NCAA Reiterates its Focus on Improper NIL Inducement and Signals Future Shift in NIL Landscape
This year kicked off with several important name, image, and likeness (“NIL”) updates that universities, boosters,1 and NIL Collectives2 would do well to review. Earlier this month, the NCAA Division I Committee on Infractions Panel (the “Committee”) issued a negotiated resolution with Florida State University (“FSU”) following an investigation into alleged impermissible conduct during the recruitment of a football player who was listed in the National Collegiate Athletic Association’s (“NCAA”) transfer portal. This resolution comes on the heels of new NCAA disclosure rules and the NCAA President’s letter that proposes allowing universities to enter into NIL agreements with student-athletes.
- NCAA Cracks Down on Improper NIL Inducement in the Transfer Portal
In April 2022, a student-athlete entered the transfer portal and made an official visit to FSU’s campus. During this visit, an FSU assistant coach drove the athlete and his parents to a meeting with an FSU booster, where the booster — on behalf of an FSU NIL Collective — offered the athlete $15,000.00 per month for at least one year as compensation for an NIL opportunity if he enrolled at FSU. Following the meeting, the booster followed up by sending text messages to the athlete and his mother. A few days later, the athlete removed his name from the transfer portal, and he remained at his university.
Following the Committee’s investigation, as detailed in the negotiated resolution, the Committee and FSU agreed that the booster, the assistant coach, and FSU had violated NCAA Division I bylaws, including those prohibiting an institution’s staff and boosters from impermissibly recruiting a student-athlete and from directly or indirectly offering a benefit to a student-athlete.3 To determine the appropriate penalties, the Committee considered numerous aggravating and mitigating factors applicable to FSU and the assistant coach. With respect to mitigating factors, the Committee “gave significant weight” to the affirmative steps that both FSU and the assistant coach took to expedite resolution of the investigation, as well as FSU’s “healthy reporting” of low-level violations and absence of high-level violations in recent years. Ultimately, however, the aggravating factors for FSU and the assistant coach outweighed the mitigating factors, and the Committee, FSU, and the assistant coach agreed to the following penalties:
- For FSU: (i) Two years’ probation; (ii) a fine of $5,000.00 plus 1% of the budget for the football program; (iii) a mandatory 5% reduction of scholarships awarded in the football program; and (iv) recruiting restrictions, including a reduction in the number of official paid visits in the football program and recruiting communications.
- For the assistant coach: (i) Multi-game suspension, which shall apply even if he transfers to another institution within the next two years; (ii) two-week prohibition against recruiting communications; and (iii) mandatory attendance at an upcoming NCAA Regional Rules seminar.
- For the booster: Three-year disassociation from FSU.
- For the NIL Collective: One-year disassociation from FSU.
Perhaps unsurprisingly, FSU bears the brunt of the consequences for the conduct of the booster and assistant coach. Indeed, in addition to the above penalties, FSU must publicize the infractions and invest in developing a “comprehensive educational program on NCAA legislation” for all FSU personnel responsible for recruiting student-athletes (about which it must provide annual compliance reports to the Committee).
This negotiated resolution is reminiscent of the February 2023 negotiated resolution between the University of Miami (“Miami”) and the Committee, which arose from a booster’s impermissible contact with student-athletes in the transfer portal that was facilitated by Miami’s women’s basketball coaches. There, similar penalties against Miami included probation, a fine, and recruiting restrictions. However, unlike FSU, Miami’s booster was not disassociated, in large part because the NCAA violations did not arise from NIL activities. That the penalties against FSU are more severe than those against Miami reveals the NCAA’s increased efforts to tamp down impermissible transfer portal inducement involving NIL-related conduct.
The penalties for NCAA rule violations arising from inducement in the transfer portal have long-lasting consequences for universities as well as their boosters, NIL Collectives, and athletes. For example, scholarship reductions shrink the pool of talented athletes, which in turn impacts the success of athletic programs for years, and when boosters and NIL Collectives are disassociated from their universities, not only do they suffer reputational and financial harm, but athletes are also negatively impacted by the resulting reduction in NIL opportunities. Universities can reduce the chances of finding themselves in enforcement proceedings by dedicating the resources necessary to ensure that staff, boosters, and NIL Collectives comply with NCAA regulations.
- NCAA Attempts to Open Communication Channels Between Itself and Universities, Athletes, and NIL Collectives
When permissible, universities can improve booster and staff compliance by opening communication channels with NIL Collectives. Current NCAA rules and regulations arguably discourage communication between these entities because they prohibit a university’s involvement in NIL activity. In its October 2022 guidance, the NCAA prohibited certain contact by universities with NIL Collectives, such as:
- Engaging in negotiations for student-athletes with NIL Collectives;
- Offering incentives or donating cash to NIL Collectives; and
- Employing members of NIL Collectives.
Such prohibitions are intended to ensure that NIL Collectives’ activities cannot be attributed to universities, which are not permitted to engage in NIL activity under the NCAA’s current guidance.
Earlier this month, however, the NCAA adopted new disclosure and transparency rules intended to protect student-athletes by improving transparency in the NIL marketplace. These rules go into effect on August 1, 2024.
Under the new rules, the NCAA will establish a national registration process for NIL service providers (e.g., agents and financial advisors), and information about service providers who register will be available to student-athletes to assist them in making informed decisions when selecting their service providers. Additionally, student-athletes will be required to disclose to universities any NIL agreement that exceeds $600.00 within 30 days of signing the agreement, and universities must then deidentify the agreements and provide them to the NCAA twice a year.4 The agreements will be placed into an NIL database that the NCAA will use to educate student-athletes on trends in NIL agreements and to help universities make informed decisions about their NIL-related policies. The NCAA also stated that it plans to work with universities to educate student-athletes on rules pertaining to NIL and NIL agreements, including by providing student-athletes with a template contract and recommended contract terms.
It also appears that the NCAA may be backing away from its concerns regarding communications between universities and NIL Collectives. Up for vote in April is a proposal that would “eliminate regulations governing communications between schools and NIL [Collectives] regarding enrolled student-athletes but would continue to prohibit a school from directly or indirectly providing financial support or assets to NIL [Collectives].”5 If adopted, this proposal could ease the administrative hurdles universities face — such as which, and in what way, university personnel can communicate with the NIL Collective — and, thus, make it easier for universities to ensure compliance from their affiliated NIL Collectives.
As the NCAA increases transparency in a historically opaque NIL marketplace, we will be closely monitoring how universities and NIL Collectives respond.
- NCAA Considers Proposal to Allow Universities to Enter NIL Contracts
Since the NCAA enacted NIL regulations in 2021, it has regularly clarified existing NIL rules and proposed new rules. In 2024, the NCAA may redirect the entire trajectory of the NIL landscape.
Last month, NCAA President Charlie Baker sent a letter to NCAA Division I school members that proposed several NIL policy changes. The proposed changes would overhaul the long-standing prohibition against university involvement in NIL agreements by permitting Division I schools to enter into NIL agreements with student-athletes.
Should such an approach gain momentum, it would likely implicate numerous administrative and legal hurdles for universities that are currently absent from the NIL space. For example, Title IX regulations could apply to NIL agreements, which could require equitable distribution of NIL opportunities across universities’ athletic programs. Labor and employment laws might also become part of the NIL and collegiate athlete landscape.
With NIL Collectives currently carrying the majority of NIL activity, allowing universities to join the playing field could drastically alter the NIL landscape. Under current NCAA rules, because universities are prohibited from conducting NIL activity, coordination between NIL Collectives and universities is often challenging. If the NCAA permits universities to participate in NIL deals, universities may bring NIL Collectives under their umbrella. This would likely lead to additional rules and regulations for NIL Collectives, which would consequently assist universities in ensuring that their NIL Collectives comply with NCAA rules. Ultimately, student-athletes may benefit from the additional NIL-related resources from their universities.
While the NCAA’s negotiated resolution with FSU reveals its intent to police NIL conduct in the transfer portal, we are also seeing a shift in the NCAA’s openness to NIL activities. The new NCAA disclosure rules focus on improving communication between the NCAA, universities, NIL Collectives, and student-athletes. And if the NCAA adopts the proposed changes to allow universities to enter into NIL agreements with student-athletes, not only will the NIL world as we know it look different, but there will be significant ripple effects on related regulations that will further impact universities and NIL Collectives. Stakeholders should consider engaging competent counsel to navigate this changing NIL landscape.
1 A booster, which the NCAA refers to as a “representative of the institution’s athletic interests,” is anyone who has: (i) donated to the institution to obtain season tickets for any sport; (ii) promoted the institution’s athletic programs; (iii) financially contributed to the institution’s athletic department or to a booster organization; (iv) provided employment to student-athletes; (v) assisted or been asked to assist in the recruitment of student-athletes; (vi) provided benefits to student-athletes or their families; or (vii) been involved in promoting university athletics. Role of Boosters, NCAA, https://www.ncaa.org/sports/2013/11/27/role-of-boosters.aspx (last visited Jan. 23, 2024).
2 NIL Collectives are entities established to create financial opportunities for student-athletes at a specific university.
3 See Nat’l Collegiate Athletic Ass’n, Division I Manual: 2021-22 NCAA § 13.01.2; 13.2.1.
4 The requirement that universities deidentify the agreements before providing them to the NCAA aligns with state laws that safeguard student-athletes’ privacy. For example, Texas’s modified NIL bill includes a confidentiality provision that makes any information created, collected, or kept by an institution regarding student-athlete NIL contracts confidential and exempted from compelled public disclosure. See Texas House Bill 2804, 88th R.S., ch. 512, General and Special Laws of Texas.
5 Meghan Durham Wright, Division I Council approves NIL disclosure and transparency rules, NCAA (Jan. 10, 2024), https://www.ncaa.org/news/2024/1/10/media-center-division-i-council-approves-nil-disclosure-and-transparency-rules.aspx.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.