Will College Athlete NIL Legislation Cross the Finish Line?

Will College Athlete NIL Legislation Cross the Finish Line?

Several important bills protecting the “name, image and likeness” (NIL) rights of college athletes are currently under consideration and review in Congress...

Several important bills protecting the “name, image and likeness” (NIL) rights of college athletes are currently under consideration and review in Congress.  While the bills share a common goal and theme, they each employ a slightly distinct approach to NIL rights and address a variety of issues including, among others, state law preemption, health, wellness standards, international athletes, discrimination, and student transfers.

NIL Rights of Student-Athletes

Student-athletes have been steadily gaining momentum in their efforts to share in the profits colleges and universities generate from college sports. In NCAA v. Alston, for example, the U.S. Supreme Court struck down NCAA rules limiting the education-related benefits that schools may offer student-athletes, including rules prohibiting schools from providing free laptops or offering graduate school scholarships.

While the majority opinion focused exclusively on education-related benefits, Justice Brett Kavanaugh’s concurring opinion questioned whether the NCAA’s remaining compensation rules would withstand scrutiny when tested. “The NCAA’s business model would be flatly illegal in almost any other industry in America,” he wrote. Justice Kavanaugh specifically addressed compensation,  noting that “Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate…The NCAA is not above the law.”

State-Level NIL Laws

In the wake of Alston, 32 states have enacted NIL laws. Many are modeled after California’s “Fair Pay to Play Act,” which led the way by prohibiting an athletic conference from preventing “a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, likeness, or athletic reputation.”

The 2020 New Jersey Fair Play Act  grants collegiate student-athletes the ability to earn compensation for the use of their NIL. However, the Act does not take effect until the fifth academic year following the date of enactment.  For its part, New York adopted its own NIL law in 2022. The New York Collegiate Athletic Participation Compensation Act, effective immediately, allows student-athletes to receive compensation for the use of their NIL.  The Act also allows athletes to retain an attorney or agent to negotiate business deals without repercussion or penalties. 

NCAA NIL Policy

The NCAA also loosened its restrictions following the Supreme Court’s decision. The NCAA’s Interim NIL Policy, which will remain in place until federal legislation or final NCAA rules are adopted, provides the following guidance applicable to college athletes, recruits, their families and member schools:

• Individuals can engage in NIL activities that are consistent with the law of the state where the school is located.
• College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to name, image and likeness.
• Individuals can use a professional services provider for NIL activities.
• Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.

As states work to enact more permissive NIL laws, the NCAA has started to push back. In a recent letter, the NCAA advised that schools must abide by the association’s NIL rules regardless of conflicts with state laws. “The Association has been clear and maintains that schools must adhere to NCAA legislation (or policy) when it conflicts with permissive state laws,” NCAA executive Vice President of Regulatory Affairs Stan Wilcox wrote in a letter to universities and colleges. “In other words, if a state law permits certain institutional action and NCAA legislation prohibits the same action, institutions must follow NCAA legislation.”

Federal NIL Legislation

In July, lawmakers introduced three separate NIL bills. The legislation signals that lawmakers are recognizing the NCAA’s call for uniform federal regulation. Although the bills are in their infancy, it is worth summarizing the basic provisions of each:

College Athletes Protection and Compensation Act

The discussion draft introduced by Jerry Moran (R-KS), Richard Blumenthal (D-CT), and Cory Booker (D-NJ) would establish the College Athletics Corporation (CAC), a central oversight entity that would set, administer, and enforce rules and standards to protect athletes who enter into endorsement contracts. Athletes would be permitted to have representatives assist them with contracts, finances, marketing, and brand management. Moreover, institutions would be prohibited from punishing athletes for receiving food, rent, medical expenses, insurance, tuition, fees, books, and transportation from a third party.

The bill also addresses a host of issues in addition to NIL rights. For instance, the bill provides that athletes must be permitted to retain their aid covering tuition, books, and other fees until they graduate. Institutions would also be required to continue offering the aid in the event of a career-ending injury and or being released or “cut” from a team. The College Athletes Protection and Compensation Act would also create a Medical Trust Fund to cover out-of-pocket expenses for injuries and other long-term conditions resulting from athletes’ participation in sports, as well as establish health, wellness, and safety standards to protect college athletes from serious injury, mistreatment, abuse, and death.

In an effort to increase transparency, institutions would be required to report the revenues and expenditures of each athletics program, the average number of hours college athletes spent on college athletic events, and academic outcomes and majors for college athletes.

Protecting Athletes, Schools, and Sports Act of 2023

The Protecting Athletes, Schools, and Sports Act of 2023 (PASS Act) seeks to protect both student athletes and higher education institutions. U.S. Senators Joe Manchin (D-WV) and Tommy Tuberville (R-AL) introduced the bill after soliciting and obtaining input from a broad range of stakeholders, including athletic directors, administrators, associations, and student-athlete groups.

The PASS Act would create a national standard for NIL and require collectives and boosters to be affiliated with a college or school. The Act would also require agents and collectives that participate in NIL to register with regulating body and mandate that all NIL contracts be disclosed within 30 days. To further boost transparency, it would also establish a public-facing website to publish anonymized NIL data.

The PASS Act also requires universities to provide health care coverage and assume student-athletes’ medical expenses. The bill obligates all institutions to provide healthcare coverage while a student athlete is participating in intercollegiate athletics. Institutions making more than $20 million in revenues from athletic programs would be responsible for 2 years of out-of-pocket medical expenses, while institutions making more than $50 million in revenue from athletics would be responsible for 4 years of out-of-pocket medical expenses. For any out-of-pocket expenses beyond the responsibility of institutions, the PASS Act establishes a trust fund taken from 1% of annual proceeds from revenue-generating collegiate tournaments or playoffs, including the NCAA Tournament and the College Football Playoff.

Under the PASS Act, student-athletes must complete their first three years of academic eligibility before being allowed to transfer without penalty, with exceptions for a death in the family, a coach that is fired or leaves, and other criteria. The bill also prohibits scholarships from being eliminated due to injury or without just cause.

Finally, violations of the PASS Act are subject to enforcement by the Federal Trade Commission (FTC), while the NCAA is charged with overseeing and investigating NIL activities and can refer violations to the FTC. Conversely, if the NCAA fails to carry out its duties, the FTC may investigate the NCAA and assess a penalty for unfair and deceptive acts or practices and may revoke the NCAA’s tax-exempt status.

College Athlete Economic Freedom Act

The College Athlete Economic Freedom Act is the most athlete-friendly NIL bill under consideration. Introduced by Senator Chris Murphy (D-CT) and Representative Lori Trahan (D-MA), the bill seeks to “[e]stablish an unrestricted federal right for college athletes and prospective college athletes to market the use of their name, image, and likeness — individually and as a group — by prohibiting colleges, conferences, and the NCAA from setting or enforcing rules that restrict this right or otherwise colluding to limit how athletes can use their NIL.” The Act would also ensure that athletes could retain agents and representation of their choosing, including a collective representative (i.e., players association) to negotiate individual and group licensing deals with third parties, as well as colleges and athletic associations.

As with the other proposals, the Act seeks to assist international athletes as well and would amend the Immigration and Nationality Act to allow international athletes the ability to engage in the same NIL activities as their peers without risking or losing their F-1 student visa. The legislation also seeks to address discrimination by gender, race, or sport in the facilitation of NIL deals by requiring collectives to register with the Federal Trade Commission (FTC) and report the NIL deals they have facilitated for athletes by gender, race, and sport. The bill also makes clear collectives cannot discriminate in the facilitation of NIL deals and that Title IX applies to colleges in the ways they support athletes’ NIL opportunities.

Key Takeaway

The Alston decision cleared the way for student athletes to be compensated for use of their name, image, or likeness. However, it did not establish any rules for student athletes, schools, athletic conferences, collectives, and boosters to follow. While federal NIL legislation is on the horizon, it will take time for lawmakers to reach a consensus and enact a final bill. Given that the legal landscape surrounding NIL rights continues to evolve quickly, student-athletes, higher education institutions, and athletics conferences are advised to work with experienced counsel to stay on top of legal updates and Scarinci Hollenbeck’s attorneys are here to assist.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Albert J. Soler, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.