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New NCAA memo takes aim at state NIL laws, prohibits institutional incentives

Nakos updated headshotby:Pete Nakos06/27/23


While Charlie Baker pleads with Congress for federal NIL legislation, the NCAA has released more guidance to member schools. The memo, first released by Sports Illustrated, features six question-and-answers tackling state NIL laws and institutional involvement in providing incentives to donors. The NCAA independently provided On3 with the guidance.

Over the past few months, states across the nation have crafted and passed new laws giving institutions a significant recruiting advantage. Lawmakers in Arkansas, Colorado, Missouri, Montana, New York and Oklahoma have sponsored or passed bills to prevent the NCAA from launching investigations into NIL activities. 

A Texas bill, set to be enacted on July 1, will allow universities to establish agreements with a third-party entity to facilitate NIL activities on its behalf. Missouri is waiting for its governor to sign legislation that would allow schools to pay athletes to promote their own sporting events.

The NCAA issued its response Tuesday, sent in a letter by the NCAA executive vice president of regulatory affairs, Stan Wilcox.

“NCAA rules are adopted by member schools,” college athletics’ governing body wrote in the memo. “It is not fair to those schools who follow the rules to not enforce rules against those who choose not to do so. Schools who do not like the application of a particular rule should work through the NCAA governance process to change the rule. Unless and until the membership changes a particular rule, all schools, as part of a voluntary membership, are required to comply.”

In the second paragraph of the memo, the NCAA directed schools to, “adhere to NCAA legislation (or policy) when it conflicts with permissive state laws.”

Along with state laws, NIL entities in Arkansas and Texas have opened the door for compensation models that have a closer connection to the school which is against the NCAA’s policy. The initial reaction from many in the NIL industry was that the memo was toothless.

“Are they going to go after A&M? They could have already gone after Arkansas, but they haven’t,” Mit Winter, a college sports attorney at Kansas City-based Kennyhertz Perry, said. “They keep sending out these memos. But they obviously haven’t done much.”

Added an SEC collective leader: “This was bound to happen. Not sure it’s a good move for NCAA. But we are in a constant game of chicken.”

This is not the first memo released by the NCAA that discusses permissive state laws. On3 recently obtained an interpretation of state laws from November where the governing body alluded to permissive state laws.

In its eyes, it is not the duty of the NCAA to interpret each state law.

“State NIL laws and executive orders are written differently, and the NCAA national office is not in a position to interpret those state laws,” the NCAA wrote. “Please consult your university counsel for questions about what state law may require of an institution. However, the NCAA can offer its view about the interaction among state laws that have permissive language, the NCAA NIL policy and relevant NCAA bylaws. There are many examples of permissive state laws that reinforce the NCAA’s position that bylaws prohibiting that permissive activity are enforceable.”

NCAA clarifies guidance toward NIL incentives

The NCAA guidance also outlines that institutions are prohibited from providing assets, such as priority points or club seating, to donors. The Texas athletic department announced earlier this month that current members of the Longhorn Foundation will earn loyalty points for any donations to the NIL collective starting July 1.

The relationship between NIL activity and institutional foundations continues to draw closer. Texas Tech also recently announced its fundraising arm, the Red Raider Club, will promote and assist money-generating efforts for NIL collective The Matador Club. While the two entities will remain separate, The Matador Club has become a corporate sponsor and the official and exclusive NIL collective of Texas Tech Athletics. 

“Here’s what we’ve been able to do for our athletes,” Texas One Fund executive director Patrick “Wheels” Smith recently told. On3 “He’s able to say, ‘Ok, great, these donors can get loyalty points for that.’ That’s huge. It really is. It does give us a little more competence.”

What would NCAA enforcement look like?

Charlie Baker and the NCAA have spent significant time in Washington, D.C., in recent weeks. The new NCAA president recently said he would ideally like to see a bill passed by the end of the calendar year – before the 2024 election takes over the news cycle for the foreseeable future.

If he does not get the federal mandate he is pushing for, it could set the stage for a possible courtroom battle if the NCAA enforces its NIL policy. Institutions are state-funded entities. If forced to make a decision, schools will always follow state rules over the NCAA’s guidance.

When The Supreme Court of the United States unanimously upheld a district court’s rule on the NCAA v. Alston, it also made it known NCAA restrictions – including on NIL activity – could face serious legal challenges in the future.

Schools like Texas and Texas A&M have made it clear they are rolling with their state law over the NCAA. They helped piece together the Lone Star State’s latest legislation. The SEC is preparing to align state NIL laws to enforce it at the conference level.

So what happens if the NCAA decides to enforce its interim NIL policy, though? It’s a question many are asking and waiting for.

“The NCAA, like any other private association, can establish and enforce rules, subject to state laws that govern it,” said attorney Darren Heitner, who works with institutions and collectives. “A private association’s rules and regulations generally must comply with state laws and cannot override nor contradict state laws. The NCAA would need to prevail on an argument that the state law is unconstitutional, which is a very high burden and, in my opinion, rather unlikely.”

Until the NCAA comes down on a school for an NIL penalty, how a court would rule on the situation is unclear. In the meantime, however, college athletics’ governing body has issued guidance stating institutions must comply with their rules.

Even if it means going against state laws.

“At the end of the day, the NCAA is now trying to take a stance that is not the law of the United States,” Sports Attorney Dan Lust said. “It’s not the law across each 50 states. In each of the 50 states, the NCAA is telling them they are above the law of our country.”