As we reported last week, the College Sports Commission (CSC) issued initial guidance on how it would evaluate student-athlete NIL deals. As part of that guidance, the CSC promised to make available additional information “pending discussions with House class counsel.”
On July 31, the CSC made good on that promise, and in doing so, altered the initial guidance it previously issued. The CSC’s new guidance focused solely on the valid business purpose (VBP) criterion for evaluating NIL deals. It indicates that, in furtherance of the prohibition on “pay for play,” the House settlement allows the defendants to adopt the VBP test as a benchmark for reviewing NIL deals between associated entities and student-athletes. The CSC refers to the language of NCAA Bylaw 22.1.3, which states in relevant part:
[A]n associated entity or individual shall not enter into an agreement with or provide payment to a prospective student-athlete or student-athlete unless the agreement or payment terms, as determined by the name, image and likeness clearinghouse, are for a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit . . . .”
The CSC guidance indicates that, to meet the VBP requirement — and satisfy NCAA Bylaw 22.1.3 — the NIL payment must be related to the promotion of goods or services that are sold “for profit.” The guidance clarifies that the inquiry focuses on whether the sale of the goods or services is for profit, as opposed to the profitability of the entity itself. It states that the CSC may require student-athletes or entities to provide “information and documentation” establishing the “entity’s efforts to profit from the deal.” It warns that refusal to supply such evidence may result in the CSC not clearing the NIL deal.
The guidance further reminds student-athletes that the existence of a VBP is not the end of the inquiry. Under Bylaw 22.1.3, the compensation must also be “at rates and terms commensurate with compensation paid to similarly situated individuals with comparable name, image and likeness value who are not prospective student-athletes or student-athletes of the institution.” Lastly, the guidance indicates that an associated entity or individual can serve as a marketing agent, matching student-athletes with businesses offering NIL opportunities.
Just as important as the additional, revised guidance the CSC provided are the deletions the CSC made from its prior guidance on VBP. The prior guidance described in greater detail the circumstances under which an associated entity such as a collective could not compensate student-athletes within the bounds of the VBP test. It indicated that an associated entity’s effort to compensate a student-athlete to appear at an event open to the general public (e.g., a golf tournament), would nevertheless likely fail the VBP test because the entity itself (the collective) exists primarily for the purpose of providing NIL compensation to student-athletes. The CSC has now jettisoned this guidance. Instead, it now focuses on the sale of goods or services for profit, and it makes no mention of the character of the entity.
The CSC’s citation to Bylaw 22.1.3 does create some lack of clarity with respect to its guidance. The CSC still requires that student-athletes report all third-party NIL deals that add up to or exceed $600, but Bylaw 22.1.3 does not reach all third-party NIL deals; by its name, it only addresses “involvement of associated entities or individuals in student-athlete name, image and likeness activities.” One interpretation of the CSC’s present citation to this bylaw is that there are certain NIL deals between associated entities (like collectives and booster organizations) and student-athletes that could satisfy the VBP test. This would be a stark departure from the CSC’s earlier guidance, which suggested that a collective or booster organization could never meet the VBP test because their primary purpose is to compensate student-athletes.
In a letter the CSC sent to the athletic directors of Division I institutions, the CSC indicated that it will be reevaluating NIL deals that were not cleared under the prior guidance. In a separate statement, CSC CEO Bryan Seely expressed that “[E]very NIL deal done with a student-athlete must be a legitimate NIL deal, not pay-for-play in disguise.”
