Within days after the Supreme Court’s decision in Alston last June, the NCAA issued an “interim policy statement,” suspending rules that had restricted the compensation a student athlete might receive not only directly from her school, but also from third parties, for the commercial use of her “name, image, and likeness” (NIL).
While the “interim” statement said that “prohibitions on pay-for-play and improper recruiting inducements [would] remain in effect,” it also qualified that statement by saying these prohibitions might be overridden by state legislation or executive action. And the statement said the NCAA itself would not monitor compliance with state law.
Almost a year later, in May 2022, the NCAA supplemented this “interim” statement with guidance detailing the circumstances under which “third party” or “booster” involvement with an NIL “collective” would violate these prohibitions by conditioning compensation to the athlete on her enrollment at a particular school or on her meeting specified measures of “participation or achievement,” e.g., membership on a roster, minutes on the court, points scored, etc.
But the supplemental guidance said nothing further about how these rules might yield to contrary state law. And in the meantime, quite a number of states had enacted legislation, and at least one governor had issued an executive order, that may test this very question.
Yet further guidance issued in October 2022 detailing the manner in which a college or athletic department might or might not property involve itself in facilitating the activities of NIL collectives expressly disclaimed that it was “subject to” state law to the contrary.
In effect, the NCAA has seemingly surrendered the field to state legislatures and governors. And the result may be chaos. Already there are any number of booster-sponsored NIL “collectives” that engage entire teams and openly court transfers and recruits.
At the time the “interim” policy was announced, only California had actually enacted legislation covering the subject. SB 206 might be seen as a model for some, but by no means all, of the more than two dozen statutes that have been enacted by other state legislatures in the intervening months.
The California statute ostensibly forbids a college to enforce any rule that would prevent a student athlete from participating in intercollegiate sports, or from receiving a scholarship, based on the fact that she has received compensation for the use of her name, image, or likeness. And it forbids a conference or association, specifically including the NCAA, to enforce such a rule against a student athlete or against the college itself.
While the bill also forbids a college, or a conference or association, to compensate a “prospective” student athlete, presumably meaning a secondary school student, for use of her name, image, or likeness, it otherwise reads like a flat prohibition against any rule that might, for example, prohibit boosters or even colleges themselves from using NIL incentives to retain existing players or to recruit through the transfer portal.
The California law forbids a student athlete to enter into an NIL contract that conflicts with existing commitments the college has made, for example, to providers of uniforms or branded equipment, but it also provides that team contracts entered into after the date of enactment may not prevent the athlete from using her name, image, or likeness for commercial purposes when she is off the clock.
Rags and patches
While some states, by statute or by executive order, have incorporated in one form or another the NCAA policy against not just colleges but also third parties using NIL opportunities as recruitment or transfer inducements, other have followed the California model almost verbatim.
To take just one example, while Illinois SB 2338, which took effect July 01, 2021, forbids a college to directly compensate a student athlete for her publicity rights, an amendment to that bill added by HB 1175 deleted language that would have extended this prohibition to “indirect” arrangements. In effect, the college is permitted to engage with booster-sponsored collectives to achieve the same result.
At least twenty states have taken no action yet, in effect leaving the NCAA policy in place in those states.
A bill introduced two years ago in the House that would have set national policy, among other things prohibiting boosters from providing financial inducements for athletes to transfer from or to remain in a particular college or conference, died in committee. Another, similar effort last year in the Senate is still at a very preliminary stage. Legislative text has not yet been introduced.
For the moment, at least, what we have is a patchwork of inconsistent rules on the crucial question whether a booster-sponsored “collective” can use NIL opportunities as a recruitment tool. And quite a number of these collectives have done just that, even in states where the NCAA policy ostensibly still holds.
Tax exempt collectives
While many of these “collective” actors make no pretense to be operating other than for profit, there are several dozen that have applied for and have been granted tax exempt status by IRS. Obviously these organizations will not have cited as their exempt purpose connecting college athletes with commercial opportunities or recruiting athletes to particular schools.
In early days, at least, the dominant model for tax exempt collectives was to engage athletes in making public appearances and providing memorabilia for local charitable organizations, in exchange for modest compensation. But some have begun to move into more commercial spaces, connecting athletes with large corporate sponsors.
These collectives will have to contend not only with the uncertainties of conflicting state laws and NCAA policies on recruitment, but also with adhering to the conditions under which their exempt status was granted or risk losing that status.