Will the SEC continue with its fractured state-by-state NIL approach?

Saturday marks the two-year anniversary of the NCAA’s NIL Era and many coaches and administrators continue to call, to no avail, for a federal bill to provide uniform regulations. However, at the state level, legislators have shown their willingness to pass legislation – sometimes of the emergency variety – in an attempt to give local schools a competitive advantage.

As Year 2 of the NIL Era comes to a close, On3 is analyzing the most pressing issues nationally with an eye on Year 3 of college athletics’ modern athlete compensation model.

Since Congress has yet to vote on a single NIL-related bill, could the state governments in a single conference’s footprint, such as in the Southeastern Conference, potentially agree upon and then each pass a similar bill to provide a uniform legal framework that many stakeholders claim they want?

“Well, I think it’s an option,” SEC Commissioner Greg Sankey told On3 in a phone interview last week.

Texas A&M athletic director Ross Bjork said, “It is something that we have discussed in a very, very generic, general sense within our conference.”

Indeed there are numerous hurdles, including state legislatures that meet on different schedules, an admitted hesitancy for stakeholders with advantageous laws to give up their legal edge and whether competing schools or conferences represented in those states would lobby against such an effort.

“The other piece of it really is where does that leave the ACC and other conferences in the state of Florida?” Florida Republican Rep. Chip LaMarca said.

The NCAA released a new enforcement memo on Tuesday, setting up a standoff entering July. The memo states, “Unless and until the membership changes a particular rule, all schools, as part of a voluntary membership, are required to comply.”

Missouri ‘at the top’ thanks to new NIL bill

Missouri Gov. Mike Parson received House Bill 417 in late May. According to the bill, athletic conferences and associations can’t open investigations into activities protected by the bill.

It’s very similar to Texas House Bill 2804, which Gov. Greg Abbott signed and takes effect July 1.

The Missouri bill says school employees, including coaches, can identify and negotiate NIL deals for student-athletes. Tax-exempt charitable organizations can enter into NIL deals. Third parties that act on behalf of an institution can compensate athletes for the promotion of their institution, athletic programs or athletic events. High school athletes can also earn NIL compensation after signing a National Letter of Intent or a written agreement to enroll at an in-state institution.

“I feel like we’re at the top in terms of what we have in statute right now,” said Missouri Republican Rep. Kurtis Gregory, who was the starting right guard for Missouri in the late 2000s. “I’d have a hard time wanting to give that up. That’d be like learning the new weightlifting secret to success or something along those lines.

“Why would you want to give that up and your trade secrets-type deal?”

Legislators have introduced or passed similar bills to those in Arkansas, Colorado, Montana, New York and Oklahoma, too. But not all collectives operators in states with liberal NIL legislation feels the same way as Gregory.

“To us, state rules are irrelevant because the way that we are proceeding with building collectives has nothing to do with figuring out how to launder money to kids,” Jason Belzer, the co-founder and CEO of Student Athlete NIL, which powers the collective Crimson and Cream at Oklahoma, said Tuesday after the release of the NCAA memo. “Our entire business model is not based, in any of our collectives, on compensating student-athletes. That is not what we do. Our job is to be able to connect student-athletes with fans and brands. That is our job.”

However, Gregory affirmed his support of the bill Tuesday night after the NCAA released its latest memo.

“The funny thing to me is they basically for the longest time said that state law trumps,” he said. “I feel like we passed something really good here in Missouri that some of the lines in there are what other states have done so far. So, I think we’re going to roll with it.”

SEC Commisioner: ‘Confusing’ that states bar enforcement

Generally speaking, there have been three waves of NIL-related bills at the state level. After the California State Assembly passed Senate Bill 206, also known as “The Fair Pay to Play Act,” in 2019, the Florida Legislature leapfrogged California’s Jan. 1, 2023, scheduled start date to the NIL Era on July 1, 2021, the effective date for a bill of its own.

In 2020 and 2021, state legislatures raced to pass a law pertaining to college athletes’ NIL rights. Ironically, in the current context of a potential uniform, multi-state framework, several state bills have been based on their predecessors in other states, sometimes with entire clauses that read identically.

“Really the SEC [states’] framework, I would say, really pretty much followed Florida’s basic law in 2020 that became effective in 2021,” LaMarca said.

In 2022, many states amended, or even repealed or suspended, their original law in order to remove restrictions for in-state schools, their athletes and the collectives that support them.

Now, in the latest wave of amendments, state lawmakers are aggressively protecting certain NIL activities, such as deal facilitation involving school employees and the ability for nonprofit corporations or other third-party entities affiliated with a school to engage in NIL deals, while preventing conferences or the NCAA from investigating in-state schools.

“The direction of late has been this kind of one-upmanship at the state level and one of the really confusing pieces is to see states that are barring even conferences from enforcing conference policies,” Sankey told On3. “Our universities come together in a voluntary association. Our presidents and chancellors decide on our policies and that’s the kind of oversight and regulatory activity we want.”

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“If we’re left to our own devices right now, then we’re all going to be looking for that competitive edge,” Missouri athletic director Desiree Reed-Francois said earlier this month at Arizona’s Future of College Sports summit in Washington, D.C.

Legislative schedules could be a holdup

Even if all 14 SEC members – 16 when including Texas and Oklahoma – and their soon-to-be 12 state legislatures could align on a common bill, there would be structural challenges to passing the bill in each state. Not every state legislature or general assembly meets on the same schedule.

“Texas is finishing or finished for two years so they won’t come back for two years unless they have a special session just on this,” LaMarca said in a recent interview. “You’ve got legislative calendar alignments to look at.”

The role of the Texas Legislature is critical in this conversation.

The 12th Man Foundation that supports Texas A&M may have ushered in the next era of college athlete compensation when it announced in February it’s creating the 12th Man+ Fund, which will compensate Aggies athletes in exchange for promoting the foundation. Donors will receive priority points in exchange for their NIL-related contributions.

“I think something would have to bubble up, maybe in a very extreme way, for us to go back before a two-year period is up,” Bjork said.

Texas has since announced plans to offer loyalty points to donors who contribute to the Texas One Fund, albeit through a different model than the 12th Man+ Fund. Texas Tech announced it will assist the Matador Club in fundraising efforts. Sources have indicated there are similar efforts taking place at Oklahoma and Missouri, too.

While all of the parties associated with the 12th Man+ Fund have stressed the 12th Man Foundation’s independence from Texas A&M, the 12th Man+ Fund is as close to an in-house compensation model that exists today, aside from athletic department-funded cost-of-attendance stipends or Alston awards.

The Texas bill Gov. Abbott signed into law will legally protect the 12th Man+ Fund, which is likely to inspire similar models for athletic departments that are supported by an independent fundraising organization.

“Just anecdotally, I’ve heard probably a half-dozen to a dozen schools have looked at very similar models,” Bjork said during a phone interview Tuesday. “Arkansas has (ONEArkansas). I’ve heard schools look at a model very similar to that. I’ve heard schools look at models very similar to the 12th Man+ model. So, I’ve heard varying things but I haven’t seen anything announced.”

At the time of publishing, Bjork hasn’t responded to a text or voicemail regarding the NCAA’s latest memo.

Texas A&M AD: ‘No one’s opposed’ to uniform standards

There are two important questions when it comes to proposed uniform legislation. Do all of the coaches and administrators who lobby for it truly want it, given the flurry of advantageous amendments at the state level that they’ve sometimes shaped through lobbying?

“No one that I’ve discussed this with, including legislators, including our folks here at Texas A&M or colleagues around the state of Texas – no one’s opposed to more uniform national standards. Even if that means, ‘Hey, we’ve got to pull back a little bit,'” Bjork said. “And that gets into what does pull back mean? The market is the market. We don’t need to restrict the market.”

Secondly, would a federal law or matching state laws actually provide the solution that advocates believe given the lack of enforcement of current state laws and NCAA bylaws?

“The problem now is, and it’s turned into a little bit of a race to the bottom, everybody is in survival mode and competitive mode,” said Walker Jones, the executive director of The Grove Collective at Ole Miss. “I think there’s a lack of hope that there’s gonna be some uniformity coming so in the absence of uniformity. These universities have basically said, ‘Look, since there isn’t anything coming or any impending progress towards uniformity, let’s go create some competitive advantages and help separate our universities from the pack while we can.'”

Jones and Matt Hibbs, the CEO of Classic City Collective at Georgia, each said they support uniform state laws. So did LaMarca, even though the Florida Legislature helped spur the start of the NIL Era.

“I totally support conferences working together to do these things,” LaMarca said.

However, in a landscape filled with contractual confidentiality clauses, state laws that often protect contract terms from public disclosure and rumored but hard-to-verify compensation figures, what entity is capable of meaningfully enforcing any law or bylaw?

In the two years since the NCAA established its interim NIL policy, it hasn’t announced any violations. The NCAA announced in a publicly negotiated resolution in February Miami had committed recruiting violations in a press release that mentioned “NIL-adjacent conduct.”

Given the NCAA’s recent track record in court, namely the Supreme Court’s unanimous ruling in 2021 in Alston v. NCAA, and ongoing legal challenges to the NCAA, the association’s enforcement arm appears to be severely limited.

Congress hasn’t even voted on any of the proposed bills designed to federally regulate NIL activities.

State laws sometimes lack an enforcement mechanism, so even if states in a conference footprint aligned their laws, there’s no guarantee it’d have the desired effect.

“It’s just like every state has a law regulating athlete agents and have you ever heard of a state enforcing that ever? No,” Hibbs said. “It’s been there for 10 years, probably more. So, I think that’s the best example of putting it on paper and I fundamentally disagree with the fact that we will get people to follow the rules by punishing them.”

After the first year of the NIL Era, On3 was unable to find evidence of any reported violations of state laws or official inquiries into potential violations.

“My understanding is consistent with yours,” Sankey said. “Even in circumstances where states have adopted what I think are healthy laws, I’m not aware of any oversight outcome or enforcement outcome related to a state’s particular law so we have policies that aren’t overseen. That sets up the answer, which is the need for oversight and the question would be where does that reside?

“I’ve observed that under the previous administration, I wasn’t convinced the NCAA is the right place. It may very well be.”

‘Highly, highly unlikely’ that states align laws

In days, the 12th Man+ Fund will have the legal protection to enter into NIL deals with Texas A&M athletes and donors at soon-to-be SEC rival Texas will soon receive loyalty points for contributions to the Texas One Fund. Will schools or third-party entities with newfound legal protection choose to pursue those protected NIL activities?

If so, will the NCAA attempt to enforce its rules?

Meanwhile, California could potentially completely change the compensation model for college athletics once again as Assembly Bill 252, which is also known as the College Athlete Protection Act. The legislation calls for a form of revenue sharing and currently sits in the California Committee on Education.

“Ok, well, what’s this state gonna do? What’s this school gonna do in terms of where we go from here? Who’s gonna try and push the envelope next?” said Gregory, the Missouri lawmaker, describing the current landscape. “Like the kid that’s told only get two cookies out of the cookie jar and he grabs three and realizes, ‘Well, hey. Nothing really actually happens when I grab three cookies.’

“So I’ll be curious to see who’s gonna be the first one to really actually cross that line in terms of what the NCAA says you can and can’t do inside of their parameters.”

While Sankey acknowledged it’s an option for states within a conference to pass a similar bill, he emphasized effort in communicating with members of Congress regarding a potential federal law.

“We’ve been consistent that the wrong way to go about implementing name, image and likeness at the college level is on a state-by-state basis and that view remains,” Sankey said.

LaMarca said there would need to be a conference among legislators from different states if they potentially try to align their state laws.

“Whether it’s our conference or other conferences, we commit our participation to a set of regulatory policies that provide an enhanced competitive experience for the participants,” Sankey said. “It’s the same type of conversation here. It may mean that one school may have to advance a little bit from where they are, another school or program may have to pull back a little bit to find that consistency. But that’s a collaborative effort that’s been there in any number of ways in the past.”

A little collaboration regarding athlete compensation could be a lot to ask within the country’s premier college football conference, especially when state law reigns supreme over conference or association bylaws, barring a successful legal challenge from the NCAA.

“We just gave the SEC the heads-up that this was coming, but they’re not in a position for approvals or anything like that to really resolve sort of the ‘yes or no’ answer,” Bjork told On3 in February regarding the creation of the 12th Man+ Fund. “That’s just not the role that they can play, especially given the landscape right now around NIL.”

When state laws can provide advantages beyond the bounds of NCAA bylaws given the lack of a federal law, they appear to be an unlikely, albeit potential, source for uniformity.

“I think it’s highly, highly unlikely that anything like that were to happen,” Gregory said. “Because I mean what makes you think that Alabama or Louisiana is gonna want to potentially be on the same playing field? You can pull a ‘Well, we got you’ type deal. It’s a great thought process. Don’t get me wrong.

“But I just don’t think that that would be likely.”