Texas Gov. Greg Abbott signs transformative NIL bill

Add Texas to the list of states that have signed sweeping NIL reform on the local level aimed directly at bypassing oversight by the NCAA.

House Bill 2804 was passed in the Texas Senate after previously flying through the Texas House in late April. The bill was sent back to the House for a few minor changes in mid-May. And finally, the bill was signed by Gov. Greg Abbott on Saturday. It becomes law on July 1.

Political observers in the Lone Star State projected Abbott to sign the bill all along, especially since Texas, Texas A&M and other state school officials played a major role in shaping the legislation. Members of both parties also supported the bill.

“Since we passed our law two years ago, the college landscape on this issue continues to evolve,” Rep. Brandon Creighton while discussing the legislation. “And as a result, Texas must ensure that its name, image and likeness law remains competitive with other states.”

The signing comes on the heels of NCAA President Charlie Baker and college sports leaders lobbying lawmakers on Capitol Hill this week for a federal NIL bill.

Lawmakers in Arkansas, Colorado, Missouri, Montana, New York and Oklahoma have sponsored or passed bills in recent weeks to prevent the NCAA from launching investigations into NIL activities. Plus, NIL entities in Arkansas and Texas have opened the door for compensation models that have a closer connection to the school which is against the NCAA’s policy.

Baker appeared to have no patience for states acting against the NCAA.

“They say screw the NCAA,” Baker said. “Screw the conference. Screw their rules.”

NIL reform in Texas could be ‘tipping point’

National experts believe the Lone Star State’s move could be a watershed moment for NIL on the state level.

Yes, other states have passed NIL reform, including earlier this week in New York. But this is Texas – where everything is bigger, including the drive to see the Aggies and Longhorns succeed at the highest levels of college football.

“It could signal a tipping point,” John Holden, an associate professor at Oklahoma State that specializes in the rights of student-athletes, recently told On3. “Anytime Texas, California or Florida do something in college sports, other states are going to start making moves. No one is going to want to be left out.”

What’s in the new Texas NIL law?

The revised Texas legislation includes a number of provisions that are school and student-athlete friendly. But the most notable change appears to provide cover for state schools from being punished by the NCAA for any NIL-related violations, including any committed by collectives that have been set up to support student-athletes through deal facilitation.

According to the legislation: “An athletic association, an athletic conference, or any other group or organization with authority over an intercollegiate athletic program at an institution to which this section applies may not enforce a contract term, a rule, a regulation, a standard, or any other requirement that prohibits the institution from participating in intercollegiate athletics or otherwise penalizes the institution or the institution’s intercollegiate athletic program for performing, participating in, or allowing an activity required or authorized by this section.”

Texas arguably has one of the most expansive and striking groups of NIL collectives in the country. Collectives have become crucial ways for schools to keep talent on rosters and attract talented recruits. 

There are more than a dozen active NIL collectives in the Lone Star State, headlined by the Texas One Fund at Texas and The 12th Man+ Fund at Texas A&M. Yet, there are a handful of other wildly successful collectives in Texas, including Houston’s LinkingCoogs, TCU’s The Flying T Club, SMU’s Pony Sports DTX and Boulevard Collective and Texas Tech’s Dark Horse Collaborative and The Matador Club. There are even three collectives at UTSA, such as Runners Rising, 210 Inspired and City Fans 210.

Bill opens door for booster groups to fund NIL

Additionally, the legislation allows a college to establish agreements with a third-party entity to facilitate NIL activities on its behalf.

This part of the bill received a lot of attention after the 12th Man+ Fund launched at Texas A&M in February. The bill technically allows for the ability for third-party 501(c)(3) organizations, independent of athletic departments, to provide NIL compensation to athletes and provide priority status or other perks to donors. However, on Friday the IRS warned that NIL collectives could soon no longer be deemed public charities.

What the IRS memo means for the 12th Man+ Fund is unknown. Because the fund also raises dollars for facilities and other Texas A&M initiatives, it could argue it is acting as a nonprofit.

A&M and Arkansas are believed to be the first schools whose booster organization also is directly fundraising for NIL opportunities for student-athletes. Other schools in the SEC footprint, especially in Missouri and Oklahoma, are also aggressively pursuing similar organizations.

What will the NCAA’s reaction be?

While on Capitol Hill this week, Baker made it clear the NCAA has a list of wants in a Congressional bill: a registry of NIL deals, a certification process for agents and a uniform NIL standard.

For years, the NCAA has been lobbying Congress for antitrust exemption. That push has come around again in the last two years. With the patchwork of state laws in place across the country, the governing body believes the only way to enforce its policies is with the power to supersede NIL laws.

More than the legal issues laws create, Baker seemed annoyed states were making efforts to keep the NCAA from entering its borders. He had no problem calling out the previous NCAA regime for putting him in this position.

“When you have 30 states with different standards and different rules and different laws around NIL, and very few conferences that don’t cross multiple state lines, the whole questions about how you create a competitively-level playing field, which between and among teams in different conferences, skip the question about across the country, gets enormously complicated,” he said this week. “I think it was a big mistake for the NCAA not to do a framework around NIL when they had the opportunity. I think there were too many people in college sports that thought no rules would work well for them. And what everyone has discovered is no rules, no transparency, no accountability, no framework doesn’t work well for anybody. That’s one of the reasons why I think it’s possible Congress may be interested in doing something about this.”