The Supreme Court’s 2021 decision in National Collegiate Athletic Association v. Alston opened the floodgates to billions of dollars of investments in the use of athletes’ name, image, and likeness (NIL) rights to market products and services. For the first time, top student-athletes (primarily in high-profile sports such as basketball and football) can negotiate and enter into incredibly lucrative – even lifechanging – endorsement deals with companies, ranging from regional car dealerships to global apparel and shoe brands. In four short years, this so-called “professionalization” of college sports has sparked an intensified prevalence of the NCAA transfer portal (with six- and seven-figure NIL deals becoming an increasingly important part of the recruiting process), the abrupt departure of one of the winningest collegiate football coaches in NCAA history, and most recently, the arrival of the all-time greatest NFL coach to the college ranks.
This dynamic shift has, of course, created similarly massive opportunities for agents, who may now procure and negotiate marketing agreements for student-athletes and collect agent fees ranging from 10-20% of a student-athlete’s earnings. However, while the “professionalization” of college sports promises to continue to be lucrative for athletes and agents alike, it is important for agents to understand that many states still view student-athletes as amateurs and have taken important steps to protect them. Sports and marketing agencies, as well as agents entering the NIL arena, must therefore understand the legal distinction between professional and amateur athletes, and ensure compliance with applicable laws and regulations. Failure to do so can result not only in loss of eligibility for student-athletes, but also civil and criminal penalties for agents.
The purpose of this article is to highlight and caution against some of the most common mistakes that members of our Sports & Entertainment Group have seen agents make when entering the collegiate NIL space.
- Failing to register as an athlete agent in every state in which the agent recruits collegiate athletes.
The single most common mistake we have seen agents make is the failure to register as an athlete agent with the applicable state agency in every state in which the agent does business before pursuing an agency contract with a student-athlete. We have seen this mistake made even by some of the world’s top sports and marketing agencies.
A majority of states have adopted some variation of the Uniform Athlete Agents Act (UAAA), which, among other things, requires each “athlete agent” to register as an agent within the state. As a threshold matter, NIL agents must understand that while the definition of “athlete agent” varies from state to state, all of the UAAA states define the term broadly. In fact, in some states, an individual is considered an athlete agent even if the scope of services is limited to merely providing advice or guidance to a student-athlete regarding the student-athlete’s professional sports career in exchange for (or in anticipation of) compensation.
Regardless of the definitions they use, all UAAA states require agents to register with the appropriate state agency – most commonly the Secretary of State. Failure to comply with this requirement can not only result in a finding that an agency agreement is unenforceable and void (thus requiring the agent to forfeit any money earned), but can also result in civil and criminal penalties.
Case Example: this scenario played out in 2022 in the case of Williamson v. Prime Sports Marketing, in which a North Carolina court declared that NBA player Zion Williamson’s contract with Prime Sports Marketing, LLC (executed while Mr. Williamson was a student at Duke University) was void and unenforceable because his marketing agent had failed to comply with North Carolina’s Uniform Athlete Agents Act. See Williamson v. Prime Sports Mktg., LLC, Williamson v. Prime Sports Mktg., LLC, 1:19-cv-593 (M.D.N.C. Jan. 20, 2021) (“To begin, it is undisputed that Defendant Ford holds herself out as an athlete agent yet neither she nor her agency are licensed as athlete agents in North Carolina, nor have they applied for such a designation.”)
- Failing to timely notify the student-athlete’s University.
Most UAAA states also require that the agent notify the student-athlete’s Athletic Director of the existence of the agency agreement within a defined timeframe (usually within 72 hours after execution). This affords the University the opportunity to advise the student-athlete of the risks associated with entering an agency contract, and to take whatever other steps the University deems necessary to protect the interests of the student-athlete. (Note: many UAAA states also affirmatively require the athlete agent to make certain risk disclosures to the student-athlete). Failure to comply with this requirement can also result in the agency contract being deemed unenforceable and void.
- Providing (or facilitating) improper inducements, incentives, or benefits to student-athletes.
Despite the changing NCAA landscape, one pillar of its regulatory structure that remains consistent is the prohibition against providing student-athletes with improper benefits or compensation. For an NIL agent, this can include furnishing anything of value to a student-athlete or his/her/their family or friends prior to the execution of an agency contract. In most UAAA states, such conduct is expressly forbidden.
Another (trickier) example is charging the student-athlete below-market fees as an inducement to signing an agency contract. Doing so could artificially inflate the value (actual or perceived) of a student-athlete’s NIL, and would likely be deemed a violation of the UAAA and/or NCAA regulations.
Additionally, NIL agents must be careful not to facilitate any agreement that has the intent or effect of paying the athlete merely for competing in a sport or for a particular school. Notwithstanding the potentially huge sums of money available to student-athletes through NIL, NCAA Bylaw 12.1.2 – which explicitly prohibits compensation to student-athletes that constitutes “pay-for-play” – currently remains fully intact.
- Blurring the line between being an NIL agent and contract agent.
Agents must also recognize that despite their growing prevalence in collegiate sports, they may not blur the line between being an NIL agent and being a contract agent. Even if an NIL agent is a certified agent with a professional sports league, the agent may not – under any circumstances – represent a student-athlete in connection with securing a future professional sports contract while the student-athlete retains NCAA eligibility, as such conduct is expressly forbidden under NCAA Bylaw 12.3.
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NCAA regulations and state laws concerning student-athletes are complex and subject to change – particularly in light of the forthcoming decision in the House v. NCAA case. Due to the significant legal and regulatory complexities surrounding NIL, agents are strongly advised to consult with experienced counsel to ensure full compliance with applicable laws and regulations.
If you have any questions on NCAA regulations or state law surrounding NIL deals, please reach out to Alain Mathieu, or any member of Prince Lobel’s Sport & Entertainment group.
