VerifiedInk says Verified Fan Challenge permissible NIL pay to recruits

When the NCAA unveiled its interim NIL policy in June 2021, the association’s press release said the policy “preserves the commitment to avoid pay-for-play and improper inducements tied to choosing to attend a particular school.”

Aaron Linksy and Nate Slutzky, the co-founders of the NFT platform VerifiedInk, say the platform’s Verified Fan Challenge feature is a way for college sports fans to get involved financially in the recruitment of high school athletes without violating the NCAA’s interim NIL policy, state laws or high school athletic association regulations.

On3 contacted several attorneys and industry professionals to get their perspective on the new NFT platform’s feature that incentivizes fans to get involved in recruiting. The keys for all parties involved, they said, is for VerifiedInk to maintain a metaphorical arm’s-length distance in its relationships with NCAA member institutions and that boosters don’t purchase NFTs as recruiting inducements.

The Verified Fan Challenge page on VerifiedInk’s website says, “Show your Fandom! Help your team land and keep top talent.”

Through VerifiedInk’s Verified Fan Challenge, users who purchase a high school athlete’s NFT trading card can declare which school(s) they support. A user can support multiple schools for the same player. A leaderboard next to the athlete’s NFT trading card shows the amount of money committed by fans of each school.

If the athlete commits to a school other than the one a user selected, then the user can choose to “burn” the NFT and receive a 100% credit to use on another NFT trading card through the Verified Fan Challenge.

The feature could be proof that it may not be a cliche when someone says the NIL landscape is changing weekly, if not daily.

“This is one of the many situations where we don’t quite know where all the lines are and we don’t quite know where those lines are going to be defined,” said Bob Boland, who previously worked at Penn State as its athletics integrity officer before joining Shumaker, Loop & Kendrick, LLP, in an Of Counsel role and the Seton Hall University School of Law as a full-time faculty member.

VerifiedInk temporarily takes down NFT

Last Thursday, VerifiedInk took down the NFT trading card for one of the two high school athletes who was featured on the Verified Fan Challenge. A public relations representative for VerifiedInk said the move is temporary and that the athlete’s participation on the platform is compliant with the relevant regulations.

However, the president of the athletic association in which the athlete’s school competes told On3 in an email that the association doesn’t have an NIL policy and that the association hasn’t discussed one. The president wouldn’t answer questions as to whether NIL deals are currently allowed without impacting an athlete’s eligibility.

“We are doing it in ways that are staying within the NCAA’s guidelines as they currently stand,” Slutzky said last week during a Zoom call with On3, which took place before the athlete’s NFT trading card was taken down. “The way that we’re operating it where there’s no direct pay-for-play, nothing is based explicitly on what college the athlete goes to school at. We have other ways of determining what athletes, if they make a commitment somewhere, it really has nothing to do with that school. It’s just that other schools, we’re allowing fans to release their money, so there’s really nothing about committing to a particular school that’s basically them causing a payment to occur. The payments have already occurred.

“So we’re staying within those guidelines and I imagine those guidelines are very likely to get looser and not stricter because I think we’re getting closer and closer to an environment where athletes will get just directly compensated for their play.”

A previous press release promoting the participation of the athlete, whose NFT trading card has since been taken down, said, “When fans purchase his NFT trading card, total sales start to build up and in turn provide an incentive… to stay committed” to the college in which he’s committed.

That would give the athlete “a lot more to lose if he decides to change his mind and gives fans the opportunity to get in on the recruiting action,” according to the press release.

“If it’s just a leaderboard, it’s kind of an agnostic site, right?” Boland said. “It’s tracking stuff, who’s bidding on NFTs, who’s out there doing it. I think the challenge comes is when, does it become part of any school’s recruitment or is it conceived of as part of one school’s recruitment? … I think there are worries there.”

Creating competition through NFTs

A public relations representative said VerifiedInk recommends high school athletes mint NFT trading cards before they commit to a school in order to create competition among multiple schools’ fan bases.

“That utility, if you will, that we’re providing is helping them make that decision,” Linksy said. “It is saying, ‘I’m a fan of Ole Miss and I bought seven of your cards. I’d like it if you came to my school.’ And then the way that we’ve also made that even lower-risk is with our guarantee of, ‘If he chooses to go to another school, that’s fine and you can return your card and use whatever money you used to buy those initial cards on other athletes on the platform.'”

Slutzky spoke in four and five-figure terms as the type of revenue from NFT sales that could potentially make a difference in an athlete’s recruitment and college commitment.

“I know when I was 18, you know, a few thousand dollars would make some difference,” he said. “$10,000 would make a huge difference and $20, $30, $40,000 would make an even bigger difference. I think that every athlete is going to have their own threshold of where that thing is going to be.”

Few purchases in Verified Fan Challenge

However, as of last Thursday morning, before one athlete’s NFT trading cards were taken down, just two users had purchased the athlete’s NFTs for $25 apiece.

A spokesperson at the school in which the athlete is committed responded in an email that On3’s request regarding the Verified Fan Challenge is probably best for the NCAA. The NCAA hasn’t provided comment at the time of publishing.

Class of 2023 quarterback Zae Teasett, an On3 three-star recruit who attends Scotlandville Magnet High School in Louisiana, is also involved in the Verified Fan Challenge. Louisiana is a rare state in the South whose high school athletic association allows high schoolers to sign NIL deals and retain their eligibility.

Only two fans, one who supports Arkansas and another who supports Louisiana Tech, have bought Teasett’s NFT trading cards as of Monday morning. The leaderboard shows $25 for each school.

Ole Miss, Mississippi State and Nicholls State are also listed on the leaderboard, with $0 listed for each school’s fan base. No national recruiting service lists Mississippi State or Nichols Sate among the schools that have interest in Teasett, while other schools that have offered him a scholarship, such as Kansas, aren’t listed on the leaderboard.

Linksy said hundreds of athletes have signed up with VerifiedInk.

“As far as buyers, we’re much earlier there,” he said.

Importance of distance in relationship

In promoting the new NFT platform in a crowded market, its co-founders said they’ve had conversations with schools.

“We’re definitely talking with athletic departments and some of which we’re working with already,” Slutzky said. “Collectives, talking with. We haven’t started working with any of them directly already, although I’m sure that’s coming soon.”

Attorneys that On3 contacted said it’s important for schools to keep a proper distance in regards to the platform’s recruiting feature.

“Many are concerned about collectives crossing the line into recruiting inducement territory, primarily because each collective is tethered to a particular university. However, VerifiedInk appears to be an arms-length third party,” David McGriff, a Los Angeles-based sports and entertainment lawyer, wrote in an email to On3.

“If the NFT platform is not tied to any specific school, and therefore has no interest where the student-athlete ultimately commits, then recruiting inducement may not be a real issue… There could be a problem, however, if a big money donor for a particular university has a secret deal directly with the student-athlete and uses the NFT platform to pay the student-athlete for their commitment. That could be considered a booster related recruiting inducement.”

Responsibility falls on the athletes

The FAQ section of VerifiedInk’s website includes a question for athletes that says, “Could this affect my eligibility?”

“No,” reads the first sentence of the answer. The answer then says VerifiedInk is very closely tracking NCAA guidance and state legislation and high school regulations.

Later, the answer to the FAQ says, “It is the responsibility of the athlete to certify that their sale is not part of recruiting activity, a pay-for-play agreement, or a gift from an agent. Any athlete found using VerifiedInk for these activities does put their own eligibility at risk, and will be suspended from the platform.”

The additional NIL guidance the NCAA released in May defines boosters as “any third-party entity that promotes an athletics program, assists with recruiting or assists with providing benefits to recruits, enrolled student-athletes or their family members. The definition could include ‘collectives’ set up to funnel name, image and likeness deals to prospective student-athletes or enrolled student-athletes who might be considering transferring.

“NCAA recruiting rules preclude boosters from recruiting and/or providing benefits to prospective student-athletes.”

Competition among fan bases

Linksy said they’ve found that there aren’t many fans who are willing to invest in an NFT because an athlete attends a specific high school. “With the Fan Challenge, we’re starting to focus on the already entrenched fans in colleges,” he said.

The type of fan who purchases a high school athlete’s NFT is important and Boland said it’s important for schools to watch their donors and their activities.

He described how the NCAA’s NIL era has almost created a benefit, if not a need, for schools to have fans who act as boosters but who aren’t actually labeled as such.

“It would turn on whether the individual was a booster because then they’re under the jurisdiction of the school,” he said. “It’s almost one of the weirder things that NIL has set up a situation where you want… to have these people who are clearly your boosters but who aren’t designated as your boosters. The so-called kind of dark booster web, if you will, of folks who are out there, who can influence things.”

On3 asked Linksy and Slutzky if they have concerns that the payments made through the Verified Fan Challenge could be classified as recruiting inducements or pay-for-play.

“I was a college football coach for 10 years and been involved in sports at the collegiate level for five or six years since I left coaching,” Slutzky said. “I have a pretty good sense of what’s going on, where this is going. I think at the end of the day what everyone is recognizing is that athletes are providing all the value, or nearly all the value, and receiving almost none of the money. I think we’re getting closer and closer to a world where that is getting righted and this is a path, this is a step along that journey that we’re happy to be a part of.

“And we are doing it in ways that are staying within the NCAA’s guidelines as they currently stand.”

‘That’s a pretty good reason’ to commit

Athletes design their respective VerifiedInk NFT trading cards themselves. Linksy said athletes receive 94% or 95% of the profits. They’ll also receive a royalty when their card is traded.

VerifiedInk’s FAQ page on its website says, “80+% of all sales go directly to our athletes.”

Another important question is if, and how, the Web3 world in general could intersect with the gambling and gaming industries. McGriff said schools could ask whether the Verified Fan Challenge could potentially be classified as a form of gambling. Boland brought up the term “pride betting.”

“It kind of has that value that you’re not necessarily following the athlete or the transaction or even the recruitment,” Boland said of how some users could theoretically engage with the platform. “You’re really just sort of bidding your school.”

Drawing a comparison to fantasy football, Slutzky said users can earn points when an athlete enrolls at a school that they support. Users can redeem their points for experiences, such as a raffle entry to win tickets to the Final Four.

“We’re going to essentially reward fans for getting involved in athletes and their recruitment early,” Slutzky said. “So let’s say you’re a big Indiana basketball fan… and your team is recruiting an athlete that you really want them to get. You might put $100 down and buy four of the cards of that athlete and you mark them for Indiana. Now Indiana’s total is going up and up and up.

“The athlete of course chooses whatever school they want but if Indiana is $10,000 more than everyone else, that’s a pretty good reason — you know if that athlete wants to make sure that none of those people are going to return their cards — to go to Indiana. Now when that athlete goes to Indiana, not only in like a dollars way do they have a part in that recruitment, they also will get rewarded in our system as basically earning points, like you can picture fantasy football points, well this is almost like fantasy recruiting in a sense.”

Now the question is whether VerifiedInk, or another platform with a similar feature, can achieve the scale of users in a crowded NFT market in order to create high-dollar sales without forming cozy relationships with schools or attracting the boosters whose participation could potentially cause violations of NIL policies or laws.