Have you heard collegiate Name, Image and Likeness (“NIL”) referred to as “The Wild, Wild West?” To understand why, don’t think Billy the Kid or Pancho and Lefty. Think profiteering and seemingly endless freedom without much governmental authority or intervention.
NIL across America has become big business. Yahoo Finance reports the first year of NIL activity yielded ~$917mm in earnings for collegiate athletes, with second year projections exceeding $1 billion. NIL market reached $917 million in first
year (yahoo.com). If the history of capitalism in America and the explosion of NIL across it are any indicators, the NIL market will continue to rapidly grow in size and value without reform or regulation.
But how did we get here, with NIL being compared to the “Wild, Wild West?” Most agree this story began in 2009, when Ed O’Bannon filed a lawsuit challenging the NCAA and others’ free use of athletes’ images and likenesses for commercial profit. Do you remember the O’Bannon brothers from UCLA? They were key players on the 1995 NCAA Basketball Championship Team. Ed was better than Charles (sorry Charles). While the conclusion of O’Bannon’s lawsuit is a bit confusing and ambiguous, the case is important because of the August, 2014 ruling by Judge Claudia Wilken of the United States District Court for the Northern District of California, which held that the NCAA could not prevent student athletes from earning money on the use of their names and images. This ruling was monumental because she’s a Federal Judge, meaning she was appointed to the Bench by the President of the United States and confirmed by the U.S. Senate. Suffice to say, when she ruled in 2014, the NIL ground shook, so to speak.
Within 5 years, the NIL wildfire started to spread. By September, 2019, California Governor Gavin Newsome signed “The Fair Pay to Play Act,” the first State law passed authorizing collegiate athletes to profit off their NIL. A few other States followed in 2020.
Also in 2020, the NCAA created a policy which I will refer to as the “National NIL Rule” to regulate NIL in collegiate athletics. As you might expect, the National NIL Rule proposed that the NCAA retain power and authority to regulate the NIL space.
In January, 2021, just before the NCAA was set to vote on its National NIL Rule, the U.S. Department of Justice notified the NCAA that the National NIL Rule could, if approved and implemented, violate Antitrust law. The NIL Era Has Arrived: What the Coming of July 1 Means for the NCAA (harvardjsel.com) Think Monopoly. In response, the NCAA quickly abandoned efforts to promulgate the National NIL Rule and immediately switched gears to increase efforts to lobby Congress to pass a Federal law regulating NIL. Ultimately, these efforts also failed. But why? What happened? Most observers blame the NCAA because it failed or refused to lobby Congress for a law that would have bicameral support because the NCAA refused to give up control in the NIL space. By example, as far back as 2020, Senator Jon Tester (D-MT) quipped to the NCAA in a subcommittee meeting: “To be honest with you, you don’t want us [Congress] to solve this. You want us to help you solve this.” Senate Critical of NCAA at NIL Hearing on Student Athlete Pay (frontofficesports.com)
Importantly, during this same time – January 1 – July 1, 2021 – we saw a strong lobbying effort from a number of southern States pushing to immediately pass State NIL laws, making them effective on July 1, 2021. Indeed, the lineup of States looked almost like an SEC Basketball tournament: Florida, Georgia, Alabama, Tennessee, Texas, Mississippi , and New Mexico and executive orders were issued in Kentucky and Ohio. The NIL Era Has Arrived: What the Coming of July 1 Means for the NCAA (harvardjsel.com) Why did these unexpected developments occur? That is a tougher question to answer – and I am sure there is disagreement. It appears these southern States became concerned they would lose out in the recruiting battle (and untold revenue) and deemed NIL to be essential to their future success. I think these States also developed a reasonable and healthy fear the NCAA was impotent to regulate and enforce NIL in the future. After all, the NCAA failed to regulate NIL via the National NIL Rule and failed (thus far) to successfully lobby Congress for a Federal Law regulating NIL.
In early June, NCAA then-President Mark Emmert appeared before the U.S. Senate Commerce Committee to ask Congress to pass a Federal NIL law. His requests were denied. At that hearing, Senator Marsha Blackburn (R-Tenn) boldly declared: “The inability to move to a point of decision has just been an insufferable…event for so many of the student-athletes and their parents. This is why the states have taken it upon themselves to do what the NCAA has proven incapable of doing…” Ouch. Senators pressed to step into NCAA student-athlete ‘NIL’ debate by July 1 (rollcall.com)
This story gets more interesting and complicated on June 21, 2021, the date the U.S. Supreme Court unexpectedly released its unanimous opinion, NCAA v. Alston, 141 S. Ct. 2141 (2021). 20-512 National Collegiate Athletic Assn. v. Alston (06/21/2021) (supremecourt.gov) This case is important more for what it did than what it held. Let me explain.
Alston is an Antitrust lawsuit against the NCAA. The issue before the Court focused on whether the NCAA’s rules limiting education-related compensation/benefits violated Section 1 of the Sherman Act, codified at 26 Stat. 209, 15 U.S.C. §§ 1 – 7. Justice Brett Kavanaugh’s Concurring Opinion includes perhaps the case’s most oft-quoted language: “The NCAA is not above the law.” Id. He went on: “The NCAA couches its argument for not paying student athletes in innocuous labels. But the labels cannot disguise the reality: The NCAA’s business model would be flatly illegal in almost any other industry in America.” Id. After reading that language and after realizing Alston was a unanimous ruling, can you tell the Supremes are not big fans of the NCAA regulating NIL? Well, the NCAA did. And the July 1, 2021, effective date for NIL laws across a number of SEC-rich States was only 10 days away! So the NCAA immediately whipped up support for NCAA passage of an NIL “Interim Rule.” As a result, on June 30, 2021, the NCAA announced it passed the “The Interim Rule,” which permissively and generally authorized NIL (while still prohibiting Pay-to-Play and Inducement to Enroll/Recruiting).
Since July 1, 2021, Congress has not intervened in NIL to any significant degree, so there still is no Federal NIL law on the books. This has resulted in a “patchwork” of State laws being passed across a number of States which differ in substance and form from each other. Other States have not passed any NIL law.
We need a uniform, fair and reasonable set of rules to regulate NIL across the entire collegiate space.