On Feb. 16, Florida Gov. Ron DeSantis signed H.B. 7-B, capping a legislative process to amend Florida's law governing the name, image and likeness, or NIL, rights of student-athletes at Florida's public and private universities.

The new legislation, which significantly reduces prohibitions that, until now, kept colleges, athletic departments and coaches in Florida from directly participating in the development of NIL deals, is another sign of a possible trend of state deregulation of the publicity rights of collegiate student-athletes.

Some states, however, still maintain stricter NIL laws on their books, meaning that — unlike on the court or field — not all student-athletes are playing by the same rules nationwide.

NIL is a rapidly developing area in which athletics, education, law, politics and economics intersect. At its core, NIL refers to the ability of student-athletes to earn money from third-party businesses — from sports drink makers, to footwear companies, to fast-food chains — in exchange for the business's use of the athlete's NIL to advertise their products.

For most student-athletes, NIL deals may help to cover living expenses or provide a modest amount of disposable income.[1] But for a few four- and five-star recruits, social media-savvy athletes, and others in high demand, individual students can earn millions for allowing third parties to use their NIL, sometimes before even stepping on the playing field.[2]

Until the summer of 2021, National Collegiate Athletic Association rules prevented student-athletes from benefiting from their NIL rights in any respect. Once the NCAA suspended its NIL rules, the floodgates opened. In the first year alone, NIL spending reached above $900 million.[3]

Many states passed legislation either before or shortly after the NCAA stopped restricting NIL deals. At the time, legislatures assumed that passing laws protective of athletes' NIL rights would give their collegiate teams a competitive advantage in recruiting.[4] Others did not legislate on the issue at all, defaulting to whichever NCAA rules had not been suspended.

As it turns out, not legislating may have been the best recruitment tool of them all. Guidance from the NCAA has continued to loosen over time, and states whose laws NIL laws at first seemed liberal or revolutionary appear to be becoming places in which students, universities and athletic departments have fewer ways to structure deals.

States with no NIL laws, or more open-ended laws, appear to be becoming more attractive to student-athletes, boosters and businesses. Recent efforts in several states, like Florida, have focused on repealing the more restrictive provisions of earlier NIL statutes.[5]

For now, the jurisdiction that a student-athlete lives in or intends to play sports in can be a significant factor in how and when that athlete can enter into a contract to license the use of their NIL.

The state of Texas is a booming market for college sports. Yet, under Texas' current NIL law:

No individual, corporate entity, or other organization may … enter into any arrangement with a prospective student athlete relating to the prospective student athlete's name, image, or likeness prior to their enrollment in an institution of higher education.

Nor can they "use inducements of future name, image, and likeness compensation arrangement to recruit a prospective student athlete to any institution of higher education."[6] In other words, until an athlete has officially matriculated at a Texas college, that athlete cannot enter a contract to profit from their NIL.

In contrast, California's Fair Pay to Play Act — the first NIL law in the country — contains no prohibition barring prospective student-athletes from signing an NIL deal before signing an enrollment agreement at the college of their choice. Most states with NIL statutes or executive orders are in accord with California law.[7]

The potential impact on student-athletes considering enrolling at a Texas university is apparent. Reports of recruits signing lucrative NIL deals surface every week.

Often, these recruits are entertaining offers from multiple institutions, meaning that they have not yet committed to, much less formally enrolled at, a university.[8] In most states, that does not pose a problem. Under the present statute in Texas, it could play a role in an athlete's decision making.

Other states' laws purport to limit the amount that student-athletes can earn on their NIL rights. Oklahoma's current law, for example, states:

[A] student may earn compensation commensurate with market value for the use of the name, image or likeness of the student athlete while enrolled at a postsecondary institution without penalty or resulting limitation on participation.[9]

Pennsylvania's is similar.[10] Until it was amended, Florida's NIL law also required any NIL-related "compensation [to] be commensurate with the market value of the authorized use of the athlete's name, image, or likeness."[11]

These market value restrictions are not ubiquitous. As examples, Kansas and Ohio, just next door to Oklahoma and Pennsylvania, have no law limiting NIL compensation to market value.

In the abstract, universities in states without market value restrictions would seem to be at a legal advantage, because there is no apparent cap on what their supporters can pay student-athletes for NIL rights. In practice, that advantage is less clear-cut because the actual effect of such provisions is questionable.

The market value of NIL deals seems to be constantly on the rise; boosters, collectives and businesses interested in pursuing NIL deals effectively make their own market; and there is generally not a method defined in law for calculating the market value of an athlete's name, image or likeness. It is likewise unclear who might have standing to sue to enforce market value provisions.

Another common item in state NIL laws is a restriction on NIL deals that will conflict with team contracts or agreements between the university and a third party.[12]

Colleges and athletic departments may rely on provisions like these to protect, for example, an agreement with an apparel company or a contract with a food or beverage provider. Many states with this type of provision, like Michigan, but not all, like Arizona, explicitly require student-athletes to disclose any potential NIL deal to his or her university.[13]

Even this issue can differ from state to state. Florida's recent amendment to its NIL statute did away with a restriction against athletes entering into "a contract ... [that] conflicts with a term of the intercollegiate athlete's team contract."

States that have repealed their student-athlete NIL laws entirely, like Alabama, arguably fall into this category too. Contractual conflicts between businesses, boosters, universities and student-athletes could be a ripe ground for litigation.

State-to-state conflicts in NIL law could become a thing of the past if federal legislation supplants state laws — something that many interested parties, including elected representatives, have called for.[14]

When the NCAA opened the door to NIL deals, it expressly contemplated that its temporary policy would "remain in place until federal legislation or new NCAA rules are adopted."[15]

Furthermore, universities often set their own standards for participation in the NIL market, which student-athletes should follow in addition to the applicable state law.

Unless and until there is a uniform, nationwide standard, agents, student-athletes, universities, donors and businesses interested in pursuing deals in the NIL space must pay careful attention to the laws of the jurisdictions in which they are operating.

Drew T. Dorner is an associate at Duane Morris LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

References

[1] https://www.nbcnewyork.com/news/sports/one-year-of-nil-how-much-have-athletes-made/3765040/.

[2] https://bleacherreport.com/articles/10029537-2023-5-star-cfb-recruit-reportedly-signs-historic-nil-deal-worth-up-to-8m.

[3] https://www.courant.com/2022/07/06/nil-spending-estimates-surpass-900-million-deals-in-2022-23-could-easily-top-a-billion/.

[4] https://www.si.com/college/2021/03/04/name-image-likeness-state-laws-congress-ncaa.

[5] https://www.insidehighered.com/news/2022/02/11/states-rethink-restrictive-nil-laws.

[6] Tex. Educ. Code § 51.9246(j).

[7] Cal. Educ. Code § 67456.

[8] https://www.si.com/college/southcarolina/recruiting/nyckoles-harbor-inks-nil-deal-ahead-of-commitment.

[9] Okla. Stat. § 70-820.23(A).

[10] 5 Pa. C.S.A. § 3703.

[11] https://www.flsenate.gov/Session/Bill/2023B/7B/BillText/er/PDF.

[12] See, e.g,, Ohio Exec. Order 2021-10D ¶ 5.

[13] Mich. Act 366 of 2020, § 390.1737; Ariz. Rev. Stat. § 15-1892.

[14] https://www.tuberville.senate.gov/newsroom/press-releases/tuberville-manchin-announce-key-feedback-from-nil-stakeholder-feedback/.

[15] https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx.

Reprinted with permission of Law360.