On July 10, the College Sports Commission (CSC) published guidance on its website setting out additional information concerning the criteria for evaluating student-athlete NIL deals.
Beginning on June 7, NCAA Division I student-athletes must report all third-party NIL deals valued at $600 or more via the NIL Go portal. The CSC indicates that the NIL deals will be evaluated based on three criteria: the payor association, the valid business purpose, and the range of compensation.
Payor Association: CSC will first evaluate deals to determine whether there is any relationship between the payor and the student-athlete’s institution of enrollment, i.e., whether the payor is deemed an “associated entity” for NIL purposes.
- Any entity that exists primarily for the purpose of (a) promoting or supporting a particular institution’s intercollegiate athletics program or student-athletes; and/or (b) creating or identifying NIL opportunities solely for a particular institution’s student-athletes;
- Any entity that assists in the recruitment or retention of student athletes or which is requested to do so by the athletic department staff; and
- Any entity that is owned, controlled, operated by, or affiliated with an associated entity, other than a publicly traded corporation.
The guidance mirrors that provided by the NCAA and conferences in their recently released Q&A. Interestingly, in discussing this topic, the CSC emphasizes the importance of institutional cooperation, stating that “[i]t is critical that schools provide the College Sports Commission with information about the entity involved in the deal when it’s requested.”
Valid Business Purpose: Next, the CSC will evaluate whether deals have a valid business purpose (VBP), i.e., whether the deal “demonstrate[s] a legitimate commercial rationale,” Including (1) that the student-athlete’s NIL is being used to promote a good or service being offered to the public for profit, and (2) the entity complies with industry-standard NIL practices.
The CSC’s guidance further highlights the importance of the “business purpose” of the entity providing the NIL payments. Where an entity exists primarily for the purpose of providing NIL payments or benefits to student-athletes (e.g., a collective or booster organization), the guidance states that the CSC will not find that NIL agreements with these entities meet the VBP test. This is true even if the entity contracts with the student-athlete to appear at an event open to the general public. However, according to the CSC, an NIL deal might satisfy the VBP requirement even if the payment is made by a collective if “there is documentation establishing that the sources of those specific funds were the entities with a valid business purpose that received the benefit of the student’s NIL.” This purports to allow entities (including collectives) to act as de facto “marketing agencies” that connect student-athletes with businesses that have a valid purpose.
Range of Compensation: Lastly, the CSC has stated that each NIL deal will be evaluated to determine if it fits within a range of compensation (RoC). This RoC analysis is a “valuation process” aimed at determining whether the NIL compensation is commensurate with that paid to similarly situated individuals with comparable NIL value, taking into account multiple factors, including the performance obligations under the deal, the student-athlete’s athletic performance and social media reach, and the local market. Importantly, the CSC stated affirmatively that it (and NIL Go) will not be calculating the fair market value of NIL deals. However, the present guidance does not clarify the differences between fair market value and the RoC calculation.
The guidance concludes by promising additional information following discussions with class counsel in the House litigation.
In a statement issued on July 10, The Collective Association expressed its position that the CSC guidance regarding a deal’s valid business purpose is “deeply dismissive” of collective organizations.
