The Oversight and Monitoring of NIL

The sports marketing industry will soon undergo the single most dramatic change in its history, when college athletes are finally granted the right to monetize their Name, Image and Likeness. The mission of Student Athlete NIL is to help brands seize this opportunity and capture the attention of student-athletes, identify the ones that best personify their values, and then develop value-based partnerships with those individuals to mutually reach their goals. Working hand-in-hand, we can finally democratize college athletics.

In today’s addition of Student Athlete NIL, we will give a high-level overview of one of the biggest challenges facing the implementation of Name, Image and Likeness – the monitoring of what may end up being millions of yearly financial transactions between student-athletes and their endorsers and other business partners.

Pre-Enrollment NIL Policies 

Many areas of current legislation, including amateurism regulations, outline standards for activities that occur prior to a student-athletes enrollment at an NCAA institution. There appears to be concerted effort to outline rules applicable to prospects.

According to the NIL legislation initially proposed by the NCAA, pre-enrollment NIL rules would align with those that would apply to enrolled student-athletes, with the following parameters:

  • A prospect is required to report all activities to an independent third-party administrator;

  • Separate and targeted disclosure requirements may be developed for business activities and commercial endorsements;

  • Institutional accountability is triggered for situations in which boosters are impermissibly involved in a prospect’s NIL activities after that prospect signs a letter of intent; and

  • Institutions are required to provide appropriate education during the initial recruiting interaction with a prospect.

  • The symmetry between NIL rules prior to a college student-athlete’s enrollment at an NCAA school and the rules in play after were a key contemplation. This regulatory approach to NIL addresses both prospects and student-athletes given that NIL-related relationships and agreements could form well before a prospect’s collegiate enrollment.

This model of symmetry between pre- and post-enrollment NIL rules should ensure consistency and clarity for prospects and student-athletes, as well as individuals involved in NIL-related activities (e.g., professional service providers). The symmetry between pre- and post-enrollment rules supplemented by targeted education during the recruiting process should aim to minimize the risk of prospects entering into agreements or relationships before full-time enrollment that could render them ineligible when they become student-athletes.

Required Disclosure of NIL Transactions

To date, NCAA rules do not legislatively require disclosure of NIL activities primarily because NIL activities were, by and large, prohibited, nullifying the need to confirm details. As referenced above, the proposed disclosure requirements would encompass both pre- and post-college enrollment activities.

The new NCAA concept would require a prospect to disclose NIL activities, including compensation arrangements and details of relationships with involved individuals, commercial entities and other third parties. As referenced above in relation to prospects involvement with boosters on NIL opportunities, disclosure would be required before a prospect signs an offer of athletically related financial aid or accepts an offer of admission.

Legislation would require current student-athletes to disclose information related to their business activities and relationships with individuals and other entities in advance of any arrangements for the use of their NIL and when changes are made to such agreements. In the case of advertisements or promotions of a third-party commercial product or service (or charitable, educational or nonprofit entity) the disclosure would include both Compensation arrangements, as well as details of relationships with an involved individual, commercial entity and third parties.

The student-athlete would be required to provide disclosure information in advance of any arrangements for the use of their NIL and shall provide updates to the information within 14 days if arrangements with the commercial entity or third parties change.

The NCAA Division I NIL Disclosure Subgroup of the Legislative Solutions Group developed a template disclosure form to serve as the basis for a nationally consistent standard for gathering required disclosure information from student-athletes who seek to engage in activities that involve the use of their NIL for promotional purposes. Institutions and conferences would be permitted to seek additional information beyond the baseline information required in the form. It was noted that the form may need to be customized depending on state laws regarding disclosure. It seems likely the disclosure form will see a few iterations as the NCAA NIL process evolves.

The Legislative Solutions Group agreed that student-athletes should be required to disclose involvement in NIL activities. Disclosure requirements will help to provide support to student-athletes, monitor booster involvement, ensure integrity of the recruiting process, and identify activities that may not align with the values of the NCAA, conferences or institutions.

Some third-parties intending to cultivate opportunities and represent student-athletes in the new NIL marketplace have expressed resistance to having to disclose NIL agreements’ terms and conditions, including transaction value, as that would arguably undermine the third-parties’ competitive edge for their clients in the NIL marketplace. This brings forward the discussion around the role(s) of the NCAA’s third-party administrators.

Third-Party Administrator

To support integrity and fairness in the new NIL environment, the role of third-party administrators becomes vital. Current NCAA rules do not require student-athletes to disclose NIL activities because compensation for such activities is not permitted, making disclosures unnecessary. Prospects submit academic and amateurism information to the NCAA Eligibility Center; however, there is no entity within the NCAA’s structures that currently requires any NIL activity disclosure.

As the NCAA has indicated, a third-party administrator is needed to develop a web-based platform for individuals to submit information to satisfy new disclosure requirements, report to an oversight entity (e.g., NCAA) national trends, and monitor and evaluate NIL activities for possible malfeasance. In addition, the third-party administrator could help ease the burden on campuses by providing supplemental education to student-athletes, prospects and key stakeholders (e.g., boosters, professional service providers). In other words, there may be multiple third-party administrators to fulfill these roles.

With hundreds of thousands of NCAA student-athletes, it is likely that the third-party administrator(s) will have to track millions of transactions yearly, not only to ensure that student-athletes are remaining in compliance with NCAA and state/federal rules, but also to ensure that none of the parties in the transaction (the student-athletes being the most important) will run into any legal and regulatory issues. On top of that list is ensuring student-athletes are in compliance with tax obligations, as the vasty majority have had little interaction with the IRS at their age.

The Legislative Solutions Group has agreed to explore whether disclosure efforts could be conducted through the assistance of third-party entities. The NCAA Board of Governors Federal and State Legislation Working Group encouraged the exploration of whether disclosure or enforcement efforts in this area should utilize the assistance of third-party entities at the local, conference or Association-wide levels, in part to help relieve the burden that campus compliance personnel may face attempting to monitor the newly permitted activities. Feedback from various groups has included concern related to activities of boosters and other involved individuals and entities, making third-party oversight fundamental.

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