Here's how state NIL laws could challenge the NCAA's interim policy

A meeting in late July of Nevada’s Joint Interim Standing Committee on Education raised the question of what economic freedoms state NIL laws could protect for athletes beyond, or in spite of, what is defined by the NCAA’s interim NIL policy. Numerous state legislators have backtracked on NIL legislation that they often rushed to enact, by either amending state NIL laws or removing them entirely. So what if state legislators went in the opposite direction?

What happens when state laws legally protect NIL activities that the NCAA’s interim NIL policy either doesn’t specifically address or even expressly prohibits?

While numerous state legislators have amended their NIL laws, it remains to be seen if the Overton window will shift enough to prompt more drastic legal changes.

“If you’re talking about changes by degree, those are probably almost always going to get by,” said Bob Boland, who works in an Of Counsel role for Shumaker, Loop & Kendrick, LLP, and at the Seton Hall University School of Law as a full-time faculty member. Boland previously worked at Penn State as its Athletics Integrity Officer.

Nevada law allows NIL deals with gaming industry

On July 29, a state-appointed committee in Nevada that was tasked with studying NIL presented its recommendations to the state’s education committee. One of the NIL committee’s recommendations was for the education committee to send a letter to the Nevada Gaming Control Board and the Nevada Gaming Commission. The purpose of the proposed letter was to urge the two organizations to conduct a study concerning NIL implications for the state’s gaming industry.

“Considering we are a unique state in that we have the majority of gaming in the country, we just want to be forward thinking on that,” Assemblyman C.H. Miller said during the meeting.

While there are state laws and institutional policies that specifically prevent NIL deals between college athletes and gambling or gaming entities, Nevada’s state law isn’t one of them, ironically.

However, Nevada’s Assembly Bill 254, which was signed into law, says a university can “adopt a policy that imposes reasonable restrictions on a student-athlete entering into a contract… with an organization or person whose goods, services or mission are contrary to the mission of the institution.”

UNLV‘s NIL policy, obtained by On3 through a public records request, specifically names sports wagering as an industry that the university prohibits its athletes from engaging with for NIL deals. The policy doesn’t specifically mention other types of gaming or gambling entities, however.

Regarding establishments that don’t align with the university’s mission and value, the university policy states, “Examples of this include but is not limited to drug dispensaries, alcohol endorsements, sports wagering and adult establishments.”

‘State law would prevail’

The NCAA’s interim NIL policy doesn’t specifically address potential deals with the gambling or gaming industries. However, that’s generally beside the point in the larger context of how state laws stack up against NCAA rules.

There’s a reason a tweet that mistakenly refers to NCAA rules as “laws” will get ratio’d on Twitter.

“Even if there were an NCAA rule that prohibited a student-athlete from entering into a branding deal with a gambling establishment, for example, state law would prevail over that NCAA rule and allow that kind of involvement to happen,” Chief Deputy Legislative Counsel Asher Killian of the state’s Legislative Counsel Bureau said during the Nevada education committee meeting. “NRS 398.300 allows an institution to adopt a policy that imposes reasonable restrictions on student-athletes entering into those kinds of contracts. So, I think that’s the core of this question, and the origin of this recommendation from the NIL committee, to ask the Gaming Commission and Gaming Control Board to study this issue.

“There’s not a lot of understanding yet as to whether that would be a reasonable restriction or not, and there hasn’t been movement by the NCAA to determine whether that would be something that would violate their rules. But even if the NCAA did find that that violated their rules, state law would prevail in this instance.”

States repeal, suspend and amend laws

The NCAA’s 11th-hour, relatively barebones interim NIL policy is still in place more than 13 months after the NCAA Division I Board of Governors approved it on June 30, 2020. State legislators in Alabama and South Carolina have since repealed and suspended their NIL laws, respectively. That means institutions and college athletes in those states only need to follow the policies established by the NCAA and their respective institutions.

“I’m a huge advocate of every state just repealing its NIL law,” said Mit Winter, an attorney at Kennyhertz Perry, LLC, who specializes in sports law, business litigation and NIL. “To me, they’re pointless right now. If everyone just repealed their NIL law, they could just follow the NCAA rules. That, to me, is the way to go because the state laws are not necessary to allow the athletes to monetize their NILs.

“They just add additional restrictions on top of that.”

The removal of a state NIL law is intended to provide institutions and their employees, athletes and donors more freedom in the NIL landscape. Boland thinks schools in states with a NIL law are “a little better off” from an institutional perspective, given the potential protection and comfort a state law could provide.

So, rather than removing specific clauses, if not an entire law, in order to provide more leeway in the NIL landscape, what if state legislators intentionally provided additional protections to reach a similar outcome?

Sports and IP lawyer Darren Heitner recently tweeted that he “would love to see” a state enact a law that allows NIL compensation that’s contingent upon enrollment, or for athletic participation or achievement. A Q&A released by the NCAA regarding its interim NIL policy says that its prohibitions are subject to state law.

From the NCAA's #NIL Q&A:

Rules prohibiting compensation contingent upon enrollment and for athletic participation/achievement are "subject to state law."

Would love to see a state enact a law that says these activities are permissible and watch the NCAA's reaction. pic.twitter.com/SaVxplTytm

— Darren Heitner (@DarrenHeitner) August 8, 2022

One state has already passed an amendment that was subtly in this vein, even if it flew under the radar.

Illinois’ notable amendment to state law

In May, Illinois House Bill 1175 passed, which amended the state’s Student-Athlete Endorsement Rights Act. The most publicized amendment removed a prohibition on institutions from directly or indirectly arranging for a third party to provide compensation to a current or prospective athlete.

However, a separate, two-word change to the Student-Athlete Endorsement Rights Act was notable for another reason.

The law still says boosters, third-party licensees, individuals and entities can’t provide or arrange compensation as an inducement for a current or prospective athlete to attend or enroll at a specific school.

However, the amendment removed language — specifically the phrase “or attendance” — from a clause that previously said NIL compensation “shall not be conditioned on an athlete’s performance or attendance” at a particular institution.

Basketball players’ decisions give Illinois comfort

Here’s how the University of Illinois interpreted that specific amendment.

“Essentially, it is our perspective that NCAA rules generally do not address NIL inducements for continued enrollment at an institution,” Illinois INFLUENCE Program Coordinator Kam Cox wrote in an email to On3. “In this environment of ubiquitous transfers, there is a strong argument that the entirety of the student-athlete experience we provide (facilities, education, travel, coaching, etc.) operates as a type of inducement for continued enrollment. Aside from this, an inducement for continued enrollment would be practically impossible to identify except in the clear case of contingencies… The law is now designed to allow for NIL contracts and compensation to terminate if the primary circumstance changes.”

When asked about the impact of the amendment to the law in the context of the NCAA’s interim NIL policy, an NCAA spokesperson reaffirmed that NIL opportunities can’t be contingent upon enrollment.

Cox said he doesn’t believe the university’s interpretation conflicts with the NCAA’s interim NIL policy.

“Our reading of the word ‘contingent’ within the first bullet under ‘Guidance Related to Current Student-Athletes‘ leads us to believe that the NCAA is addressing future potential opportunities that would exist only upon a return to a particular school, as opposed to a current opportunity that exists into the next season,” he wrote. “We feel more comfortable about this in the context of several highly-publicized cases of men’s basketball players remaining in school at the end of this past year purportedly as a result of the NIL opportunities they could expect to earn starting at the end of last season, over the summer, and into this next season.

“Of course, to the extent, there is a conflict between NCAA policy and state law, our state law would govern, and this principle also gives us comfort.”

It’s a similar message to what Killian, of Nevada’s Legislative Counsel Bureau, said at the state’s recent education committee meeting. State law has authority over the NCAA’s interim NIL policy, unless and until theoretical state law changes the NIL landscape dramatically enough that the NCAA decides to challenge it in court and wins.

NCAA claimed California bill ‘unconstitutional’

In the larger picture of the NIL landscape, the state of Nevada continuing to protect its athletes’ potential NIL opportunities with the state’s prominent gaming industry and the University of Illinois’ interpretation of a two-word change to state law are relatively subtle developments. Respectively, they required a close eye on a minor change in a state bill and spending a morning watching a live stream of a state committee meeting that took place three time zones away.

Alone, either one is unlikely to change how college athletics or the NIL ecosystem operates.

But what if state legislators took it one step further and gave legal protection to recruiting inducements or performance-based incentives?

The NCAA previously claimed in a 2019 statement that it believed California Senate Bill 206 to be “unconstitutional.” The signing of the bill, also known as the “Fair Pay to Play Act,” started the domino effect that led to the NCAA’s NIL era, while Florida legislators sped up the process by passing a law of their own.

Three years after the NCAA’s fight against California’s landmark law, what are the NCAA and its member institutions’ appetite for more lawsuits? How much would state legislators fear potential litigation?

The NCAA and its co-defendants spent more than $250 million in legal fees and settlements as a result of NCAA v. Alston, according to USA TODAY’s Steve Berkowitz.

Outbound NCAA president in Mark Emmert will step down by June 30, 2023. Longtime NCAA general counsel Scott Bearby was named senior vice president of legal affairs and general counsel after former NCAA Chief Operating Officer and Chief Legal Officer Donald Remy was appointed as the U.S. Deputy Secretary of Veterans Affairs in July 2021.

Nevada’s history with the NCAA

Boland and Winter each separately pointed to previous litigation between the NCAA and notable figures at UNLV — NCAA v. Miller, which followed NCAA v. Tarkanian — as an example of the legal strategy the NCAA could theoretically choose to take if the association ever chooses to fight any future, permissive amendments to state laws.

In 1988, UNLV men’s basketball coach Jerry Tarkanian filed suit against the NCAA, arguing he had been deprived of his due process rights after the NCAA’s Committee on Infractions found the UNLV men’s basketball program to have committed nearly 40 violations, including 10 allegedly committed by Tarkanian. The Committee of Infractions imposed sanctions on UNLV and asked the university to show why it shouldn’t receive additional penalties if it didn’t suspend Tarkanian.

The latter case was decided in 1993 after the NCAA filed a suit against defendants that included Tarkanian and then-Nevada Gov. Robert Miller. Following NCAA v. Tarkanian, Miller had signed into law a statute that granted due process protections to individuals or institutions in the state that were subject to investigation for potential NCAA rules violations.

In NCAA v. Miller, the courts ruled that the state’s statute violated the Commerce Clause and the Contracts Clause for controlling commerce that occurred outside of Nevada.

How would the NCAA react to bold change?

“I think you could theoretically see the NCAA take that up under a Dormant Commerce Clause theory… that this is now a state regulating an entire industry,” Boland said. “The NCAA probably wouldn’t do that, given the current, tenuous nature of their own antitrust statute. They probably don’t want to engage in a lot of litigation putting out brush fires around states. I think they’ve taken a posture that’s not something they want to do and the states who have been aggressive have been aggressive in just sunsetting their laws.”

Referring to NCAA v. Miller, Winter said, “If it ever did come to a situation where a state passes a law that says either NIL deals can be offered as inducements or something along those lines — collectives can get involved in recruiting, whatever it might be — if the NCAA did want to challenge those laws, I think they would do it the same way they did in that case.”

Could changes in public and judicial sentiment on amateurism lead to a different result from the 1980s and ’90s in a theoretical lawsuit involving the NCAA?

Right now, that question remains hypothetical, especially as states such as Alabama and South Carolina have repealed and suspended their respective laws, rather than doubling down on legal protecting specific NIL activities.

A state law that theoretically creates significant additional protections, however, rather than restrictions, would still have authority over NCAA rules, unless and until a potential lawsuit from the NCAA has its desired effect in the courts.

With the initial wave of state NIL laws that took effect in 2021 as proof of the NCAA acquiescing, it might take strength in numbers for theoretical, aggressive state laws to take hold.

“The die was cast for the NCAA,” Boland said of the start of the NCAA’s NIL era. “They either had to adopt a rule that permitted NIL or do what they did, which was essentially pull back their amateurism regulations to permit NIL.”