What is NIL and why does it matter?
What is NIL?
College athletes are often the face of their school and the backbone of the athletic department's revenue. Their faces appear in promotional materials across campus, the internet, and TV as recruiting and advertising tools. However, until 2021, student-athletes were prohibited from controlling or profiting from their 'Name, Image, or Likeness,' or NIL for short. While Power Four universities earned millions of dollars each year, student-athletes could not benefit directly.
NIL, as we now know it, addresses the "right of publicity," which protects against misuse of name, image, and likeness or commercial reasons. With that, college student-athletes can receive compensation and get paid in goods, services, and money.
NIL History
NIL was signed into effect by the NCAA for July 1, 2021, after receiving mounting legal pressures from former players and states for nearly two decades. Public opinion also shifted to support the idea that student-athletes can capitalize on their talents and personal brand. It was a long time coming, and several student-athletes inked deals that first day. Men still receive the bulk of the NIL deals and money, but top names in women's sports are beginning to enter the same stratosphere, namely in basketball.
How does NIL impact Title IX?
Collectives and third-party businesses are not required to follow Title IX rules when distributing money to athletes, meaning most NIL money goes to football and men's basketball players. The House settlement also lacks Title IX guidance, and back pay is also based on a student-athlete's revenue value to the school. There is a world where people on women's teams earn more from NIL deals than from their own universities. The Department of Education had previously said Title IX rules would apply but did not offer guidance.
National and State Regulations
A combination of school policies and state laws impact NIL deals. Most states have signed NIL regulations into law, but notable exceptions include Alabama, Indiana, and Wisconsin. In states without NIL legislation, the school controls what NIL deals a student-athlete can sign. Nationally, NIL is unregulated, with conferences and the NCAA attempting to work with Congress to create a standard for all schools and athletes.
There have been fears that, with NIL deals, student-athletes could be classified as university employees in a "play-to-pay" situation and that the states without regulations will use NIL as a recruiting practice, which states with legislation have outlawed. Of course, even with regulation, much NIL takes place in a gray zone.
To date, there are no national NIL regulations.
How NIL Deals Happen
Student-athletes can sign NIL deals in two ways. The first is when they are paid directly by a company or business for promotions or sponsorships ranging from local organizations to international, publically traded companies. Top players, like USC basketball player JuJu Watkins, have deals valued in the millions of dollars with Nike, Instagram, AT&T, and Gatorade. There is no limit on the number of NIL deals an athlete can make.
The second option for payment is through an NIL collective. The Gator Collective was the first one to launch but has since been absorbed by Florida Victorious, the latest Florida collective. Generally, collectives are donor and booster-funded groups for a specific university that operates independently from the school's athletic department for now. Collectives can sign individual athletes or entire teams, for example, the University of Michigan women's basketball team signing with 'Champions Circle."
Today, there are about 250 collectives.
Collectives have been criticized for promoting a "pay-to-play" model to attract talent to their (un)affiliated school. Another facet of the organizations can help connect student-athletes with third-party organizations for NIL deals, essentially acting like an agent.
Who can make NIL deals?
NCAA college student-athletes at all levels can sign NIL deals and, even in states that have not signed NIL legislation. Some states also allow high school students to participate in NIL deals. Again, with no federal law, there is a variety of NIL requirements for each state. Currently, NIL deals are restricted to US citizens, as completing NIL duties while on a student visa in the US could put the visa at risk. For now, the approximately 25,000 international students competing in the NCAA can take NIL deals if all duties are performed in their home country.
States that currently prohibit NIL for high school students
- Alabama
- Hawaii
- Indiana
- Michigan
- Mississippi
- Ohio
- West Virginia
What is next for NIL?
The House vs. NCAA lawsuit is changing college sports once again. The case is based on the accusation that the NCAA violated antitrust laws by not allowing student-athletes to capitalize on their name, image, and likeness prior to 2021. The NCAA agreed to settle for a casual $2.8 billion in damages to student-athletes from 2016-2020 based on the statute of limitations.
Beyond damages, the settlement will allow schools to pay student-athletes directly. Power Four conferences (ACC, Big Ten, Big Twelve, and SEC) have the option of sharing 22% of the athletic department's revenue each year for the next ten years. In 2025-26, that looks like a cap of $22 million, but that number is expected to increase over time. Revenue sharing is voluntary, but for schools to compete at the highest level, they better pay up.
Final approval of the revenue sharing model can be expected in the spring of 2025, with the program going into effect in the summer of 2025.
The settlement is also meant to curb the power of NIL collectives and allow schools to absorb collectives directly. NIL payments from collectives or directives will not count towards the 22% limit but need to be disclosed to the school and be "fair market value" to prevent the deal from being a recruiting tool.