Virginia’s New Law on College Student-Athlete NIL – Is Virginia a Leader or Irrelevant?

During this General Assembly session, Virginia enacted a law that expands the legality of university support for student-athletes’ name, image, and likeness (“NIL”) opportunities and prohibits the NCAA from acting against them.

You could argue that Virginia is the most progressive state in the country in terms of NIL rights for college student-athletes. In addition to the new law, the Virginia Attorney General succeeded in federal court in a joint effort with the Tennessee Attorney General in getting a preliminary injunction against enforcement of rules prohibiting college sports collectives from using NIL to entice athletes to attend their universities. A collective is a booster organization related to a specific university that pays NIL to that school’s student-athletes and arranges for NIL opportunities with businesses.

What will this mean for the business of college sports in Virginia, which greatly impact the Virginia economy?

The new Virginia law is vague in places. For example, for some NIL activities, it doesn’t expressly state that a Virginia university may do something; it just prohibits the NCAA from punishing doing that thing, which implies that the activity is legal. Here’s how I interpret the important parts:

• It allows universities to pay student-athletes directly for using their NIL.
• It also allows universities, their athletic foundations, and collectives to identify, create, negotiate, and assist with NIL opportunities for student-athletes.
• It empowers each university to set NIL policies for its student-athletes.
• It prohibits schools from using student fees (which are charges separate from tuition) to fund NIL activities.
• It authorizes universities to give perks to donors who contribute to NIL funds, such as premium seating and special access.
• Importantly, it prohibits the NCAA (without expressly naming it) from punishing any university or student-athlete for engaging in the NIL activities the statute authorizes.
• Student-athletes are required to disclose NIL deals to their universities. A university may prohibit a NIL deal that conflicts with its advertising or sponsorship agreements or institutional policies.
• It prohibits student-athletes from earning NIL in connection with a list of controversial products and services, such as alcohol, adult entertainment, marijuana, other illegal drugs, steroids, tobacco, vaping, weapons, and gambling, including casinos and sports betting.
• It prohibits student-athletes from using the university’s logos, apparel, and facilities for NIL activities unless the university permits it.
• It states that these permitted NIL activities shall not be deemed to make a student-athlete a university employee. Whether student-athletes are employees is a hot political and legal topic mainly controlled by federal law.

Will these new NIL rights for college athletes give Virginia a competitive advantage in attracting the best athletes to help Virginia’s universities win sports games? A few other states have recently enacted similar laws. Virginia’s law may be unique because it apparently permits Virginia universities to pay NIL to student-athletes. Yet, this is only a minor advantage over other states. The new laws of the other front-running states permit collectives to pay NIL to student-athletes.

Under current NCAA rules, universities are prohibited from paying NIL to student-athletes or brokering NIL deals for them. Collectives must operate independently of universities. Thus, states such as Virginia are overriding NCAA rules.

Will the NCAA attempt to punish universities or student-athletes who exercise these new NIL freedoms? Will they sue to revoke these new NIL state laws?

In theory, the NCAA could sue, claiming that the state laws impermissibly regulate interstate commerce, which is the province of Congress, or impair contracts between the NCAA and member institutions. So far, the NCAA has not sued or punished schools for exercising rights protected by state statutes and probably is afraid of doing so because of the losses it has suffered in court concerning other freedom-restricting rules for athletes.

The NCAA is under tremendous legal pressure. The NCAA is facing several antitrust cases over its amateurism rules. In 2021, a Supreme Court case that didn’t concern NIL signaled that universities won’t receive special deference when it comes to applying antitrust laws to NCAA financial restrictions on student-athletes.

The NCAA faces a particularly threatening class action lawsuit, House v. NCAA, which attacks the NCAA for prohibiting student-athletes from receiving NIL for several years before doing so was legalized. If the class action plaintiffs win everything they seek, they could recover billions of dollars from NCAA institutions. This poses a possible mortal threat to some athletics departments. A ruling on liability could come within a year.

The NCAA recently proposed some liberalization of NIL rules but has not adopted those changes yet. The NCAA is considering allowing universities to assist with NIL opportunities but not to pay NIL itself.

In the end, Virginia may have given its major athletics programs a slight and temporary NIL advantage. There’s a good chance that court decisions and this state-law land rush will soon force the NCAA to capitulate and legalize all university and student-athlete NIL opportunities and perhaps repeal amateurism entirely.

Written on April 17, 2024

by John B. Farmer

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