As I See it

• Publication year: 2023
• Pages: 14

AS I SEE IT No. Vol. 52, No. 6 [Page 14] Colorado Lawyer July, 2023

August, 2023

DEPARTMENT

The State of the NCAA’s Name, Image, and Likeness Rules in Colorado

BY TIM SHANNON

In early 2014, the University of Oklahoma ordered three members of its football team to make a financial contribution to a charity of their choosing as punishment for violating the National Intercollegiate Athletic Association’s (NCAA) amateurism rules. The punishment stemmed from the players’ acceptance of an improper benefit at a graduation celebration—a free bowl of pasta—that threatened their amateur status and eligibility to compete at the NCAA level. To ensure that accepting free pasta would not render the players ineligible for the upcoming football season, the University of Oklahoma required each to make a charitable contribution to offset the value of the pasta, or $3.83.^[1]

The infamous story of the illicit pasta is just one example of how the NCAA operated before the dawn of the name, image, and likeness (NIL) era. Student-athletes were prohibited from receiving anything of value in recognition of their notoriety as athletes, and the NCAA scrupulously enforced its rules and amateurism model. Even the smallest infraction could jeopardize an athlete’s eligibility.

The NCAA’s decades-old practice of strictly enforcing its amateurism model was flipped on its head when the NCAA officially adopted its interim NIL rules on July 1, 2021.^[

2

] Based on these rules, and less than a decade after the Oklahoma pasta incident, NCAA student-athletes have cashed in handsomely on the use of their NILs. For example, Louisiana State University gymnast Livvy Dunne and former Alabama quarterback Bryce Young^[3] have each reportedly earned more than $1 million through NIL endorsements.^[4]

As the NIL economy continues to grow in both size and scope, so do opportunities for Colorado attorneys. Individual athletes, NIL "collectives," collegiate institutions, and businesses hoping to expand their marketing reach need guidance from attorneys who specialize in antitrust, employment, business, tax, NCAA compliance, and intellectual property law to successfully navigate the NIL marketplace. This article provides an overview of the history and current state of the NIL rules in the hopes of encouraging Colorado attorneys, including those who have never worked with athletes, to get involved in this exciting new space.

Development of the NCAA's NIL Rules

In less than a decade, the NCAA evolved from an organization that punished those who took $3.83 worth of free pasta into an organization that allows student-athletes to make millions of dollars from the use of their NILs. However, this massive shift was not driven by the NCAA. Instead, the organization was compelled to make a series of ever-growing concessions to student-athletes in response to public criticism of its strict amateurism model and subsequent litigation questioning the fairness of that model.

Public Outcry Expands Student-Athlete Benefits

The NCAA's strict amateurism model first began to erode after "pasta-gate" came to light in early 2014. In the midst of widespread backlash against the NCAA over the ridiculousness of forcing college students to offset the value of pasta worth $3.83, in April of 2014, Shabazz Napier, a basketball star from the University of Connecticut, made headlines when he said that he sometimes went to bed hungry because he could not afford to pay for food.^[5] In an attempt to quell the public outcry generated by these two incidents, the NCAA, an organization that reported total revenues of just under $1 billion and an annual budget surplus of $80.5 million in 2014,6 amended its bylaws to allow student-athletes to receive unlimited meals and snacks from their respective schools.^[7]

While providing student-athletes who generate $1 billion worth of revenue with access to adequate nutrition should seemingly be a minimum requirement rather than a fringe benefit, at the time, this rule change was seen as a significant concession from the NCAA. As the NCAA's harsh rules and strict model of amateurism continued to be publicly scrutinized, the organization faced rising pressure to further increase benefits for student-athletes. Once the NCAA began to capitulate in response to mounting public pressure, it became clear that a new, athlete-centric era of intercollegiate athletics was underway.

O'Bannon v. NCAA Recognizes Student-Athlete NIL Rights

While the NCAA was expanding benefits for student-athletes in response to rising public pressure, it was simultaneously facing legal challenges to its strict amateurism model in the courtroom. One of the most notable cases during this period was O'Bannon v. NCAA,^[8] an antitrust class action lawsuit brought by former college football and men's basketball players against the NCAA after the NCAA entered into a licensing agreement with video game maker EA Sports. As part of its licensing agreement with the NCAA, EA Sports produced basketball and football video games featuring avatars that strongly resembled real student-athletes, complete with accurate uniforms and numbers.

Upon review of the NCAA's actions that culminated in the EA Sports licensing agreement, the O 'Bannon court held that the NCAA restrained trade and violated the Sherman Act by illegally controlling the market for the student-athletes' NILs. According to the court, prohibiting student-athletes from profiting from their own NILs while simultaneously benefiting from such prohibition by negotiating a competition-free licensing agreement with EA Sports amounted to anticompetitive behavior by the NCAA. By recognizing that student-athletes have rights to their NILs, that there is an economic market for those rights, and that the NCAA is subject to the Sherman Act when restricting those rights, the O'Bannon decision laid the groundwork for the current NIL landscape. Even so, in the wake of O'Bannon, the NCAA opted to end its agreement with EA Sports rather than allowing current student-athletes to be paid for the use of their NILs in video games.^[9]

California Forces the Issue

The next major blow to the NCAA's strict amateurism model came from the California legislature. Emboldened by the O'Bannon decision, California Governor Gavin Newsom signed the Fair Pay to Play Act into law on September 30, 2019, with an effective date of January 1, 2023.^[10] Among other key provisions, the act prohibits "California postsecondary educational institutions" from "preventing a student p articipating in intercollegiate athletics from earning compensation as a result of the use of the student's name, image, or likeness."^[11]Further, the act establishes that any "group or organization with authority over intercollegiate athletics" is prohibited from preventing a California postsecondary educational institution "from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student's" NIL.

In other words, the Fair Pay to Play Act directly contradicted the NCAA's strict amateurism rules and gave California intercollegiate student-athletes the right to profit from the use of their NILs without fear of retribution from the NCAA. Predictably, panic ensued. Schools across the country feared that they would be unable to compete when recruiting top athletes, as most student-athletes would go to California schools to take advantage of the state's new NIL law. In turn, the NCAA worried that other states would pass similar laws to remain competitive and the strict amateurism model that it had relied upon for decades would be lost.

The Landmark NCAA v. Alston Opinion

In short order, the concerns generated by the Fair Pay to Play Act became moot, as the current NIL era was officially ushered in by the Supreme Court's 2021 decision in NCAA v. Alston .^[12] On its face, Alston was another class action antitrust lawsuit brought by student-athletes against the NCAA, this time challenging NCAA rules that placed limits on educational benefits available to student-athletes. In the unanimous opinion, the Supreme Court held that NCAA member institutions must be allowed to offer enhanced education-related benefits to student-athletes, such as laptops, tutoring, and internships, without affecting the student-athletes' athletic eligibility. The holding was explicitly limited to education-related benefits and did not impact any of the NCAA's other "compensation...