The NCAA's regulatory NIL framework enumerates opportunities and restrictions for student-athletes.
Athletics Veritas is a weekly series aimed at helping higher education executives, faculty, and other stakeholders stay tuned in on trending national issues impacting college athletics, especially NCAA Division I. Athletics Veritas is created by senior DI athletic administrators around the nation.
The Regulatory Framework for Implementing the NCAA’s Draft NIL Policy
Select commercial categories may be restricted from involvement with individual student-athlete NIL opportunities
Student-athletes will be granted permissible access to agents and similar professional services to help navigate NIL transactions
Proposed parameters around institutional and booster involvement with prospects’ and student-athletes’ NIL transactions
Disclosure of transactions is a key mechanism in regulatory framework
Educational outreach to current student-athletes and prospects is point of emphasis
Roles of third-party administrators would include managing three key aspects of the new NIL environment
In this week’s Athletics Veritas, we continue examining the NCAA’s recently published draft NIL concept, including the potential for expanded involvement with professional services to assist student-athletes in managing their NIL opportunities, as well as the new NIL regulatory framework that would be established.
The draft NIL proposal would specify that NIL activities within certain categories are not appropriate within the collegiate model. Specifically, legislation would prohibit a student-athlete from engaging in NIL activities involving a commercial product or service that conflicts with NCAA legislation (e.g., sports wagering, banned substances, adult entertainment).
Interestingly, Division I institutions have already carved out sponsorship relationships with entities such as sports wagering companies and alcohol brands, two sponsorship categories that would seemingly be more off-limits for student-athletes (e.g., student-athletes making appearance and/or autograph signing at a casino’s sports book; a student-athlete presumably of legal drinking age appearing in billboard advertisement for an alcohol brand.)
On the equipment side, the draft NIL proposal specifies that a student-athlete's NIL may not be used by an athletics equipment company to publicize the fact that the institution's athletics program uses its equipment. This seemingly wouldn’t prohibit a student-athlete from securing an NIL opportunity with an equipment sponsor, but would restrict the scope and wording of the opportunity if the equipment being endorsed by the student-athlete is also used by the institution.
In the sponsorship categories mentioned above, frontline, real-world, instructive FAQ examples will need to be published for the NCAA membership, student-athletes, and other stakeholders to better understand where the boundary lines are drawn.
Regardless of what the final, adopted version of the NCAA’s new NIL policies will look like, NCAA member institutions will continue to be permitted to establish institutional policies and codes of conduct that may be more restrictive than NCAA legislation in a number of areas. In much the same way universities are free to implement stricter admissions policies than the NCAA initial eligibility standards require, Division I member institutions could elevate NIL standards and prohibitions beyond what the NCAA codifies.
Specifically, the draft NIL proposal states:
This is where, for example, the high-profile apparel (e.g., Nike, Adidas, Under Armour) sponsorships currently in place for the lion’s share of Division I member institutions collide with individual student-athlete NIL opportunities with those same companies. If a rising prospect is beholden to wearing Adidas apparel, but the member institution signing them to a scholarship is sponsored by Under Armour, how will those competing interests coexist? Institutions will also need to consider how emerging markets such as vaping and CBD products present sponsorship opportunities to student-athletes, but could conflict with not only NCAA policies but also institutional values such as promoting and maintaining a drug-free campus.
This provision also specifies that institutions must make prospects aware of their NIL policies by no later than when an athletic scholarship or offer of admissions is provided to the prospect. In the months leading up to the anticipated effective date (August 1, 2021), NCAA member institutions will need to develop policies that enumerate the NIL activities in which student-athletes may or may not engage.
Use of Professional Services
One aspect of the NCAA’s amateurism foothold that will be facing a seismic cultural shift is the broader, permissible involvement of service providers including agents and brand managers. Currently, NCAA rules hold that an individual becomes ineligible for participation in intercollegiate athletics if they enter into an agreement with or receive benefits from an agent.
An “agent”, under NCAA rules, isn’t limited to those individual service providers who help negotiate a professional contract. Individuals serving in a wider spectrum of roles involving financial transactions, brand management, and marketing opportunities could also fit under the NCAA’s definition of an agent. An agent could even be a prospect’s family member or family friend who intercedes in the prospect’s recruitment for their own financial gain. In other words, the term “agent” wears many hats in the NCAA compliance world.
An agent is currently defined by the NCAA as any individual who, directly or indirectly: (a) represents or attempts to represent an individual for the purpose of marketing their athletics ability or reputation for financial gain; or (b) Seeks to obtain any type of financial gain or benefit from securing a prospective student-athlete’s enrollment at an educational institution or from a student-athlete’s potential earnings as a professional athlete.
The proposed NIL concept would permit a student-athlete to receive the following services from a variety of professional service providers:
Advice regarding NIL activities;
Representation in contract negotiations related to NIL activities; and
Marketing of the student-athlete’s NIL activities.
To avoid conflicts of interest, permissible professional service providers, for the purpose of NIL activities, would be limited to those who are not employees or independent contractors of the institution, unless otherwise permitted by NCAA legislation. Companies that contract with an institution for the primary purpose of providing products, not services, would not be deemed to be independent contractors.
The new concept also notes limited institutional involvement with professional service providers would be permitted. Specifically, institutions would be permitted to assist student-athletes with vetting professional services providers, similar to the activities that are currently permissible under NCAA rules for institutional professional sports counseling panels who may counsel a student-athlete on their professional sports opportunities (e.g., selecting an agent; reviewing a professional contract; advising on draft rules).
However, institutional involvement in identifying, selecting, arranging or providing payment for professional service providers related to NIL activities would not be permitted. This specific prohibition within the proposed rule will be under the microscope for marketing entities with current relationships with NCAA member institutions that also intend to enter the student-athlete NIL service market by prospecting NIL opportunities for student-athletes.
Deterring Impermissible Inducements through NIL Activity
The NCAA’s draft NIL concept also attempts to prevent impermissible inducement issues by dictating that a student-athlete would be required to have a professional services fee arrangement consistent with norms for the service provider’s industry and the terms should not be more favorable as a result of athletic ability. All fees should be fully stated pursuant to a written agreement (e.g., flat fee, profit share, pro bono, upfront guarantee) with the service provider. Further, a student-athlete would be permitted to receive the same benefits (e.g., meals, copies, mailing) from a professional service provider that a general client could receive.
Opening the gates for student-athletes to use professional services to assist with NIL activities reflects the complexity of the NIL environment. Any use of a student-athlete’s NIL for an activity that intersects with athletics could result in the student-athlete being paid, at least in part, due to their athletics reputation -- something traditionally restricted. One primary rationale for allowing student-athletes to engage professional service providers for NIL purposes is to help the student-athlete navigate a complex and, in many respects, well-established business environment.
The NCAA’s Legislative Solutions Group emphasized the importance of student-athletes receiving guidance from qualified professionals in NIL activities, while upholding the collegiate model by not allowing an agent to promote the student-athlete’s athletics ability for future professional sports opportunities. That will be a fine line to toe.
The same school of thought compelled the NCAA to carve out exceptions from its longstanding use of agent restrictions for baseball and men’s ice hockey prospects to permissibly sign, on a temporary basis, an agent to help the prospect navigate negotiations with pro teams who had drafted the prospect. In theory, the upside of getting contract negotiation expertise on behalf of a pro franchise drafted prospect outweighed the cons and concerns of agents exceeding the boundaries of the exception itself.
Parameters for Institutional Assistance
Current legislation permits institutions to provide general support and education to student-athletes on a variety of topics. Currently, an institution is permitted to develop promotional content (e.g., graphics for social media) for a student-athlete to use, provided the student-athlete is not compensated. The primary purpose of providing the content has been to promote the institution’s athletics program. This type of involvement by an NCAA member institution will certainly continue.
Neither the institution nor a member of the institution’s staff, including contractors, though, may be involved in the development, operation or promotion of a student-athlete’s business activity. Examples of activities that would constitute impermissible institutional involvement in a student-athlete’s NIL activity include, but are not limited to:
Institutional purchase of a student-athlete’s work product or service;
Use of institutional facilities (except for camps/clinics/lessons per rental policies); and
Use of institutional marks.
For academicians teaching entrepreneurial courses and programs, it’s worth noting that business activities developed as part of the student-athlete’s coursework or academic program are not subject to these institutional-assistance restrictions, provided such institutional assistance (e.g., access to institutional facilities, development assistance) is extended to all participating students in the course or program.
One of the draft parameters in the NIL proposal of note is the indication that institutions, or third parties hired by the institution, could not be involved in identifying or securing NIL opportunities for a student-athlete (e.g. pairing a student-athlete with a company seeking a student-athlete for an advertisement). This boundary will need real world application FAQ clarifications from the NCAA as it pertains to third parties in the NIL branding and marketing space that have contractual relationships with member schools but who seek involvement in identifying or securing NIL opportunities for individual student-athletes.
Social media will be a platform ripe for NIL opportunities as well as the convergence of institutional and student-athlete involvement and boundaries. For example, the draft policy holds that a student-athlete may post or repost content created by the institution or one of its vendors, provided the institution retains the rights to the content and the student-athlete does not use the content in any activities for which the student-athlete is compensated.
NCAA Institutions Advising & Educating Student-Athletes About NIL
Institutions would be encouraged, though not required, to provide comprehensive education to their student-athletes regarding NIL activities. The following activities would be permitted without triggering an impermissible institutional involvement in a student-athlete’s NIL activity:
Providing educational programming on NIL and associated regulations, including brand enhancement.
Assisting in evaluating opportunities, including compliance elements (e.g., booster engagement).
Assistance with disclosure expectations.
Division I institutions’ compliance staffs and other campus leaders likely have been or will soon be providing more NIL education to their student-athletes (and coaches, staff, and others) as the reality of permissive NIL opportunities being legislated by the NCAA draws near.
Assistance with Evaluation of Professional Service Providers
As described thus far, to fall into the category of “no institutional involvement” when it comes to NIL parameters, at a minimum, an institution may not be involved in the development, operation or promotion of an NIL activity. In addition, it would not be permissible for institutional marks or institutional facilities to be used.
The Legislative Solutions Group noted that it is in the best interests of student-athlete well-being for institutions to be permitted to provide some assistance and support to student-athletes involved in NIL activities to facilitate appropriate compliance, ensure integrity and protect student-athlete well-being.
Pre-Enrollment NIL Policies
Many areas of current legislation, including amateurism regulations, outline separate standards for activities that occur prior to enrollment at an NCAA institution. There appears to be concerted effort to outline rules applicable to prospects.
Pre-enrollment NIL rules would align with those that would apply to enrolled student-athletes, with the following parameters:
A prospect is required to report all activities to an independent third-party administrator;
Separate and targeted disclosure requirements may be developed for business activities and commercial endorsements;
Institutional accountability is triggered for situations in which boosters are impermissibly involved in a prospect NIL activities after that prospect signs a letter of intent; and
Institutions are required to provide appropriate education during the initial recruiting interaction with a prospect.
The symmetry between NIL rules prior to a college student-athlete’s enrollment at an NCAA school and the rules in play after were a key contemplation. This regulatory approach to NIL addresses both prospects and student-athletes given that NIL-related relationships and agreements could form well before a prospect’s collegiate enrollment.
This model of symmetry between pre- and post-enrollment NIL rules should ensure consistency and clarity for prospects and student-athletes, as well as individuals involved in NIL-related activities (e.g., professional service providers). The symmetry between pre- and post-enrollment rules supplemented by targeted education during the recruiting process should aim to minimize the risk of prospects entering into agreements or relationships before full-time enrollment that could render them ineligible when they become student-athletes.
Permissible Involvement of Boosters
The effort to eliminate NCAA member schools’ potential recruiting advantages from the NIL environment was a driving incentive to regulate booster involvement within the process -- an ambitious undertaking noting the inevitable overlap between booster status and the parties most likely to have interest in student-athletes offering their NIL for compensation to endorse a booster’s business. Current legislation precludes a representative of athletics interests (aka a booster) from providing student-athletes any benefit not expressly permitted by NCAA legislation. In addition, boosters are precluded from providing inducements to prospects.
Current legislation restricting boosters would continue to apply with the Legislative Solutions Group’s NIL concepts. However, boosters would be permitted to engage in NIL activities with student-athletes, provided no improper inducements or extra benefits are provided.
Disclosure requirements will be important as a safeguard to address concerns about inappropriate booster engagement with prospects. The draft NIL concept would require a prospect to disclose NIL activities, including compensation arrangements and details of relationships with involved individuals, commercial entities and other third parties (e.g., boosters).
The timing of recruitment and scholarship offers are impacted slightly here, too. The disclosure of prospect’s NIL activities would be required before a prospect signs an offer of athletically related financial aid or accepts an offer of admission.
Integrity and disclosure requirements are designed to enhance monitoring and minimize impermissible booster activity and recruiting inducements. The Legislative Solutions Group recognizes in many cases, boosters -- being the local corporate entities with existing ties to member institutions -- may be the most likely sources of opportunities for student-athletes to engage in NIL activities. In another example of the prospective upside outweighing the downside, student-athletes should be permitted to take advantage of legitimate opportunities, even if the source of the opportunity comes from a booster of the institution.
Required Disclosure of NIL Transactions
To date, NCAA rules do not legislatively require disclosure of NIL activities primarily because NIL activities were, by and large, prohibited, nullifying the need to confirm details. As referenced in a couple examples above, the proposed disclosure requirements would encompass both pre and post college enrollment activities.
The new NCAA concept would require a prospect to disclose NIL activities, including compensation arrangements and details of relationships with involved individuals, commercial entities and other third parties. As referenced above in relation to prospects involvement with boosters on NIL opportunities, disclosure would be required before a prospect signs an offer of athletically related financial aid or accepts an offer of admission.
Legislation would require current student-athletes to disclose information related to their business activities and relationships with individuals and other entities in advance of any arrangements for the use of their NIL and when changes are made to such agreements. In the case of advertisements or promotions of a third-party commercial product or service (or charitable, educational or nonprofit entity) the disclosure would include:
Compensation arrangements; and
Details of relationships with an involved individual, commercial entity and third parties.
The student-athlete would be required to provide disclosure information in advance of any arrangements for the use of their NIL and shall provide updates to the information within 14 days if arrangements with the commercial entity or third parties change.
The NCAA Division I NIL Disclosure Subgroup of the Legislative Solutions Group developed a template disclosure form to serve as the basis for a nationally consistent standard for gathering required disclosure information from student-athletes who seek to engage in activities that involve the use of their NIL for promotional purposes. Institutions and conferences would be permitted to seek additional information beyond the baseline information required in the form. It was noted that the form may need to be customized depending on state laws regarding disclosure. It seems likely the disclosure form will see a few iterations as the NCAA NIL process evolves.
The Legislative Solutions Group agreed that student-athletes should be required to disclose involvement in NIL activities. Disclosure requirements will help to provide support to student-athletes, monitor booster involvement, ensure integrity of the recruiting process, and identify activities that may not align with the values of the NCAA, conferences or institutions.
Some third-parties intending to cultivate opportunities and represent student-athletes in the new NIL marketplace have expressed resistance in recent months to having to disclose NIL agreements’ terms and conditions, including transaction value, as that would arguably undermine the third-parties’ competitive edge for their clients in the NIL marketplace. This brings forward the discussion around the role(s) of the NCAA’s third-party administrators.
Third-Party Administrator
To support integrity and fairness in the new NIL environment, the role of third-party administrators becomes vital. Current NCAA rules do not require student-athletes to disclose NIL activities because compensation for such activities is not permitted, making disclosures unnecessary. Prospects submit academic and amateurism information to the NCAA Eligibility Center; however, there is no entity within the NCAA's structures that currently requires any NIL activity disclosure.
As the NCAA has indicated, a third-party administrator could develop a web-based platform for individuals to submit information to satisfy new disclosure requirements, report to an oversight entity (e.g., NCAA) national trends, and monitor and evaluate NIL activities for possible malfeasance. In addition, the third-party administrator could help ease the burden on campuses by providing supplemental education to student-athletes, prospects and key stakeholders (e.g., boosters, professional service providers). In other words, there may be multiple third-party administrators to fulfill these roles -- something the NCAA is intending to map out through a pending RFP process.
The Legislative Solutions Group has agreed to explore whether disclosure efforts could be conducted through the assistance of third-party entities. The NCAA Board of Governors Federal and State Legislation Working Group encouraged the exploration of whether disclosure or enforcement efforts in this area should utilize the assistance of third-party entities at the local, conference or Association-wide levels, in part to help relieve the burden that campus compliance personnel may face attempting to monitor the newly permitted activities. Feedback from various groups has included concern related to activities of boosters and other involved individuals and entities, making third-party oversight fundamental.
The NCAA’s complete RFP for NIL third-party administrators is here. The NCAA noted that 19 bids were received by the October 2 deadline. Review of the bids will begin immediately with the goal of identifying finalists by the end of October. A final decision is not expected until mid or late November. It is important to note that although the membership has yet to consider and act on final legislative concepts, proposals are being considered at this time to provide ample time for development and implementation.
Further, the NCAA has noted concepts appearing in the RFP may or may not be adopted, decisions may be delayed or the RFP may be cancelled in its entirety by the membership as the membership continues its review.
In next week’s Athletics Veritas, we will examine how the draft NIL policy resets the scope of the NCAA’s benchmark, yet amoebic concept of amateurism; highlight key NCAA amateurism rules that will continue forward as-is; and project next steps in the process toward adopting a new permissive NIL environment.
Athletics Veritas is presented for information purposes only and should not be considered advice or counsel on NCAA compliance matters. For guidance on NCAA rules and processes, always consult your university’s athletics compliance office, conference office, and/or the NCAA.
