Federal judge scrutinizes NIL transactions; changes could come in the future

College sports leaders believe they have found a way through a massive antitrust settlement to finally separate “true NIL” payments to athletes from sponsor-funded payments they say are really play or recruiting incentives disguised as sponsorship deals.

If a federal judge approves the settlement, mandatory disclosure rules, an outside clearinghouse to evaluate the deals and an enforcement process involving neutral arbitrators would be used to examine name, image and likeness transactions between athletes and third parties for fair market value, with a focus on so-called NIL class transactions.

Some believe the plan is an overreach by the NCAA and conferences, which will ultimately lead to them facing new litigation.

“Sincere question for those with #NIL, as well as all sports fans: WHY should a college athlete be required to submit a NIL agreement above $600 (as proposed by the NCAA) for approval by the NCAA (or other group)?” Russell White, head of The Collective Association, posted on social media.

Other legal experts see numerous precedents in professional sports leagues that support trying to regulate NIL.

“The idea that there would be a whole bunch of lawsuits over this disclosure requirement, in my opinion, was not well thought out,” said Jay Ezelle, an Alabama attorney who has worked on NCAA and antitrust cases.

Proposed Settlement

The NCAA, Big Ten, Big 12, Atlantic Coast Conference, Southeastern Conference and Pac-12 agreed in May to settle multiple antitrust lawsuits over athlete compensation for $2.78 billion. The full term sheet was filed last week and still needs to be approved by U.S. Judge Claudia Wilken of the Northern District of California, a process that could take until next year.

If approved, the NCAA and conferences would change rules to allow schools to distribute about $21 million annually in athletic revenue to athletes, starting in 2025.

Under the agreement, NIL transactions between college athletes or recruits and individuals deemed to be school sponsors will be subject to review for a “legitimate business purpose related to the promotion or endorsement of goods or services provided to the general public for profit, for compensation at rates and on terms commensurate with those paid to similarly situated individuals with comparable NIL who are not current or prospective student-athletes” at the same school.

Breaking news and more in your inbox