NIL Free-For-All

After the Alston case held the NCAA rule prohibiting student athletes from accepting compensation for use of their name, image and likeness, (NIL), to be in violation of federal anti-trust laws, college athletic departments held their collective breath. What would the NCAA do now? The answer was not much. The best the NCAA could do was to adopt an interim policy allowing universities to comply with their state laws on NIL until the Congress passed a federal statute pre-empting those state laws. But that will never happen.

There is no way a member of the House or Senate is going to vote to substitute a federal law for a recently enacted law in their home state on the same subject.  To be sure, no member of Congress from Texas, regardless of party, is ever going to vote for a bill that would gut Texas NIL law in favor of federal domination.  In the meantime, the momentum has moved irrevocably to a state solution and there is little hope the feds can real it back in.  So, it will be a free-for-all nationwide for the near term.

However, uniformity could emerge driven by free market factors.  Given the extremely competitive market for athletes, state legislatures know they must provide a favorable environment to maximize recruiting leverage for their universities. And as states continue to enact enabling statutes, they will copy each other to make sure they are not at a disadvantage. The result may be that they all begin to look the same.

Texas addressed this issue in the last legislative session with the enactment of Sec. 51.9246 of the Texas Education Code. Rather than attempting to describe the “rights” enjoyed by the student-athlete, the statute prohibits institutions and athletic conferences from engaging in certain acts in Texas. For example, institutions cannot prohibit a student athlete: (a) from earning compensation for the use of his/her name, image or likeness when not engaged in official team activities, or (b) from “obtaining professional representation” including from lawyers licensed to practice in Texas. (The language suggests that the non-lawyers giving such advice do not need to be licensed anywhere).  Additionally, an athletic conference may not punish an institution for complying with the statute. 

The Texas act also specifically permits the use of tax-exempt charitable organizations to receive tax deductible contributions from donors from which to pay NIL compensation to the student athletes. This provision will allow donors to direct their contributions to a specific purpose and will result in a corresponding reduction in the funds received by athletic departments, generally.  Such reductions could adversely affect the budgets of less revenue-generating sports.

In any event, a new legal specialty has been born and student athlete would be wise to “lawyer up” as they negotiate the twists and turns of this ever-changing landscape.