New NCAA Guidelines Announced
On May 9th, the NCAA and its Division I Board of Directors issued new guidance on Name, Image, and Likeness (NIL).
The new guidance from the NCAA is in response to the growing use of NIL collectives and the NCAA’s concern that these collectives and the NIL money they are providing to student-athletes have been used to induce (help recruit) athletes to specific schools.
Importantly, here, the new NCAA guidance specifically states that NCAA enforcement can and will retroactively investigate and enforce sanctions on schools that have already egregiously violated these bylaws. Meaning, the NCAA will be looking to bring enforcement actions against schools which they believe have violated the NIL/recruiting regulations in the past 10 months (the effective ‘life’ of NIL in college sports).
What makes this so interesting is that the NCAA published ‘interim’ NIL regulation and sat back and watched individual states pass their own NIL legislation. The NIL collectives are claiming that they have been operating in accordance with the NCAA’s interim NIL legislation and their respective state laws. Accordingly, these collectives are gearing up for a legal fight if NCAA enforcement attempts to crack down on the schools.
The main reason why the NCAA would be looking to go after the schools, as opposed to the individual athletes, is due to the landmark Alston decision.
In June 2021, The Supreme Court handed down a 9-0 unanimous decision upholding a lower court’s decision that NCAA restrictions on “education related benefits” for student-athletes violated antitrust law.
Although this was a narrow decision, only ruling on education related benefits and not benefits deemed unrelated to education or pay-for-play, the decision has been very impactful on college athletics. The Justices of the Supreme Court were quite transparent in their attack on the NCAA’s business model and how strongly they felt that it was a violation of antitrust laws. Justice Kavanagh specifically stated in his concurring opinion that, “Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. … The NCAA is not above the law.”
The Alston decision and its impacts on college athletics, and NIL specifically, are too voluminous to cover here. However, for the sake of the collectives issue, the important aspect to note is that due to the Alston decision, the NCAA is likely unwilling to wade into the waters of investigating and enforcing any type of sanctions on individual athletes who either have already signed NIL deals with the collectives or will be looking to sign these deals with collectives, all because they fear the legal ramifications of violating antitrust laws.
But let’s take a step back and take a look at what these collectives are in substance, and how they are changing landscape of NIL and college sports.
What are NIL Collectives?
The basic premise of most collectives is that an alum, or group of alums, band together to form a company whose goal is to provide NIL opportunities to student athletes of that institution.
They can be part of a larger company as a for-profit or non-profit entity. In the vast majority of cases, there can be no relationship with a school. Collectives must remain a third party in the process. These collectives are established as stand-alone entities and legally formed and organized just like any other corporation, LLC, limited partnership, etc.
So, in the emerging NIL era (we are still only 10 months into this era) this new cottage industry has been born as collectives are already in place at the vast majority of Power 5 schools, and if they are not already in place, they are certainly in the works and will be launched very soon.
How do Collectives Assist Student Athletes?
Collectives are generally formed to be associated with one specific school and are run by savvy alumni who are usually wealthy entrepreneurs with financial backgrounds. How these collectives operate and ultimately provide money to the athletes differs from collective to collective.
For example, The Gator Collective was formed by a successful Florida Gator alum who is also a successful entrepreneur and financial planner. The Gator Collective has been established as a sort-of subscription service; starting at $5.99 (up to $999.99) a month, Gators fans get exclusive autographs, interviews and even personal appearances.
In Texas, the Clark Field Collective is paying Longhorns offensive linemen $50,000 each. It is still not entirely clear what these payments will be ‘for’ in terms of an exchange of services provided by the athletes in return for the payments.
A third example comes from south Florida. There, billionaire John Ruiz is paying at least 17 Miami Hurricanes players this year a total of approximately $550,000 to promote his businesses: Life Wallet (medical history app) and Cigarette Racing Team (boating). Quarterback Jake Garcia has signed a two-year contract worth $145,000. He threw 14 passes in 2021 as a freshman backup.
Ruiz has been clear on the record that he believes that his collective would be immune from any potential attack by the NCAA because they operate under a clear quid pro quo platform. That is, they have set up their collective and are paying their athletes in a clear exchange for services (promoting Ruiz’s business). This quid pro quo element is essential to comply with the majority of state laws and the NCAA’s interim NIL policy, which has guided much of the NIL conversation since its inception.
A lot of collectives are managed on third-party platforms which are used to ensure that the quid pro quo nature of the transactions is adhered to. Apart from collectives run by alumni, there are also plenty of examples of collectives being formed and managed by sports agents/attorneys that don’t have a specific school they are looking to improve.
Thus, these collectives have all been exploring various strategies in terms of making sure players at their alma mater get compensated. But, as far as the NCAA is concerned, are these collectives a syndicate of alumni/businesspeople looking solely for a way to promote their businesses while compensating the student-athletes for their time? Or is this entire business a not-so thinly veiled attempt to lure recruits to their alma mater by paying them large sums of money?
Bottom line is this- “If you are not doing it (forming a collective), you will be left behind.”, stated Oliver Luck, former West Virginia AD who started the “Country Roads” collective along with the owner of the Arizona Diamondbacks to help support WVU athletes.
Who is the NCAA Going After with this New Announcement?
The May 9th release from the NCAA and the Division I Board of Governors was meant to provide clarity on the ever-evolving landscape of NIL in college sports, according to the NCAA press release.
The newly released guidance defines a booster as any third-party entity that promotes an athletics program, assists with recruiting, or assists with providing benefits to recruits, enrolled student-athletes, or their family members.
The definition could include “collectives” set up to funnel name, image and likeness deals to prospective student-athletes or enrolled student-athletes who might be considering transferring.
Specifically, the NCAA guidelines state that a collective with an overall mission of promoting one specific institution by only making NIL opportunities available for prospective and current student athletes at that particular institution would trigger the definition of a booster.
This complex NIL/collective ecosystem could turn entirely on the “inducement” issue. That is, will the NCAA investigate and determine that these collectives are offering NIL money as a form of recruitment to specific schools?
Colorado AD Rick George, who also serves on the NCAA’s NIL working group, has been quoted as saying, “Any booster or booster-led collective that has been found to have associated with a prospect about recruiting—on another college team or in high school—will be found to have violated NCAA rules, and the booster’s school is at risk of sanctions. . . a booster, or booster-run collective cannot communicate with a student-athlete or others affiliated with a student-athlete to encourage them to remain enrolled or attend an institution.”
Thus, many of the collectives previously mentioned above would likely fall into the purview of this new guidance from the NCAA. The CEO of the Gator Collective has even been quoted as saying that his mission is “all about the confetti” meaning that his primary goal in operating the collective is to help the Florida Gators win national championships. But again, wanting your alma mater to win and using funds disguised as NIL money specifically to induce recruits to come to your school could be two entirely different issues, as far as what an NCAA investigation could turn up.
Looking at the Future of Collectives and NCAA enforcement
All of this begs the question, how can a collective survive that is owned and operated by alumni of a certain school that only provides NIL deals to athletes at that school? Can it avoid scrutiny under the new NCAA guidance?
If these collectives run by wealthy alumni with a clear stated mission of only providing NIL money to athletes at their alma mater seem to be obvious insofar as they are set up to help recruit and retain athletes, how could the NCAA and their investigation team conclude any differently than that?
This could lead to institutions being sanctioned by the NCAA for their athletes accepting money from these booster-collectives, which in turn would seemingly lead to the institutions attempting to prohibit their athletes from associating with and accepting money from specific collectives.
This in turn spawns another potentially difficult issue as the institutions are generally prohibited from being involved in their athletes’ NIL deals, and further, would prohibiting an athlete from choosing their NIL deal and which collective they sign with be an unlawful restriction under antitrust laws and the Alston case? What if the institutions were being sanctioned because of their athletes’ affiliation with certain collectives?
Based on the new guidance, a myriad of state laws, an ‘interim” policy from the NCAA, and the lack of any federal NIL law, this entire NIL-collective ecosystem at this time leaves us with more questions than answers.
However, is the future of collectives to be only independent collectives not associated with a school that must recruit an athlete base from a variety of institutions?
This would seem like the logical solution. This would provide for an entirely new, or at this point nascent, market for individual collective entities to form that are not associated with a specific institution and that have a roster of athletes across a variety of sports and institutions. These independent collectives would then shop for the best NIL deals and match them with specific players that are of interest both from the athlete side and from the company’s side based on what they are looking to promote. That sounds a lot like a sports agency, but based on the NCAA’s guidance, their definition of booster, and how a lot of these alumni/booster run collectives operate currently, the sports agency model would likely be the cleanest model while still providing compensation opportunities for student athletes.
The most intriguing aspect that remains, as far as the new NIL guidance is concerned, is how the NCAA will choose to enforce these ‘egregious’ violations retrospectively and what, if anything, they will do for deals in the near future by these alumni-operated collectives. Any punishment they hand down at the institution level and any restrictions that leads to, as far as the institution and athletes go, will be the driving force in how this cottage industry is shaped.
Former college lacrosse player, professional business development experience, current third-year law student, looking to create content that intersects both the legal and business aspects of the sports world.