The Act was passed in the wake of the NCAA issuing a “guidance” to schools regarding permissible and impermissible conduct in the NIL arena. See, NCAA Guidance Allows Schools to Engage in Certain Name, Image, and Likeness Activities With Student-Athletes, NIL Entities. Although the issues are still far from black and white, the Act does provides some clear guidance as to what is and is not allowed:
COLLEGE ATHLETES CANNOT BE PROHIBITED FROM MAKING NIL MONEY
The Act makes clear that student-athletes may make money off of their name, image and likeness. Specifically, the Act states that schools, the NCAA, and conferences cannot prevent student-athletes from making money off their NIL. Typical examples of avenues a players can profit from their NIL include brand promotions, including social media marketing, and media appearances. See § 6438-A(2).
Schools, conferences, and the NCAA are also prohibited from preventing student-athletes from obtaining professional representation, including but not limited to, representation by attorneys or agents that are licensed by the State. Professional representatives must be licensed and/or registered under NY state law. Agents must be registered under the New York General Business Law and attorneys must be admitted to the New York bar. See § 6438-A(4)(a)-(c).
Schools themselves are prohibited from compensating student-athletes for their NIL, but they are allowed to provide scholarships for the cost of attendance (scholarships do not count as compensation under the Act. If a school provides a scholarship, they cannot revoke it if the player earns money from NIL deals, or because the player obtained legal or agent representation. See § 6438-A(3),(5).
RESTRICTIONS ON NIL DEALS IN NY
While athletes may make money from their NIL, there are restrictions on the parameters of those deals. The Act prohibits players from entering into NIL contracts if a provision of the contract would “cause a conflict” pursuant to a list of enumerated potential grounds:
- The proposed contract would cause the student-athlete to violate the team contract;
- The proposed contract would cause the student-athlete to violate the college’s student handbook or code of conduct;
- The proposed contract would conflict with an existing contract of existing school sponsor;
- The proposed contract would reasonably be judged to cause financial loss or reputational damage to the college;
- The proposed contract would require actions by the student-athlete during team activities;
- The proposed contract would require actions by the student-athlete during scheduled classes;
See § 6438-A(6)(a)-(d).
The law states that student-athletes shall not enter into a contract that “causes a conflict” and requires schools to identify the “relevant contractual provisions that are in conflict”—but it is silent as to what happens if a student-athlete disagrees with the school’s determination. Having gone into effect January 1, 2023, we have no judicial guidance as to how conflict situations are evaluated. However, the statute appears to give schools wide leeway in asserting at least some of these grounds. For example, the Act provides that a school may assert a conflict based on the ground that it “would reasonably be judged to cause financial loss or reputational damage to the college.” This is a vague standard at best, and only time will tell what type of proof will be needed should these situations end up in court (which based on the money involved, is a good probability of happening). Similarly, it seems likely schools will be given wide deference in asserting conflicts based on: violations of team contracts, handbooks, and codes of conduct; scheduling around team activities and classes; and conflicts with existing sponsors. There is no definition of what constitutes a conflict, leaving more room for argument down the road. It also is a distinct possibility that schools will amend team contracts, handbooks and codes of conduct to ensure that they control the show. That being said, schools want to attract the best players, and the best players want lucrative NIL deals, and thus schools will likely want to work with their star athletes to allow deals to go through.
While there are restrictions on permissible NIL deals, it is notable that the Act doesn’t specifically prohibit categories of products of services (e.g. alcohol, cannabis, gambling). Other state laws do have category-specific exclusions. For example, the Texas NIL statute (effective July 1, 2021) prohibits athletes from working with companies like e-cigarette brands, alcohol, and gambling.
SCHOOLS MUST IMPLEMENT PROGRAMS TO ASSIST STUDENT-ATHLETES
Finally, the Act also requires schools to provide:
- Programs relates to financial literacy, career development, and mental health
- Financial services such as savings plans and funds for those with hardship