that there are records of all money coming in and out. You don't want a scandal or an opportunistic family or friend to negatively impact your finances. Manage your time so you can still make practice and class. Your school's athletics or media staff isn't guaranteed to be involved with your personal NIL endeavors, so manage the time that your NIL opportunities will take.