When the first states announced they would allow student athletes to capitalize on their name, image and likeness (NIL), there was discussion on whether institutions within these states would have a recruiting advantage over colleges and universities in states without such laws. On July 1, 2021, the National Collegiate Athletic Association (NCAA) suspended its NIL rules, allowing all collegiate athletes to profit from their NIL regardless of whether legislation had been signed or taken effect at the state level.
This move by the NCAA helped level the playing field in some ways, but there is no denying that NIL is altering athletic recruiting at the collegiate level. With greater opportunities to earn money, top recruits, who in previous years may have pursued a professional athletic career out of high school or before depleting their collegiate eligibility, might give greater consideration to a full collegiate career. Top talent and those looking to maximize on their athletic reputation may look more favorably at states and institutions without NIL rules or with more lenient provisions than those with requirements that are more restrictive.
Institutions may use their NIL policies to their advantage but the degree to which they can be used for recruiting purposes has limitations.
The NCAA has a number of bylaws that govern recruiting activities in order to promote “a fair recruiting environment that limits intrusions into the lives of student athletes and their families.” There are rules around who can be involved in recruiting activities, when recruiting activities can occur and the conditions under which recruiting activities may take place.
The NCAA’s interim NIL policy upholds prohibitions on pay-for-play and impermissible recruiting inducements and does not allow NIL compensation contingent on enrollment at a particular institution. When recruiting a prospective student athlete, a coach may share what NIL deals other members of the team have closed and how the institution has helped student athletes maximize their NIL earning potential. However, coaches cannot guarantee NIL deals to a prospect without violating the NCAA’s interim policy.
Group licensing deals
Other than a few requirements, the limited guidance from state regulations and the NCAA’s interim policy leave much of the NIL landscape up for interpretation. This opens the door for opportunities for such as group licensing deals sponsored by boosters.
A Michigan State booster recently announced the largest NIL group licensing deal to date, a deal that offers Michigan State football and basketball players $500 per month in exchange for the players’ promotion of his company on social media. Instead of giving the nearly $800,000 in annual payments to the university, this money could go straight into the pockets of the student athletes who opt in.
Generally speaking, only institutional staff are permitted to recruit student athletes. Boosters not permitted to, among other activities, become directly or indirectly involved in making arrangements for a prospect to receive money or financial aid of any kind. These group deals are only offered to current student athletes, but it would be naïve to think that prospects are blind to the potential opportunity and coaches will not highlight them when talking to recruits. Aside from the recruiting implications and the potentially blurred line around improper inducements to current student athletes, NIL deals between athletes and boosters could also have a direct impact on gifts made to the institution.
Other recruiting impacts
Another way that NIL has impacted the recruiting landscape includes permissions to use institutional marks. Where not barred by state law, some institutions are permitting student athletes, typically on a case-by-case basis, to use their institutional marks (e.g., school colors and logos) as part of an endorsement. This stands to benefit both parties. The student athletes can use these marks to enhance their presence while the institution may benefit from the free publicity. However, authorizing use of trademarks does not come without risks (e.g., impacts to pre-existing contracts for trademark licensing rights and misuse of licensed trademarks).
With a patchwork of state and institutional rules and a lack of federal guidance, it is still uncertain how NIL will be used as a recruiting tool in the future.
Baker Tilly can help
We can help your institution take a proactive approach to evaluate the current state of your policies, processes, internal controls and definitions related to equity within athletic programs and identify opportunities to reduce the associated risks.