While America waits for federal legislation, states, businesses, boosters, and charities are seizing the opportunity to lay the foundation on student athlete compensation.

On July 1, 2021, the NCAA's new Name, Image, and Likeness ("NIL") policy took effect. The temporary policy allows student athletes to receive compensation for their NIL—an unprecedented rule that opened the door for athletes to receive approved monetary compensation at the collegiate level. Although the policy allows student athletes to be paid for NIL, the policy still forbids "pay-for-play" and "impermissible inducements." Pay-for-play is when the student athlete gets paid directly for performance in a sport. Impermissible inducement is when a student athlete is paid for the reason of inducing a decision for the benefit of the inducer and/or university. The policy also allows student athletes to hire agents, as long as it is solely for the purpose of NIL representation. Without federal law in place for NIL, universities are required to follow the NCAA's policy unless their state passes NIL legislation.

The Future; New Legislation and New Opportunities

State legislation

The NCAA's policy states that NIL activities protected bv state law will not impact eligibility, and the NCAA will not monitor for compliance with state law. With that being said, states have begun drafting or have passed legislation to expand and protect universities' involvement with NIL activities.

On June 10, 2023, Texas passed its NIL bill—HB 2804. The bill allows Texas universities to assist their student athletes with NIL deals. But they may not act as an athlete agent, receive compensation from an athlete or third-party for assisting, attempt to influence an athlete's choice of representation, or diminish an athlete's opportunities from competing third parties. One interesting caveat is that the new law requires student athletes to attend a financial literacy and life skills course during their first academic year.

Some states, like California, have NIL bills working their way through the legislature process. On January 19, 2023, the California legislature introduced The College Athlete Protection Act. The most noteworthy takeaway from the current version of the bill is it requires some California universities to pay student athletes a percentage of its sports revenue. Although, like in Texas, student athletes will not be considered employees of their university.

New NIL opportunities emerging

So far, student athletes have received NIL compensation for advertisements, autographs, and social media endorsements, to name a few. But an old product may soon provide a new lucrative opportunity for student athletes. In February 2021, EA Sports, likely cognizant of the changing NIL landscape, announced it will re-launch its college football game, NCAA Football. The video game developer expressed plans to compensate student athletes for their NIL used in the game, opening up a new NIL compensation opportunity.

Takeaway

Although states' limitations vary as to how and from whom student athletes can receive compensation, the consistent trend so far is student athletes will not be considered employees of their university. And the compensation opportunities through NIL will likely increase as time goes on because so far, legislation has only expanded the means for student athletes to capitalize on their NIL.

Originally published by Sports Litigation Alert.

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