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Tag: NIL

Three Things Colorado Student Athletes Should Know Before Signing a Name, Image, Likeness Agreement.

On January 1, 2023, Senate Bill 20-123 became law in Colorado, which codified the statutory rights of student athletes to receive compensation for their name, image, and likeness (“NIL”). This new law comes at the heels of a transition in college sports where the National Collegiate Athletic Association (“NCAA”) is now allowing student athletes to receive compensation from NIL agreements — so long as those agreements are unrelated to an athlete’s decision to play at any given collegiate institution. 

While Colorado has enacted laws regulating student athlete NIL agreements, such laws do not always shield student athletes from predatory actors. Additionally, the NCAA has not yet established comprehensive NIL guidelines for student athletes. In the midst of such uncertainty, student athletes in Colorado should keep the following three things in mind when entering into a NIL agreement.

READ: How the Name, Image, Likeness (NIL) Revolution is Changing the World of College Sports

1. Find a licensed attorney to review any NIL agreement

According to industry professionals, incompetent and predatory representation of student athletes is prevalent in the NIL market. On September 20, 2023, members of the House Committee on Small Business held a hearing (“September 2023 Hearing”) relating to the federal government’s role, if any, in regulating the student athlete NIL agreements.

The witnesses included current Athletic Directors of Texas Christian University and Ohio State, as well as the Vice President of the College Football Players’ Association. Each witness emphasized the need for firmer protections of athlete NIL rights and warned against predatory actors attempting to swindle student athletes.

One example mentioned at the hearing was Chicago Bears rookie Gervon Dexter, who signed over 15% of his pre-tax NFL earnings for the next 25 years in exchange for a one-time payment of $436,485 within an NIL agreement. Notably, Dexter is now set to earn 7 million dollars over the next four years. 

To prevent future unfair agreements, Colorado law requires any person providing legal representation to a student athlete to be a licensed attorney. This common-sense protection benefits athletes because all attorneys are legally bound to act in their client’s best interest, and in the case of grossly incompetent representation, nearly all attorneys carry malpractice insurance to compensate for an attorney’s behavior.

These ethical safeguards ensure student athletes get the best outcomes in their NIL agreements — and can advise on additional legal matters such as copyright and trademark protection, as well as complying with the Federal Trade Commission’s requirements for endorsers. 

Further, the NIL landscape is filled with legal obstacles that student athletes must navigate. The NCAA frequently updates its NIL guidelines, and Congress is considering federal legislation that, if enacted, would establish ground rules for all current and future NIL agreements.

Finding a licensed attorney to review an NIL agreement reduces the risk of non-compliance with NCAA regulations, as well as Colorado and federal law, while also safeguarding a student athlete’s interest in contract negotiations.

READ: Navigating Sports Politics as College Football Evolves — CU Buffs Aim High

2. Pay close attention to an NIL agreement’s duration and fee structure

Student athletes should pay particularly close attention to the duration and fee structure of any NIL agreement. A student athlete’s NIL agreements should never extend beyond the time an athlete is playing intercollegiate sports because, as with Gervon Dexter, professional athletes have substantially higher potential income and NIL value.

Some states, like Texas or Oklahoma, affirmatively protect this future professional value through requiring every NIL agreement to specify the duration of the contract to ensure the agreement does not extend beyond the student athlete’s participation in the intercollegiate program. See Tex. Educ. Code § 51.9246(g)(2)(C); Okla. Stat. tit. 70, § 820.25(C).

However, Colorado law does not contain this same protection — and Colorado student athletes should be careful to avoid entering into one-sided, long-term NIL agreements.

Student athletes should also pay attention to the fee and compensation provisions of an NIL agreement. In his opening statements during the September 2023 Hearing, Congressman and Chairman of the House Committee on Small Business, Roger Williams, referenced examples of student athletes signing NIL agreements with nearly 40% commissions, complex fee structures and one particularly egregious agreement that essentially signed a student athlete to a $100,000 loan.

As mentioned above, the length and terms of an athlete’s NIL agreement may affect an athlete’s future professional earnings, and here again, Colorado lacks any particular protections for standardizing NIL agreements or the fee structure of such agreements. Consequently, it falls on the shoulders of student athletes and their attorneys to closely examine such language to best position a student athlete to avoid predatory fee agreements.  

READ: Live from Colorado — The Future of Sports Betting

3. Student athlete endorsers must comply with Federal Trade Commission (FTC) requirements

Student athletes, like any other advertiser or endorser, are subject to the FTC’s authority to regulate commerce. Failure to comply with these FTC requirements may subject both student athletes and educational institutions to civil penalties for disseminating a deceptive advertisement.

Relevant here, the FTC requires student athletes to

  1. Make honest statements regarding an endorsed product or avoid making statements that could not be made directly by an advertiser.
  2. Become a bona fide user of an endorsed product.
  3. Have no barrier to disclosing its relationship to the brand, marking any content as an advertisement.

The FTC further explains the “most important principle” when complying with FTC guidelines is that a proposed endorsement represents the accurate experience and opinion of the endorsers. Student athletes, for instance, cannot talk about an experience with a product they have never tried, or if an endorser has only tried a product once, then that person cannot state he or she uses it regularly. 

Simply put, student athletes must be honest about their experiences with and opinions of any endorsed products. Practically speaking, student athletes should consider language in their NIL agreement which ensures the athlete will not be compelled to make any public representations or statements that conflict with FTC requirements and other fair advertising laws. 

 

Benjamin Longnecker headshotAndrew GreenBenjamin Longnecker is an associate in the Denver office of Snell & Wilmer. He focuses his practice on commercial litigation. He may be reached at [email protected].

Andrew Green is an associate in the Denver and Los Angeles offices of Snell & Wilmer. He focuses his practice on commercial litigation, and represents clients in matters involving breaches of contract, construction disputes, trade secret misappropriation, trademark infringement, and unfair competition. He may be reached at [email protected].

How the Name, Image, Likeness (NIL) Revolution is Changing the World of College Sports

Thanks to an assist from the U.S. Supreme Court, more than $1.1 billion is expected to flow to college athletes during the current sophomore year of the “Name, Image, Likeness” (NIL) revolution.

Wait: Make that $1.1 billion plus another $13. 

The extra dollars went to Duante Davis, a Colorado State University football player newly enriched by my personal VISA card. You’re welcome, friend. 

I came across Davis’ name within a sprawling digital landscape maintained by Opendorse, a Nebraska company that’s one of the big players in the NIL arena. Scanning a homepage jammed with names of colleges, I drilled down to a smallish rectangle sporting the familiar CSU logo (I’m a proud alum, so…). There, I found hundreds of student-athletes willing to spread a little NIL love, for a fee. 

READ: Navigating Sports Politics as College Football Evolves — CU Buffs Aim High

Opendorse and a handful of like-minded rivals resemble dating sites like Match.com — except they’re for athletes and fans, not aspiring romantics. In my case, what I selected and received a few days later was a personalized, five-second video suitable for showing off both to friends and unwitting strangers. (“Guys! A CSU defensive back knows my name!”) 

“Shoutouts” like this are among the handful of offerings advertised by Opendorse. With an athlete’s agreement, you can receive a personalized social media post, request an autograph, book an athlete to appear at an event, or negotiate a “pitch anything” deal. The proceeds are split: For my order, $13 went to Davis, and $4.33 went for a “marketplace fee,” a fancy way of describing a commission. 

Thirteen dollars is a trifle, of course, in a billion-dollar marketplace that’s populated with high-profile “influencers” who have hit the jackpot. Examples include the likes of Leah Clapper, a University of Florida gymnast who has appeared in TV commercials for the yogurt brand Yasso; and Bijan Robinson, a highly touted recruit for the University of Texas who has reportedly surpassed $1.7 million in NIL earnings. (Parents: Keep that youth sports flame burning.)

These individuals are the headliners. More common are small-money deals like the one I made with Davis, a Poudre High School graduate who redshirted last year for the Rams. Most start in the sub-$20 range for a brief video message, although players who have risen to the big time charge more. A shoutout from Shaq Barrett, the former CSU lineman who played this past season for the NFL’s Buccaneers, will cost you $1,000. 

Other lower-end NIL endorsement models are out there, too. At University of Denver, a business student named Carlos Fuentes is working with a handful of DU athletes to broker NIL arrangements with merchants like Saucy’s Southern BBQ & Cuisine on South University Boulevard. In exchange for mentioning the restaurant on Instagram and other social media platforms, a trio of guards for the DU men’s basketball team — Ben Bowen, Tommy Bruner and Tevin Smith — get something almost every college student aspires to: the occasional platter of smoked ribs, on the house. 

READ: Live from Colorado — The Future of Sports Betting 

In-kind deals like the Saucy’s alliance and a separate arrangement Fuentes has brokered between a DU athlete and a local clothing company are door-opening preludes to cash deals that Fuentes hopes will follow. “I’m starting small,” Fuentes told me.

Fuentes, a walk-on guard for the Pioneers men’s basketball team, is studying marketing and business analytics. He sees the combination of social media presence and the NIL ecosystem opening up new possibilities for athletes in the metro area and beyond. While it’s not exactly Scott Boras territory just yet, what he’s doing is emblematic of the widening playing field for athletes who used to be blocked from cashing in at any level.

Colorado is among the 32 states (through January) that have passed laws empowering student-athletes to make money via NIL dealmaking. These authorizations happened more or less in synch with the June 2021 U.S. Supreme Court decision that found decades-old NCAA restrictions violated U.S. antitrust law. Since the NCAA adopted interim NIL rules in the wake of the ruling, the floodgates have opened, with spending believed likely to crest the $1 billion mark in the second year (June 2022 to June 2023) of NIL activity. 

Not everybody loves the new reality. To some critics, NIL is little more than a wink-wink sanitizing of backdoor payoffs from title-hungry alums. That almost surely happens — donors gotta donate — but the cynicism may be overstated. Opendorse calculates that only 15% of spending in the first year of NIL activity came from donors, while 74%, came from brand deals. 

Regardless of the source, the more common application is what I test-drove with my new CSU acquaintance Duante Davis: small-dollar deals, not life-changing injections of cash. Opendorse says the average Division I NIL participant earned about $3,000 in the first year of accepting NIL money, with Division II athletes netting $328. 

But it’s the policy, not the price, that matters. In his concurring 2021 opinion, Justice Brett Kavanaugh pointed reverently to the grand traditions of college sports — game days in South Bend, Indiana (Notre Dame football), packed gyms in Durham and North Carolina (Duke University basketball). But tradition alone, Kavanaugh wrote, “cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student-athletes who are not fairly compensated.” It’s the word “massive” that carries the weight here. With more than $1 billion now flowing across the NIL transom, the $17.33 I spent on a personalized video greeting is starting to look like a bargain. 

 

Stewart Schley JpegStewart Schley writes about sports, media and technology from Denver. Read this and Schley’s past columns on the Web at cobizmag.com and email him at [email protected]