Homeward Bound: NCAA Working Group Proposal Signals Step Toward Bringing NIL Deals In-House

The possibility of colleges directly compensating student-athletes for the use of their name, image, and likeness (NIL) is edging closer to fruition. The NCAA’s NIL Working Group recently proposed rule changes related to NIL that continue a trend towards direct compensation. This article briefly discusses the proposed rule changes in the overall context of other NIL developments and then concludes with some practical considerations for colleges and universities as they prepare for this changing landscape.

NIL Work Group Proposal

The working group recently proposed rule changes that would permit schools to provide “assistance and services” to their student-athletes in pursuit of NIL opportunities. The “assistance and services” would include identifying potential NIL opportunities and facilitating deals with third parties. While schools would be permitted to engage with third-party service providers under contract, they would still be prohibited from indirectly compensating athletes through these third parties.

The new proposed NIL rules may come quickly. The working group has recommended that that NCAA Division I Council expedite the adoption of the proposal at its meeting scheduled for later in April. This proposal is closely tied to the NIL "protections" rules that the council adopted in January. The “protections” establish a voluntary registration process for NIL professional service providers, create a disclosure database for athlete NIL deals exceeding $600, and introduce standardized NIL contracts along with a comprehensive educational plan. To encourage student-athletes to disclose NIL deals, schools would only be allowed to assist those who have disclosed their contracts in the NIL disclosure database.

While the working group's proposal is significant, it falls short of the ambitious Project DI proposal put forward by NCAA President Charlie Baker in December 2023. Under Project DI, schools would be granted the ability to enter into NIL deals with student-athletes and establish an "educational trust fund" enabling them to pay athletes a minimum of $30,000 annually. The decision on whether schools could directly compensate student-athletes was initially slated to be considered by a subcommittee of the DI Council with a timeline for a decision in the summer of 2024. However, this timeline has likely been affected by the numerous antitrust cases currently faced by the NCAA, including House v. NCAA, which could potentially result in a $4 billion damages award. The sense of urgency also comes on the heels of a Tennessee district court ruling that temporarily enjoins the NCAA from enforcing NIL rules that prohibit NIL being used as inducements for recruiting.

While the working group's proposal still would not allow direct compensation to student athletes by schools, it suggests a potential shift towards a future model where student-athletes are directly paid by their schools. State legislatures have been proactive in passing legislation to amend laws regarding NIL and schools within their states. Several states have introduced or passed legislation allowing schools to directly compensate student-athletes for their NIL use and protecting schools from NCAA penalties for doing so.

State Legislature Actions

Recently, both the House and Senate in Virginia passed a revised NIL bill preventing NCAA penalties against schools in the state for directly paying student-athletes for their NIL use. Initially slated to start on November 15, 2024, Virginia Gov. Glenn Youngkin amended the bill to take effect on July 1, 2024. The bill will now return to Virginia's legislative bodies for a vote on the governor's amendment. Oklahoma Senate Bill 1786 aims to position its schools to benefit from NIL rule changes by allowing direct payment to student-athletes if permitted by conference rules or federal law adjustments. Similarly, Louisiana has introduced a bill permitting schools to directly compensate current and prospective student-athletes for their NIL use under specific conditions, such as court orders, changes in NCAA rules, or settlement agreements.

Collegiate Trademarks and NIL

The prospect of schools becoming more directly engaged in their student-athletes' NIL deals creates opportunities for increased co-branding ventures involving schools, third parties, and student athletes. However, this expansion also raises concerns regarding the utilization of collegiate trademarks in connection with third-party agreements for student athletes.

In navigating this terrain, it is imperative that colleges and universities establish robust branding guidelines, implement diligent monitoring practices, and enact proactive protective measures to safeguard their trademarks. Comprehensive branding guidelines are necessary to delineate permissible uses of collegiate trademarks in NIL deals and mitigate the risk of dilution or misuse. Additionally, continuous monitoring efforts will be essential to detect any unauthorized or inappropriate usage of collegiate marks, enabling prompt intervention to uphold their integrity. And proactive measures for brand protection must be instituted to safeguard collegiate trademarks from exploitation or misrepresentation in third-party agreements involving student-athletes. By implementing these measures, schools can uphold the integrity of their brand identity while navigating the evolving landscape of NIL opportunities for student-athletes.