YOUR BUSINESS AUTHORITY
Springfield, MO
YOUR BUSINESS AUTHORITY
Springfield, MO
We’ve entered the Wild West of recruiting in college athletics. Changes to NCAA rules regarding the athlete transfer portal and the ability of college students to monetize their public image have given way to a true arms race between colleges and states vying for athletic dominance. This rapidly shifting landscape presents both opportunities and risks.
The term name, image and likeness broadly refers to the bundle of rights individuals possess to use their public persona to earn income by marketing or promoting certain businesses, products or causes. This collection of rights, often referred to as the right of publicity, finds its origins in the right of individuals to control how their personal name and image are used in commerce – think the Gerber Baby or the George Foreman Grill. A person’s name, image and similar personal information have long been recognized as valuable assets. In 2021, the NCAA changed its rules by adopting an interim policy allowing college athletes, for the first time, to use their NIL rights in commercial contexts to earn money while still enrolled in school. Think endorsement deals and personal appearances. However, the NCAA did not specify the precise rules governing the use of NIL rights. This shift opened the floodgates for individual states and universities to adopt their own policies.
Missouri was an early adopter of expansive NIL laws in 2021. And beginning last year, the Missouri legislature reinforced its aggressive stance by amending the state’s statutes to significantly expand the ability of business and student athletes alike to capitalize on the opportunities originally afforded to student athletes by the NCAA.
Recent developments
Under the 2023 amendment, high school students who have signed letters of intent to play for a college inside the state of Missouri may participate in NIL opportunities for the first time. This change provides a key tool for recruiting by in-state colleges. Arkansas and other neighboring states recently adopted similar laws, deepening the NIL arms race.
While the expansion of NIL opportunities to certain high school students garnered headlines, other, less splashy, changes contained in the 2023 NIL law are equally notable. The new law permits colleges to have a more hands-on role in educating and facilitating NIL opportunities for its student-athletes, including offering educational workshops on topics such as financial literacy and time management.
Student athletes are also granted a private right of action to sue those who interfere with their ability to monetize NIL rights. And perhaps most impactfully, the Missouri law directly challenges the authority of the NCAA, and to a lesser extent the IRS, to regulate in-state NIL activities.
However, the Missouri legislature is not the only catalyst affecting the student athlete compensation rules. Last month, a federal judge in Tennessee barred the NCAA from enforcing its rules prohibiting high school recruits from receiving NIL compensation. In granting an injunction against the NCAA, the judge ruled that portions of the NCAA’s NIL rules were anticompetitive and deprived athletes from obtaining full, fair-market value for their NIL rights.
In response to individual states’ NIL laws and the recent court ruling, the NCAA renewed its call for Congress to step in and pass federal NIL legislation. NIL rules are far from settled and we can expect further developments in the coming years.
NIL in practice
Missouri’s new law brings exciting new opportunities for businesses and student athletes to take advantage of the expanded access to NIL deals. However, it’s important to keep in mind that NIL deals are, at their core, licensing contracts that are governed by both state and federal laws. As with all contracts, it is critical for parties to understand their respective rights and responsibilities before signing.
With NIL contracts specifically, businesses need to ensure that they clearly understand what provisions can and cannot be included in an NIL agreement. For instance, Missouri’s law says a student athlete’s NIL compensation may not depend on a student’s athletic performance.
Additionally, there may be tax consequences for both businesses and student athletes who participate in NIL deals. Certain tax-exempt organizations should think carefully about whether and how to participate so as to not invite scrutiny. Similarly, most NIL deals involve payments to student athletes, and this may have personal income tax consequences.
New developments in Missouri law regarding NIL deals present powerful opportunities to student-athletes and businesses alike. However, business owners must be certain that they protect themselves through good contract drafting and stay informed about changes in Missouri law, NCAA policy and school policies while keeping their focus where it belongs: achieving success both on and off the field.
Ben Shantz is an attorney with Spencer Fane LLP in Springfield. He can be reached at bshantz@spencerfane.com.
Moseley’s Discount Office Products was purchased; Side Chick opened in Branson; and the Springfield franchise store of NoBaked Cookie Dough changed ownership.
