What happens to athletes' NIL deals when they enter the transfer portal?

As scores of college football players eye the transfer portal with visions of lucrative NIL deals dancing in their heads, NIL experts advise that they also exercise caution. 

The dizzying opening day of the 30-day window to enter the portal is raising an important question throughout the industry: What actually happens to the athlete’s deals with donor-driven collectives or brands once they leap into the portal?

Could athletes be sued for breach of contract? Or are there escape clauses woven into the deals to protect both parties?

“An athlete could definitely be sued for breach of contract, depending on the terms of the agreement,” Mit Winter, a college sports attorney with Kansas City-based Kennyhertz Perry, told On3 on Monday. 

Some NIL agreements require athletes to perform a specific number of deliverables or a specific number of hours of work, Winter said.

If an athlete enters the portal, hasn’t fulfilled those obligations, and shows no willingness to do so in the future, a collective would have a “good breach of contract claim,'” Winter said.

“Especially, if the athlete has received an upfront payment for all or a portion of the services,” Winter said.

While some NIL agreements allow athletes to terminate the agreement for any reason – generally with a specified number of days of notice – many don’t. 

“Termination language in NIL agreements is very important for both collectives and athletes to pay close attention to,” Winter said.

ON3 TRANSFER PORTAL RANKINGS

Ensure specific ‘outs’ are negotiated

Ayden Syal, the CEO and co-founder of MOGL – a leading athlete marketplace and NIL operations software provider – told On3 on Monday that, when entering into and signing NIL contracts, athletes must be aware of the implications of not fulfilling the requirements detailed in the contract.

When negotiating contracts, he said, “Athletes must pay specific attention to exclusivity clauses that could prohibit their future earning potential and ensure that scenarios for contract termination – such as transferring schools – are clearly detailed in the contract and understood by all parties.”

Whether it’s an endorsement contract with a brand or an agreement with a collective, he said, athletes must remember that these are formal contracts that are enforceable.

“To protect yourself,” Syal added, “please ensure that specific ‘outs’ are negotiated and written into the contract where possible.”

Another NIL expert told On3 on Monday that it is hard to believe a collective would sue an athlete for going to another school for breaching a contract. The expert said, “It would be assumed by everyone that the contract was tied to enrollment, which is illegal per most state laws and via the NCAA.”

The source added it would be a “horrible look for the collective as it pertains to future talent acquisition and it will be used against you in the recruiting world. Athletes could be sued if by leaving, [if] they miss an event or obligations, therefore breaching the contract.

“But, again, would it be prudent for a collective to actually take action from a public perception standpoint? Probably not.”

The issue underscores an aspect in the NIL and transfer portal space that’s often overlooked as fans see a flurry of potentially impactful players formally enter the portal.

Top transfer portal QBs heavily involved in NIL

Just on Monday alone, the portal welcomed players such as Utah quarterback Bryson Barnes, who was among the 85 scholarship Utes who received much-publicized leases for 2024 Dodge Ram 1500 Big Horn trucks from the Utah-focused Crimson Collective. The Crimson Collective is paying for the six-month lease for each truck [plus insurance] – each vehicle retails at $61,000. The total cost of the NIL deal is believed to eclipse $6 million. Leases roll over if a player returns next season. If a player transfers, loses, or exhausts eligibility, the athlete returns the truck.

Oklahoma quarterback Dillon Gabriel, who has an On3 NIL Valuation of $1.2 million, is among the recognizable names now in the portal.

In October, the former UCF transfer released NIL merchandise through a partnership with Brands Unlimited. It’s unclear how much he has earned from the apparel, but he was expected to receive a portion of the profits. He also promoted the Sooners’ Crimson and Cream collective throughout the season through his partnership with the group.

Another notable quarterback in the portal is Will Howard, who is transferring from Kansas State. Howard ranks No. 97 in the On3 NIL 100 with a valuation of $563,000. Like Gabriel, Howard also had an agreement with his school’s collective. In the past year, Howard promoted Wildcat NIL or deals facilitated by the collective at least a half dozen times. Plus, former Washington State quarterback Cam Ward also had a strong partnership with Cougar Collective, the primary collective at Wazzu, before he announced his transfer. Ward’s On3 NIL Valuation is now at $629,000.

Even Ohio State transfer quarterback Kyle McCord – who has an On3 NIL Valuation of $751,000 – promoted multiple Buckeye-focused collectives and businesses over the past 10 months. McCord announced Monday he was hitting the portal.

Check NIL details before declaring for portal

If you’re a talented athlete who plays a coveted position, Winter said, it makes sense to enter the portal and see what NIL opportunities exist. But, he stressed, at the very least you’ll want to have a conversation with any collective you’re contracted with before entering.

Jason Belzer, founder and CEO of Student-Athlete NIL – a company dedicated to helping brands, collectives, universities and student-athletes navigate NIL – also provided words of caution on this fast-moving first day of the portal. Belzer tweeted that while athletes of course are free to enter the portal there is a caveat.

“If you breach a contract with a collective, don’t be surprised when: You don’t get your agreement paid out or you get sued when you don’t fulfill your deliverables,” Belzer said. “Adult decisions have adult consequences.”