NCAA Rule Change Paves the Way for Student Athlete Endorsement Deals: Addendum

By Carolyn Wimbly Martin and Ethan Barr

This post is an update. Read the original post here.

On January 20, 2022, the National Collegiate Athletic Association (NCAA) member schools ratified a new, briefer version of its constitution. The most contentious issues involved athletic scholarships for Division II and III schools, as well as self-governance of each Division. However, continuing to permit student athletes to profit from their name, image and likeness (NIL) appeared to be a foregone conclusion, given the NCAA’s previous announcement on June 30, 2021 that it planned to do so.

The newly adopted constitution requires each Division to establish its own guidelines regarding commercialization of student athletes’ NIL and to “prevent exploitation of student-athletes or abuses” by anyone outside of their schools’ authority. Furthermore, the constitution states that every conference within each Division must provide similar guidelines to its athletes. Each individual school must do the same, in addition to making such guidelines public. In addition to the existing patchwork of NIL state laws, students and agents must now navigate the complexities between these three tiers of guidelines. It is also worth noting that students may have to be wary of different state tax laws, given that some states do not tax income, some have higher tax rates than others and some have various levels of standard deduction that may not tax under certain amounts. For example, a basketball player at the University of Delaware would need to familiarize herself with the NIL laws of the State of Delaware, as well as the guidelines for the NCAA’s Division I, the Colonial Athletic Association, and the University of Delaware.

While the new NCAA constitution now formally acknowledges the rule change, student athletes and schools have already been taking full advantage of the rule change. In July 2021, the University of Alabama quarterback Bryce Young was approaching seven figures in endorsement deals, on which head coach Nick Saban publicly opined, possibly as a thinly veiled recruiting tactic. Later in December, the top high school football recruit in the country switched his commitment from Florida State University to HBCU Jackson State, a case of a big fish jumping into a small pond with a safety net of NIL endorsement deals. Even former NBA player J.R. Smith, who enrolled at North Carolina A&T University at age 36, recently signed an NIL agent in conjunction with his participation on the school’s golf team.

It is this inconsistency that has plagued the first six months of the NCAA’s new rule. For instance, “booster organizations” are collectives geared toward assisting student athletes with NIL deals. However, some are already attempting to lure student athletes to certain universities, despite the NCAA expressly prohibiting such entities from recruiting activities, due to the lack of clarity around NIL laws regarding student athletes in certain states. One member of a private investment fund (and former NFL player) even directly tweeted at a student athlete to try to recruit him to his alma mater. Moreover, very few schools have publicly acknowledged whether they have reported certain endorsement deals to the NCAA, given widespread trepidation about what is permitted. Overall, NIL has become the Wild West of the NCAA.

The NCAA has called for federal NIL legislation to preempt the über-fragmented framework of state laws and piecemeal guideline systems, but it appears nothing is on the horizon. Nevertheless, the now ubiquitous ambiguity surrounding a gargantuan pot of money may accelerate that process.

Lutzker & Lutzker is experienced in trademark and right of publicity issues pertaining to colleges and will keep you updated on developments pertaining to the NCAA’s decision. We are here to help schools, as well as current and future college athletes, to address their IP needs and maximize new opportunities as the world of college athletics develops.