Film Room: third-party NIL fundamentals, public company considerations, and today’s institutional actions that preserve tomorrow’s opportunity

Third-party NIL fundamentals

In an earlier edition of Film Room, we noted key aspects of the settlement’s proposed structure for third-party NIL:

• Unlike institutional benefits, third-party NIL is not capped
• Third-party NIL deals among student-athletes and Associated Entities/Individuals will be subject to a to-be-detailed fair market value (FMV) review 
• Third-party NIL deals among student-athletes and entities/individuals that are not Associated Entities/Individuals will not be subject to any FMV review

We’ll now invite you to walk through the Associated Entity/Individual definition with public company NIL in mind. “Associated Entity or Individual” means:

1. An entity that is or was known (or should have been known) to the athletics department staff of a Member Institution to exist, in significant part, for the purpose of (i) promoting or supporting a particular Member Institution’s intercollegiate athletics program or student-athletes; and/or (2) creating or identifying NIL opportunities solely for a particular Member Institution’s student-athletes;
2. An individual who is or was a member, employee, director, officer, owner, or agent of an entity described in Section 1(c)(a) above;
3. An individual who directly or indirectly (including contributions by an affiliated entity or family member) has contributed more than $50,000 over their lifetime to a particular Member Institution or to an entity described in Section 1(c)(a) above;
4. An individual or entity that (1) has been directed or requested by a Member Institution’s athletics department staff to assist in the recruitment or retention of prospective or current student-athletes or (2) otherwise has assisted in the recruitment or retention of prospective or current student-athletes; or
5. Any entity owned, controlled, or operated by, or otherwise affiliated with, the individuals or entities described in Section 1(c)(a)-(d) above other than a publicly traded corporation.

Public company considerations

By its terms, sub-parts (a)-(c) and (e) shouldn’t apply to public companies: 

• (a) applies only to “an entity” that “exist[s], in significant part, for the purpose of (i) promoting or supporting a particular Member Institution’s intercollegiate athletics program or student-athletes; and/or (2) creating or identifying NIL opportunities solely for a particular Member Institution’s student-athletes” – what public company could be said to exist, in significant part, to support an member institution’s athletics program?
• (b) and (c) apply only to “individuals” – i.e., not corporate entities
• (e) expressly exempts “publicly traded corporation[s]” 

That leaves sub-part (d), which includes entities that have been directed or requested by a member institution to assist or that have actually assisted in the retention or recruitment of student-athletes or recruits. 

Current NCAA rules generally limit recruiting contacts to specific permissible recruiters (certain coaches, essentially). What does it mean to “assist” recruiting or retention? This audience is familiar with arguments advanced by member institutions that even public apparel companies closely aligned with athletics departments are not its “boosters.” Sub-part (d) picks up that same “assist” language in the booster definition and invites varying interpretations of what that means (at best). 

Today’s institutional actions that preserve tomorrow’s opportunities

Yes, there’s confusion regarding what NIL activity is currently permitted – or at least what activity is shielded from enforcement by the Tennessee v. NCAA injunction. Speaking of which, be on the lookout for the terms of the Tennessee v. NCAA settlement, which the parties indicated will be finalized by next Monday, March 17, 2025. 

Regardless of the current state of play, now is the time for institutions to actively consider and align approaches with the expected rules of tomorrow. 

Clumsy actions in this interim period can rob an institution of a tremendous compliant opportunity under the expected rules of tomorrow. In other words, don’t let your public company support stumble into sub-part (d) territory now. 

There are many ways in which public companies can support institutional efforts short of assisting in recruitment or retention of student-athletes and recruits. Curate that activity now to maximize the impact of public company support in a post-House world. 

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.