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Evolution of NIL—Donor Funded NIL Groups

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As NCAA institutions, athletes, and other stakeholders continue to adjust to the new normal of name, image, and likeness deals for college athletes, a new trend is emerging: donor and alumni led third party organizations focused on helping athletes grow their brands and connect with potential NIL partners.

Florida, home to the envelope-pushing state bill that played a critical role in moving the NIL modernization timeline up to July 1, is already home to at least four such organizations; three focused on student athletes at the University of Florida and one formed to support the rival Miami Hurricanes. Similar organizations have since popped up in a wide range of other states, including Oregon, Washington, and California, with backers representing some of America’s most powerful companies, in addition to powerhouse donors.

The founding of these donor-led organizations and ensuing race to capture a share of the NIL market is bound to present new compliance issues for student-athletes and institutions. While the NCAA has modified its rules to permit NIL activities, the rest of its bylaws remain in effect.

As one of the only firms in the United States with a dedicated NIL team, Miller Nash has been closely following developments in the NIL space, and actively advising stakeholders on state law and NCAA compliance issues. A few examples of compliance issues that may arise as a result of the rise in donor-led NIL organizations include:

  • Inducements to Attend: Under the NCAA’s Bylaws, institution staff and representatives are prohibited from direct or indirect involvement in arranging benefits for a prospective student athlete. While an organization may be led by alumni and donors, involvement by an educational institution’s employees or contractors in promoting or brokering deals for prospective student-athletes seem to violate NCAA rules.
  • Improper Benefits: As the NCAA reminded student-athletes in a Q&A accompanying the NIL policy change, NIL agreements without quid pro quo (compensation for work not performed) remain prohibited. Accordingly, donor-led NIL organizations cannot be used to simply direct donor funds to athletes, without a license or service flowing back the other way. Similarly, NIL organizations may create compliance issues for students by providing services (i.e., marketing and branding support), without some consideration in return from the student-athlete. As much as NIL activity may feel a bit like the “Wild West” right now, it is critical for stakeholders to remember that other NCAA Bylaw limitations still apply, and seek appropriate legal counsel before engaging in potentially problematic NIL activity.
  • State Law Compliance: Donors, NIL organizations, managers, agents, and brands have widely varying levels of sophistication—while some organizations have engaged experienced compliance professionals, sports marketing executives, or NIL-focused legal counsel to assist in the development of these organizations, others may have a less developed support system at this early stage. NIL compliance is complex, with over half of US states having a NIL bill or executive order signed into law. State laws each have their own specific compliance hurdles, and NCAA institutions have their own NIL policies for student-athletes to comply with (both in states with and without NIL law on the books). In addition, international students remain subject to visa limitations. Because compliance ultimately falls on student-athletes and institutions, some third party organizations and brands may be less familiar with or focused on compliance considerations.

Our team is actively working through the many compliance, licensing, and other legal issues facing our institution and NIL organization clients, and would be happy to discuss further with you and your organization.