NIL Rules Explained: How To Stay NCAA Compliant аnd Profit Off Your NIL
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On July 1, 2021, the NCAA published a number of significant changes to NIL rules and policy. It meant that, for the first time, student-athletes could start earning money from their name, image, and likeness.
The change to NIL policy was a welcome one for students. But as with any significant shift in long-standing policy, understanding the new NIL rule change and the associated implications for an athlete’s career can be tricky.
While there is plenty of press about college athletes signing lucrative endorsement deals, information to help athletes and their families navigate the rules is harder to find.
So, we spoke to sports lawyer and NIL expert David Fleshman to better understand the new NCAA policy, and the NIL rules surrounding it. You can listen to his full conversation with Will McGuffey, a Private Wealth Advisor, attorney, and former MLB agent on our podcast.
With insights from these two uniquely qualified experts, we’ve put together this guide to help you understand the new NIL rules. Here’s how you can profit while erring on the right side of NCAA compliance and maintaining your athletic eligibility.
What Does the New NCAA NIL Policy Say?
The new NCAA policy lays out terms under which student-athletes can use their name, image, and likeness to profit from endorsement opportunities.
According to the policy announcement, these are the key points for college athletes and recruits to keep in mind:
Must comply with state laws: Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.
In states with no NIL law: College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to name, image, and likeness.
Service providers permitted: Individuals can use a professional services provider for NIL activities.
Must report NIL activities to school: Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.
In practice, this means that while you can now sign NIL deals, you still have to adhere to school policies and state laws, which can differ drastically depending on the state and institution.
The rules are slightly different if you play for a state that doesn’t yet have an NIL policy. In this case, it’s still permissible to engage in commercial NIL activities, as long as you adhere to the NIL rules of your college. David Fleshman explains:
“The NCAA said, if you are in a state that has an NIL law that's in effect, you need to follow that law and you need to follow your institution's name, image, and likeness policies. If you are a student-athlete that's going to school in a state that does not have an NIL statute, you need to follow your institution's NIL policies.”
The problem is that the lack of consistency between different NIL state legislatures makes for an extremely complicated and confusing legal landscape.
In these situations, it pays to have the right team of experts to ensure you remain compliant with NCAA guidelines. Besides engaging the help of marketing agents and legal experts, consider lining up an experienced financial team early on.
This becomes even more important as you sign lucrative NIL endorsements when a tax planning strategy for your endorsement income can save you a significant amount of money.
The Difference Between NIL and Pay-To-Play
While many aspects of the new NIL rules are confusing, David Fleshman says there’s one thing that’s absolutely crystal clear – impermissible benefits and pay-to-play activities are still off the table:
“The NCAA, when they waived their rule prohibiting NIL, made it very clear that their rules prohibiting impermissible benefits or recruiting inducements, and pay-to-play, are all still prohibited by the NCAA. And they will still enforce those.”
This means that athletes can receive sponsorships and endorsement deals but schools are not allowed to give athletes signing bonuses or use any other kind of financial incentive to persuade them to play for a school or college.
To understand the difference between an endorsement and a pay-to-play activity or impermissible benefit, Fleshman gives the following example:
“You're a student-athlete and you have a potential deal for $100,000 to do an autograph signing.
If you don't go to that autograph signing, but you get the $100,000, then there has been no exchange there. And so that is an impermissible benefit that you received.
So there has to always be an activity or an endorsement or an appearance or something tied to the exchange of compensation. If there's not, and money just gets transferred into the account of a student-athlete, that is still a violation.
It's been a violation, and it still is. And it will probably always be. The NCAA is allowed to continue making rules on that front.”
What Are the Benefits For Athletes Under the New NIL Rules?
Now that you have way more control over your name, image, and likeness, it means that you’re free to profit off how those three elements are used and marketed.
Make sure you do your research and ask the right questions before signing NIL deals and taking advantage of these benefits.
Broader Access to NIL Endorsements
Traditionally, an athlete’s NIL was leveraged through brand and corporate endorsements, but the new NIL rules have greatly expanded the possibilities and access for student-athletes.
Rather than having to seek out individual endorsements, you can now use many different NIL sponsorship platforms to find endorsement deals. These include Icon Source, Opendorse, and MatchPoint Connection.
If you’d like to hear more about exactly how these platforms work, check out the podcast we did with Jonathan Pixley, Vice President of Athletic Operations at MatchPoint Connection.
Opportunities for Social Media Monetization
Social media is another medium that you can use to your advantage.
While student-athletes generally don’t have followings as large as professional athletes, they can still have upwards of a few thousand active followers engaging with their content.
Having the ability to monetize that following is extremely important, and it’s one of the primary ways that athletes are earning NIL money.
In fact, a study by Opendorse found that 47.8 percent of total NIL compensation was awarded to sponsored posts on social media.
These changes are particularly important to athletes in women’s sports who have built up sizable social media accounts. According to the New York Times, women’s basketball players are earning the second-most endorsement income in college sports, after football.
End to NIL Fines and Penalties
The changes to NIL policy also mean that you won’t be fined, penalized, or have your career jeopardized for endorsing a brand or product, as you would have in the past.
Fleshman illustrates the importance of this point:
“You get a soccer player that's in a sorority that promotes a local boutique with some new jackets or game day wear, that stuff's very successful for the brand itself.
And it's not game-changing for that student-athlete. It's not like they can now just retire from the $500 they made from the promotion.
But at the same time, they are not deemed ineligible and put into the headlines and now can't participate in their sport for doing that deal. So it's important that everyone remembers the scope of what we're talking about.”
What is Prohibited Under the New NIL Rules?
We spoke briefly about why pay-for-play is prohibited under the new NCAA policy, but what else can’t you do with regards to your NIL?
Although it differs by state and school, in general athletes are prohibited from:
Receiving any performance-based incentives.
Receiving compensation from a school or college for their NIL.
Receiving compensation for athletic participation or achievement.
Profiting from certain categories of goods (alcohol, casinos, tobacco, etc.)
Using school logos to benefit their NIL (in most cases, unless the school says otherwise).
Being coerced or incentivized to attend a certain school based on their NIL agreement.
David Fleshman recommends always keeping in mind that each state has different rules:
“Just because you see a deal that's done and the way that deal's done in Texas, it doesn't mean that deal could be done here legally. Some schools are allowed to facilitate arrangements and deals for their student-athletes, and other states prohibit it.”
If you’re ever unsure about what you can and can’t do with regard to your NIL, Fleshman recommends speaking to your school’s compliance department:
“It's just important to remember that we're dealing with a lot of different interpretations and different laws and regulations on this. And so stay within the bounds of your college athlete compliance department, they're up to speed on this, and they have to be.”
States That Have Passed NIL Laws
If you’re not sure whether or not your state has NIL legislation, here is a list of states that already have NIL laws in place:
| State | Law Passed | Law in Effect |
| Alabama | April 2021 | July 1, 2021 |
| Arizona | March 2021 | July 23, 2021 |
| Arkansas | April 2021 | Jan. 1, 2022 |
| California | September 2019 | Jan. 1, 2023 |
| Colorado | March 2020 | Jan. 1, 2023 |
| Connecticut | June 2021 | July 1, 2021 |
| Florida | June 2020 | July 1, 2021 |
| Georgia | May 2021 | July 1, 2021 |
| Illinois | June 2021 | July 1, 2021 |
| Kentucky | June 2021 | July 1, 2021 |
| Louisiana | July 2021 | July 1, 2021 |
| Maryland | May 2021 | July 1, 2023 |
| Michigan | December 2020 | Dec. 31, 2022 |
| Mississippi | April 2021 | July 1, 2021 |
| Missouri | July 2021 | Aug. 28, 2021 |
| Montana | April 2021 | June 1, 2023 |
| Nebraska | July 2020 | No later than July 1, 2023 (schools can implement new policy at any time) |
| Nevada | June 2021 | Jan. 1, 2022 |
|
New Jersey |
September 2020 | September 2025 |
|
New Mexico |
April 2021 |
July 1, 2021 |
|
North Carolina |
July 2021 |
July 2, 2021 |
|
Ohio |
June 2021 |
July 2021 |
|
Oklahoma |
May 2021 |
July 1, 2023 (schools can implement new policy at any time) |
|
Oregon |
June 2021 |
July 1, 2021 |
|
Pennsylvania |
June 2021 |
June 30, 2021 |
|
South Carolina |
May 2021 |
July 1, 2022 |
|
Tennessee |
May 2021 |
Jan. 1, 2022 |
|
Texas |
June 2021 |
July 1, 2021 |
Choose the Right Team to Help Maximize Your NIL Earnings
It’s clear that the financial possibilities unlocked by the new NCAA NIL rules are important to so many student-athletes.
However, it’s also difficult to know how these rules affect you depending on the state you play in.
To stay NCAA compliant and maximize the amount of money you can make from endorsements, it’s important that you understand the NIL rules for your state and institution.
Earning money as an athlete involves complex financial decisions, legal contracts, and tax consequences. It pays to have a qualified team of experts on hand to help you navigate the various intricacies of each deal.
As former athletes, our wealth advisors have a mission to help you make educated decisions about your financial future so you can own your wealth as an elite performer.
Get in touch today and we’ll be happy to discuss your situation, and how we can help maximize the potential of any current and future NIL income.
Article by Will McGuffey, CFP® - Private Wealth Advisor at AWM Capital, Licensed Attorney