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NIL Sand Trap: How Qualification Sports Pose Unique Pay for Play Danger

Updated: Aug 11, 2022

It’s no secret that athletic departments, student-athletes, and brands alike are facing a plethora of complications due to the “wild west” landscape created by July’s NIL changes. However, discussion surrounding the “wild west” has primarily been concerned with what the interim NIL policy leaves unaddressed; but as endorsement contracts continue to roll in, they’re revealing that even the limitations which are expressly outlined may prove to be just as difficult to monitor.

As it stands today, NIL limitations (absent additional state or school policies) primarily prohibit:

  • Compensation based on athletic performance (pay for play)

  • Compensation based on enrollment at a specific institution

  • Compensation for work not performed

On their face, these restrictions seem rather unambiguous. For the purposes of this article, we’ll focus our attention to the first limitation: prohibition of pay for play. You simply can’t be compensated based on the number 0f touchdowns you score. It’s clear and easy to detect, right? Yes, it is! Well…until it isn’t.

Let’s take a look at this compensation structure extracted from an actual Men’s Golf student-athlete endorsement contract to illustrate the point. (Names/company redacted for confidentiality)

Compensation for Services:

(i) Ambassador shall receive a free subscription to Anonymous App during the Term of this Agreement; and

(ii) Ambassador shall receive a fee per round entered on the Anonymous App in the amount of the following:

Turn your attention to the differences in compensation for a tournament round versus a non-tournament round. This golfer would make double the money for fulfilling the same obligations at a tournament than they would outside of one.

Here’s the problem: tournament rounds require qualification. Qualification is awarded based on individual performance. Thus, being compensated more handsomely for obligations fulfilled during tournament rounds is, in practice, rewarding student-athletes for athletic performance…violating the explicitly outlined “pay for play” NIL limitation.

Without an understanding of the structure of college golf on the part of the compliance office, or the hidden intricacies of NIL restrictions on the part of the athlete and company, this endorsement deal would probably seem standard. As you can imagine, this problem can be extrapolated across any qualification sport – and the ramifications would hurt everyone EXCEPT the company benefitting from the athlete’s endorsement.

The 5 key takeaways:

  1. There are questions as to the breadth of the “pay for play” limitation. It’s more clear when applied to the context of individual qualification sports like the example above, but what about increased compensation based on playoff appearances in team sports? If a player isn’t necessarily rewarded for individual performance, but rather for the general increase in publicity surrounding a playoff win? Either way, lots of grey area remains to be parsed out within this single restriction.

  2. Student-athletes aren’t equipped to accurately analyze their own endorsement contracts, even as it relates to the most obvious and unambiguous NIL restrictions.

  3. Absent a fundamental understanding of the competition structure of a particular collegiate sport, even compliance offices are ill equipped to detect every potential violation in their athletes’ contracts.

  4. I’m not asserting that every company drafting endorsements is out to take advantage of student-athlete naiveté in the name of self-interest. However, I am asserting that whether it be a result of intentional deceit or genuine ignorance, many contracts being proffered to young athletes are troublesome.

  5. This isn’t just a law student making a case for the necessity of attorneys in the collegiate sports realm to create job security. There is a genuine need for student-athlete legal advising as they navigate the NIL waters that have proven to be murky for all parties involved.

Addison is the President of Michigan State University Sports & Entertainment Law Society. You can find her on Twitter @AddyStandlee.

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