NCAA Rule Change Paves the Way for Student Athlete Endorsement Deals

By Carolyn Wimbly Martin and Ethan Barr

On January 22, 2022, the NCAA is expected to formally adopt changes to its constitution which were initially approved on June 30, 2021. At that time, the NCAA agreed to allow college athletes to profit from their likeness for the first time in history. The decision came after pressure from impending state laws and years of public dialog regarding how much schools profit from their uncompensated student athletes. Historically, the NCAA did not allow players to advertise or promote any commercial products or services using their name, image or likeness (“NIL”) in exchange for monetary compensation, but the June 30 decision waived this rule entirely.

While universities still cannot pay salaries to players, and athletes still cannot accept money in exchange for enrollment at a school, the decision allows college students to profit from their likeness and social media accounts, as well as negotiate endorsement deals. The NCAA’s decision opened the door for athletes to retain counsel, make millions of dollars from their NIL and register trademarks. These financial and public relations benefits impact more than just star players – even lesser-known athletes with a social media following have inked impressive endorsement deals.

Shortly after the rule change, the Cavender twins, who play basketball for Fresno State, posted a photo on Instagram to announce that they had signed a deal with Boost Mobile. The company’s CEO informed ESPN that they have a list of 400 other student athletes they are aiming to partner with. Boost Mobile isn’t the only company using influencer marketing – brands are expected to pay a collective $15 billion for influencer campaigns by 2022.

While there will be inevitable disparities in monetary compensation between high-profile, frequently televised athletes and others, the rule change provides an opportunity for student athletes across all sports to benefit. In fact, the college athlete expected to earn the most compensation is Olivia Dunne, a gymnast for Louisiana State University. While gymnastics generates only a fraction of the revenue of football and basketball, largely generated from broadcast rights, Dunne is the most followed NCAA athlete on social media. Since the recent NCAA rule change, she has signed with a sports agency, which has brokered an exclusive deal for her with an activewear brand. Dunne is the paragon of a student athlete who may have needed exposure such as qualifying for the Olympics to monetize her value prior to the rule change.

Furthermore, some student athletes are now able to monetize niche athletic talents on social media. For example, Larry Moreno, a basketball player for St. Francis College, went viral for his “trick shots” and has since partnered with an athletic products company and used his image in connection with the sale of his own clothing line. Like Moreno, other student athletes now have an opportunity to generate revenue from their talents off the field, including clothing design and singing. Athletes will also be able to monetize public speaking and endorsements related to social issues relevant to their peer group. Consider Schuyler Bailar, the first transgender Division I athlete who has become a voice for the LGBTQ+ community and inclusion, but he could not profit from his unique platform until his graduation from Harvard in 2019, a year before the NCAA rule change.

This rule change essentially creates two financial tiers of students in the NCAA: 1) the future professional athletes who are already destined for big paydays and 2) the collegiate athletes who can now create major revenue streams as influencers. More importantly, it alleviates the financial pressure on students to go pro immediately. For example, many NCAA basketball players declare for the NBA draft after one year of college to generate income as early as possible and avoid the risks of career-ending college injuries. However, with the rule change, some of the middle-tier players may opt to finish school first.

Beyond individual deals, schools have facilitated opportunities for athletes to profit from the new NIL rules. In August, Brigham Young University signed a deal with protein bar company, Built Brands, which is expected to pay for at least a year’s tuition for all walk-on players and compensate scholarship players $1,000 each. Other large schools, such as Alabama and Ohio State, have partnered with the Brandr Group to set up licensing opportunities for their student athletes where the school trademarks are used alongside the NIL of the athletes. These schoolwide endorsement deals could potentially influence decisions of high school recruits. Additionally, given the ties of schools or their coaches to companies like Nike, a top-tier basketball recruit may choose Duke, or a top-tier football recruit may be sold on the University of Oregon.

Beyond endorsement deals, athletes can now profit from their own trademarks and, in many cases, use the school’s trademarks. Prior to the NCAA’s ruling, athletes were prohibited from profiting from the sale of branded merchandise. This rule prevented athletes from filing trademarks because, to obtain a federal trademark registration, an applicant must show “use in commerce” or a bona fide “intent to use” the mark. Student athletes were not allowed to use a trademark in commerce and therefore could not obtain trademark registrations. Now that athletes are permitted to benefit from their NIL, they will have an opportunity to register trademarks and protect their brands. For example, in 2013, Johnny Manziel, former quarterback for Texas A&M University, successfully filed a trademark for “Johnny Football” and can still profit from the mark and brand today, despite a short-lived career in the NFL.

In November 2021, amidst all the new NIL deals, the NCAA Board of Governors met virtually for a special constitutional convention to rewrite its rules. Up for discussion at the November meeting was the level of authority granted to the NCAA under its constitution. Currently, the NCAA has significant authority over a variety of rules such as enforcement processes and NIL regulations. If approved, the proposal for the new constitution would give each division control to write their own rules to fit into the NCAA’s framework. The proposed changes would also reduce the size of the NCAA Board of Governors from over 20 members to nine and provide athletes with a vote on the board. Of the 2,500 representatives from schools and conferences, 85% would support the changes after only minor revisions, 10.5% would prefer major revisions and support a new constitution and 4% approve of the constitution as is. However, votes will not be finalized until January 2022.

In addition to amending its constitution, the NCAA is also lobbying for a variety of legal changes before the United States Congress to enact measures such as federal preemption over state NIL laws, establishing a “safe harbor” for the NCAA against future lawsuits filed pertaining to NIL rules, protecting the non-employment status of college athletes and maintaining the distinction between college and professional athletes. The NCAA’s plan to engage Congress in the creation of federal NIL legislation that preempts state laws is particularly interesting. This could, for example, render moot California’s new law, which makes it illegal for universities and the NCAA to punish student athletes for profiting from NIL activities. However, as mentioned above, the NCAA’s apparent goal in supporting federal legislation is to prevent a patchwork of state laws that provide advantages to students in states with NIL laws and deny NIL privileges to students in other states.

There are clearly further issues to consider, such as insurance policies for student athlete injuries. For example, in 2019, Duke basketball player Zion Williamson suffered a significant knee injury after his Nike shoe unexpectedly fell apart mid-game. He had an $8 million insurance policy, the payout of which was guaranteed if he had been drafted below the 16th slot in the NBA draft. Although Williamson was a surefire top pick regardless of the injury, the same cannot be said of other athletes at risk of injuries and subsequent major financial losses.

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 and athletes with all their IP needs and maximize new opportunities as the world of college athletics develops.

The authors wish to acknowledge the work of Margaret Horstman, who contributed to an earlier version of this Insight.