In 2021, the world of college athletics was forever changed when the NCAA introduced its interim policy allowing college athletes to commercialize their name, image, and likeness ("NIL"). Since then, there has been an influx of change at various levels of the college athletics industry. As of the date of this article, twenty-nine states have passed legislation allowing college athletes to monetize their NIL, and at least five other states have proposed legislation on the matter, creating wide discrepancies among and between the states. But despite the significant state activity, and the uneven playing field the differing state laws have created, the federal government's involvement in NIL legislation has been notably absent from the picture. With recent data revealing that the NIL industry is likely to become a billion-dollar industry this year, industry leaders have called for uniformity in the form of federal legislation.
Overview of Federal Legislative Efforts
Since 2019, at least eight NIL bills have been introduced in Congress. Although these bills vary greatly in their content, they all share one common goal– to create uniformity in NIL by eliminating the patchwork of state laws that currently are in place. However, despite significant bipartisan efforts to pass federal NIL legislation, none of the proposed bills has garnered enough support to move through the legislative process. Instead, NIL regulation largely has been left up to the individual states, NCAA conferences, and universities.
In turn, several states have engaged in a "race to the bottom" to provide the most attractive opportunities for athletes by placing minimal restrictions on NIL deals. Various states also have begun repealing or amending their existing NIL statutes in order to attract more talent to their universities in the face of increasing levels of recruiting competition from states that have less restrictive laws. On February 2022, Alabama became the first state to repeal its NIL statute, stating that the current law was too restrictive and had placed Alabama universities at a recruiting disadvantage. Since then at least five other states have either amended or suspended their NIL laws. As states continue to compete to provide the most appealing NIL framework, the disparities among NIL opportunities continue to rise.
Recently, university coaches, administrators, and conference commissioners have spoken out about the involvement of boosters in NIL deals. Some believe that due to the lack of uniformity and enforcement in NIL laws, boosters have exploited loopholes in NIL statutes to induce players to attend or transfer to a specific institution. In particular, industry leaders have criticized the use of booster-funded collectives, which pool resources from various boosters into a single business entity organized for the purpose of compensating college athletes for their NIL. Although these booster-funded collectives maintain that they are complying with applicable NIL laws, industry leaders have questioned whether the collectives merely are being used as a conduit to provide money to college athletes in return for the athlete's commitment to a particular university. As of late, booster-funded collectives have begun organizing as nonprofit corporations, claiming to be dedicated to the purpose of providing college athletes with opportunities to give back to the community. Despite the philanthropic goal of these nonprofit collectives, many believe that they are just another method for collectives to provide improper recruiting inducements to college athletes. Although the NCAA released guidance on May 9, 2022, emphasizing that boosters could not be involved in the recruiting process, NCAA enforcement actions have been sparse and slow to produce sanctions so far.
The Collegiate Athlete Compensation Rights Act
Against this backdrop, on September 14, 2022, Senator Roger Wicker (R., Miss.) reintroduced the Collegiate Athlete Compensation Rights Act (the "Act") in an effort to combat the effects of booster involvement and provide uniformity in NIL. The Act was originally introduced in December 2020, but it stalled in Committee. The proposed legislation would allow college athletes to commercialize their NIL, while also advancing a standard set of rules and enforcement measures. One of the most important aspects of the Act is that it prohibits boosters and third-parties from using NIL as a way to induce current or prospective college athletes to attend a particular institution. The Act also creates an "Office of Sport" within the Federal Trade Commission which will be tasked with enforcing all of the Act's rules and prohibitions.
Notably, the Act also provides answers to several NIL-related questions that have been posed in lawsuits currently pending across the country. These lawsuits, which are discussed in further detail here, raise the following issues (1) can former college athletes sue the NCAA for previously prohibiting NIL activities; and (2) can college athletes be considered employees of the institutions they attend? The Act would answer these questions as follows (1) former college athletes would not be able to retroactively sue the NCAA for lost or missed NIL opportunities, and (2) college athletes would not be considered employees for their athletic endeavors, regardless of any other Federal or State laws to the contrary.
The Act also provides that the U.S. Comptroller General would have to submit a report to Congress detailing the health, safety, and education needs of college athletes. The required report would analyze what the additional cost would be for institutions to provide health insurance coverage to college athletes, for up to five years after graduation. The issue of athlete healthcare has been one of the main points of disagreement previously preventing Republicans and Democrats from agreeing on NIL legislation. On the one hand, Democrats have called for strong athlete protections, including the establishment of health care trust funds, intended to cover the costs of sports-related medical expenses for current and former college athletes. Republicans, on the other hand, have favored more narrow bills that focus on regulating NIL without delving into other matters, such as athlete healthcare. This key provision from Sen. Wicker's Act, requiring an examination into the adequacy of athlete healthcare, is seen as a compromise aimed at garnering bipartisan support for the Act.
What the Future Holds for Federal NIL Legislation
Supporters of Sen. Wicker's Act hope that the Act's more conservative approach to the reformation of college athletics will help move the bill through the legislative process. Despite this, others believe that the Act does not go far enough in protecting college athletes from exploitation by the NCAA, universities, and boosters. Even with these differing opinions between Democrats and Republicans, one thing remains clear – both political parties steadfastly believe that federal NIL legislation is necessary for college athletics to survive.
As the world of college athletics continues to evolve, it is important for athletes, universities, businesses, and other key players in the industry to remain up to date on all of the important developments in the NIL field. If you are involved in the world of college athletics, you should consult with counsel in order to stay abreast of important developments and ensure compliance with all applicable NIL laws and regulations.
RESOURCES
Schnader's Client Alert, "Legal Framework for NIL One Year After NCAA v. Alston – Next Steps for Universities" – http://www.schnader.com/wp-content/uploads/2022/05/Legal-Framework-For-NIL-One-Year-After-NCAA-v-Alston-5-10-22.pdf
Schnader's Client Alert, "Name, Image & Likeness (NIL): Three Key Legal Issues Facing Businesses in College Athlete Endorsement Deals to Date" – http://www.schnader.com/wp-content/uploads/2021/12/Three-Key-Legal-Issues-In-College-Athlete-Endorsement-Deals-To-Date-12-29-21.pdf
Schnader's Client Alert, "A Checklist for University Policies Addressing Student-Athlete Name, Image and Likeness (NIL) Issues" – http://www.schnader.com/wp-content/uploads/2021/09/Checklist-for-University-Policies-Addressing-Student-Athlete-NIL-Issues-9-13-21-2.pdf
Schnader's Client Alert, "It's a New Game: Pennsylvania Statute Adopted on College Athlete Compensation for Name, Image and Likeness" - http://www.schnader.com/wp-content/uploads/2021/07/ALERT-New-Pennsylvania-Statute-on-College-Athlete-Compensation-7-15-21-3.pdf
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