When it comes to getting paid, college athletes have suddenly gone from nil to NIL. And the ripple effects from that change are being felt across the sports landscape in ever-widening ways.
For more than a century — as universities, coaches and television networks raked in the cash from college sports — athletes were prohibited by NCAA rules from receiving any financial compensation while in school beyond scholarships covering the basics like tuition, room and board.
That changed in 2021, when the U.S. Supreme Court unanimously ruled in NCAA v. Alston that it is a violation of the Sherman Antitrust Act to limit education-related compensation for college athletes. In response, the NCAA quickly changed one of its rules and began allowing athletes to make money for the use of their name, image and likeness, better known these days as NIL.
“That decision actually pertained to other NCAA regulations,” says Rudy Hill, a partner at Bradley Arant in the firm’s litigation and intellectual property practice groups. “But the way the Supreme Court came down unanimously on that case suggested that if an NIL case was presented to the court, it would be an uphill battle for the NCAA to keep those regulations in place. So, the NCAA backed off that area.”
As a result, Joey Football and Judy Soccer can now sign agreements to promote all types of goods and services, from national products to local car dealerships. Athletes can be paid for appearing in advertising, signing autographs and even posting on social media.
This already has proven to be a million-dollar opportunity for star players such as former Alabama quarterback Bryce Young, who had NIL deals last season with Dr. Pepper and Nissan while playing for the Crimson Tide. But lesser-known players are benefitting as well through smaller agreements providing a few thousand dollars here and there (which can seem like a million bucks to a college student).
“Since its inception (in 1906), the NCAA has always had an amateurism rule, which prevented college athletes from accepting compensation, including to promote any kind of product,” says Burr & Forman partner Bill Lawrence, whose practice focus includes corporate and business transaction law. “But ultimately, the NCAA caved to the realities of our modern world.”
Which, in the short term, has resulted in turmoil. Since there is no federal legislation governing NIL, it falls to the individual states to create their own regulations and enforcement. Approximately one-third of the states still don’t have any type of law in place regarding NIL, leaving it to the individual schools to establish their own policies. Meanwhile, the legislation that has passed in the other states varies significantly.
Rich Lee, CEO and co-founder of the Chicago-based dispute-resolution company New Era ADR, compared the NIL situation to the disparate laws currently in place from state to state regarding such issues as data security and cryptocurrency.
“It’s a patchwork right now of policies and legislation,” Lee says. “There’s no uniformity of what the rules actually are. Without clear rules on what’s acceptable and what’s not, it’s going to be tough. Right now it’s difficult enough for an attorney to navigate all this, much less a young athlete.”
The situation also is leading to concerns that college athletics — especially in the big-revenue sport of football — will be further divided between a few dozen schools that have large pools of NIL revenue and those with more modest NIL funds. Wealthy alumni of some schools are establishing collectives, which raise funds to help facilitate NIL deals for athletes and operate separately from the university. This, in essence, could lead to bidding wars for star athletes.
“That is one of the concerns of having a bunch of states run NIL and not having any control over it,” says Jonathan Wohlwend, an associate in the intellectual property practice group at Bradley Arant. “There’s no standard contract for NIL deals and no real way to monitor the program. That’s one of the NCAA’s gripes, that there is so much going on that they can’t control it and don’t have the resources to monitor this activity.
“Right now, you have numerous states with their own NIL laws with various provisions, and some of those states are changing their NIL laws to gain a competitive advantage. States are starting to amend their laws to remove restrictions, allowing more flexibility.”
Even University of Alabama Head Football Coach Nick Saban, who leads one of the most successful programs in the country, has expressed concern that some schools have a significant financial advantage under the current NIL setup.
“You think there’s disparity in college football right now? There’ll be a lot more in the future,” Saban said in May at the annual Southeastern Conference spring meetings. “The way Southern Cal, Texas and Texas A&M are spending money … it hasn’t hit yet. What are you willing to spend?
“If it’s going to be the same for everyone, I think that’s better than what we have now. Because what we have now is some states and some schools in some states are investing a lot more money in terms of managing their roster than others,” Saban said.
The NCAA has come to a similar conclusion. In June, NCAA President Charlie Baker said the U.S. government needs to establish a federal law regulating the use of NIL for college athletes and establishing uniform contract standards for all colleges.
“I think it was a big mistake by the NCAA not to do a framework around NIL when they had the opportunity to,” Baker said during the Future of College Athletics Summit. “I think there were too many people in college sports who thought no rules would work really well for them. And what everybody’s discovered is no rules, no transparency, no accountability, no framework, doesn’t work well for anybody.”
Alabama Senator and former Auburn University Head Football Coach Tommy Tuberville agrees. “We have to come to some kind of agreement where we can help the NCAA make improvements to this runaway NIL situation that we’re in,” he said at the Future of College Athletics Summit.
Whatever the eventual outcome, the bottom line is that college athletes now have the ability to profit off themselves, a right that nearly all other U.S. citizens have long enjoyed. And Lawrence, for one, believes that is a good thing.
“I hear people say this is going to ruin college athletics,” Lawrence says. “My response is always the same. Give me a good reason why college athletes should not be able to exploit their NIL like everyone else? The only reason has been the NCAA amateurism rule.
“I’m sure there will be some good, some bad and some ugly come out of all this. But that’s not the real issue. The real issue is, shouldn’t college athletes be able to take advantage of their NIL, especially at a time when the value of their NIL may be higher than it will ever be?”
Cary Estes is a Birmingham-based freelance contributor to Business Alabama.
This article appears in the August 2023 issue of Business Alabama.
