In this week’s Film Room, we break down newly reported detail on third-party NIL clearinghouse procedures.
Actionable Information Regarding Clearinghouse
Last week, Ross Dellenger of Yahoo! Sports reported on a memo detailing NIL clearinghouse information. Regarding the third-party NIL deal review process, the memo provided that:
- Institutions will determine whether the payor (third party) is an Associated Entity/Individual
- Submitted deals will be reviewed to determine whether they “legitimately advance business objectives”
- A 12-point “Range of Compensation” analysis will be applied to deals to determine if “compensation aligns with similarly situated individuals in comparable deals”
The memo noted that the Range of Compensation uses “historical deal data as benchmarks” and its factors “include athletic performance, social media presence, local and institutional market size, and brand influence.”
The clearinghouse will adjudicate submitted deals as (1) cleared, (2) not cleared, (3) in review or (4) information needed. For those deals “not cleared,” student-athlete options are to (i) renegotiate and submit, (ii) proceed at risk of eligibility consequences, (iii) cancel the deal or (iv) request neutral arbitration. Obviously, it would be best for all involved to avoid such consequences.
What to Do?
The settlement provides that third-party deals involving Associated Entities/Individuals may be analyzed for a valid business purpose—that placeholder is being filled by the clearinghouse. Deals that do not involve Associated Entities/Individuals are not subject to the same scrutiny. We’ve spoken at length on the major implications of this settlement construct in past editions of Film Room.
Now with increased clarity on third-party NIL enforcement, institutions can do two things to best position themselves and reduce regulatory friction for their student-athletes:
- Actively facilitate deals with non-Associated Entities/Individuals. Institutions have great access to businesses that value the promotional opportunities available through joint sponsorship deals involving both the institution and its student-athletes. Yesterday, NIL excellence meant funding the collective. Tomorrow, NIL excellence will be measured by an institution’s ability to strike these sophisticated arrangements.
- Dig into the Range of Compensation factors and ensure student-athletes and Associated Entities/Individuals are tracking so that deals subject to the clearinghouse are best positioned to meet standards.
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