In this week’s Film Room, we’ll flag key issues to consider as you optimize the NIL strategy for your campus following the NCAA’s Updated Q&A Regarding the Impact of the Proposed Settlement, which provided notable guidance on contingent offers and NIL in the current, pre-House settlement approval period.
Offers Contingent on an Approved Settlement
Q&A No. 30 noted that an institution may offer a student-athlete or recruit benefits contemplated by the settlement. Specifically, Q&A No. 30 directed that:
The membership has had the opportunity to sit with the terms of the proposed settlement for months. Still, it is somewhat jarring to see express guidance from the NCAA that contingent offers of proposed settlement benefits—i.e., payments—to student-athletes and recruits are permissible. While this guidance provides comfort with respect to NCAA rules compliance, it doesn’t resolve other practical and legal issues raised by contingent offers. Institutions can lower risk by:
- Ensuring that language in any written offer details the nature of the contingency with great clarity. For example, what if ultimately approved settlement terms differ from what has been proposed? How does the institution’s written communication with student-athletes and recruits account for that?
- Before making any contingent offers, deciding the type—direct NIL, scholarship increases, Alston funds, etc.—and amount of benefits an institution is prepared to provide. An institution must be ready to follow through on extended contingent offers.
- Communicating with specificity to coaches regarding:
- the language coaches may use—and language coaches must avoid—when communicating with student-athletes and recruits about proposed settlement benefits and what may be available to them; and
- revenue share amounts and other settlement benefits available to specific programs (again, an institution must be ready to pay promised amounts in contingent offers).
- Developing internal controls and systems to manage and track offer specifics across programs.
NIL – Now, Pre-approval (April, Maybe?), and after July 1, 2025
The settlement includes a placeholder providing that the membership can legislate “clarifying rule changes” that “may include specifying that the NCAA and/or the Conference Defendants prohibit NIL payments by Associated Entities or Individuals (individually or collectively) to current or prospective student-athletes; unless the license/payment is for a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit.” (emphasis added).
Q&A No. 31 fills in some detail regarding the expected fair-market-value (FMV) analysis and how the NCAA will approach third-party NIL deals entered into over the coming months. Peculiarly, both the contract date and the timing of payments under third-party NIL deals make a difference in how they will be analyzed:
So:
- Existing third-party NIL deals are not subject to FMV review provided that no payments pursuant to those deals occur after July 1, 2025.
- Any new third-party NIL deals entered into before House settlement approval (as early as April 7, 2025, but specific timing is anyone’s guess; and, of course, approval is not guaranteed) are not subject to FMV review provided that no payments pursuant to those deals occur after July 1, 2025.
- Any third-party NIL deals entered into after House settlement approval are subject to FMV review, even if payments occur before July 1, 2025.
As a result of this quirk, Collectives and other Associated Entities and Individuals are hustling to make payments sooner to avoid FMV scrutiny.
Thoughtful drafting of NIL deals in the works can thread the needle. For example, deals entered into prior to House approval, with payments made prior to July 1, 2025, should avoid FMV scrutiny even if contractual obligations continue beyond July 1, 2025.
As we mentioned in our January 15 post, entities and individuals that can steer clear of FMV scrutiny altogether if they don’t classify as an Associated Entity or Individual.
Roundup of This Week’s Courtroom Activity
A few interesting objections to the House settlement were submitted this week:
- One student-athlete complained of the lack of damages payable to non-scholarship student-athletes, including those who saw a lot of the field.
- Another student-athlete argued that alleged conflicts among class members (student-athletes) and the settlement’s imposition of roster limits present technical bars to approval.
- An amicus brief (non-class member) argued that the prospective aspect of the settlement (the revenue share structure and terms) violates the antitrust laws and should be rejected.
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