State laws that allow student-athletes to receive compensation from licensing their name, image, or likeness (“NIL”) were introduced to benefit student-athletes and remedy a longstanding regime that allowed colleges and universities to extract a financial windfall at student-athletes’ expense.[1] These laws are flawed, however. In only two years, we have seen multiple examples of high-profile student-athletes agreeing to exploitative or sham NIL contracts. One way to prevent student-athletes from signing similar NIL contracts in the future is to include strict reporting requirements in a federal NIL law.
NIL Laws Have Exposed Student-Athletes to New Forms of Exploitation
On July 1, 2021, bills that allowed student-athletes to earn compensation from licensing their name, image, and likeness went effective in multiple states, including California, Texas, and Florida. These bills have empowered student-athletes and provided unprecedented financial opportunity. Somewhat paradoxically, though, these laws also created new ways for studentathletes to be exploited. Indeed, in the less than three years since their enactment, multiple highprofile student-athletes have agreed to troubling NIL contracts. Gervon Dexter, Sr. and Jaden Rashada are two such examples.
Gervon Dexter, Sr. was a defensive tackle at the University of Florida from 2020 to 2022. Dexter was drafted in the second round of the NFL Draft by the Chicago Bears, and signed a fouryear, $6.72 million contract.
On September 1, 2023, Dexter filed a complaint (the “Complaint”) against Big League Advance Fund II, L.P. (“BLA”) in the United States District Court in the Northern District of Florida seeking to invalidate an NIL contract he had entered into with BLA, a company that markets itself as “Investing in the careers of athletes to empower them to achieve their dreams: making it to the next level.”[2] The Complaint alleges that in May 2022, when he was 20 years old, Dexter entered into an NIL contract with BLA after a BLA agent offered Dexter a “6 figure financial/NIL opportunity.”[3] According to the Complaint, the NIL contract required BLA to pay Dexter $436,485.00.[4] In exchange, BLA was authorized to use Dexter’s name, image, and likeness and athletic reputation in connection with BLA’s own business from the effective date of the agreement to twenty-five years after the NFL Draft.[5] Dexter was allegedly obligated to pay BLA fifteen percent of his pre-taxed NFL earnings for twenty-five years – essentially guaranteeing BLA fifteen percent of Dexter’s earnings for his entire NFL career.[6] After only one contract in the NFL, Dexter already owed BLA over $1 million.[7] The Complaint seeks a judgment that Dexter’s NIL contract is null and void because it violates multiple provisions of the Florida NIL statute.[8]
Jaden Rashada is another example of a student-athlete entering into a concerning NIL contract. In October 2022, Rashada had reportedly committed to the University of Florida and entered into a $13.85 million NIL contract with the Gator Collective, a collective not affiliated with the University of Florida’s athletic department.[9] In exchange, Rashada agreed to make a certain amount of social media posts, attend events, and autograph merchandise.[10] Notably, the Gator Collective had never promised a student-athlete anything near $13.5 million before.[11]
The first payment was due to Rashada on December 5, 2022.[12] The Gator Collective did not make the payment and terminated the NIL contract with Rashada a few days later, before Rashada enrolled at the school.[13] It was later reported that the Gator Collective did not have the money due under the Rashada NIL contract.[14] After the university released Rashada from his letter of intent, Rashada ultimately left the University of Florida and enrolled at Arizona State University.
Dexter and Rashada suffered distinct, but foreseeable harms that may befall other studentathletes who sign NIL contracts. On one hand, Dexter may lose millions of dollars over the course of his NFL career. Without protection and access to information, young student-athletes, inexperienced in reading or negotiating sophisticated agreements, may suffer a similar fate because their tremendous earning power attracts nefarious actors looking to hoodwink an unsuspecting student. Even seemingly unfair contracts are difficult to nullify, so arming student-athletes with information before they sign is critical. [15] By contrast, Rashada’s story highlights harms that student-athletes can suffer under NCAA transfer rules, which force students who are transferring to a second four-year school to sit out a year. Fortunately, Rashada’s NIL deal was terminated before the deadline to enroll in classes, and the University of Florida released Rashada from his letter of intent, so he did not need to transfer to Arizona State. However, future student-athletes may not be so lucky – they may have to use a “free transfer” or even sit out a year if their NIL sponsor backs out of a deal.
Certain States Have Adopted Reporting Requirements that may Protect Student-Athletes
Gervon Dexter, Sr. and Jaden Rashada may not have entered into sham and potentially illegal NIL contracts if reporting requirements had been in effect, and they had access to information about other NIL contracts college athletes had entered into. For example, if Dexter had access to a database of information about NIL contracts, Dexter may have realized that the terms of his particular contract – specifically, the requirement that he provide 15% of all his future NFL earnings to BLA – were not “market” and potentially violated NIL laws. Furthermore, if Jaden Rashada or his representatives had known that other NIL contracts the Gator Collective had signed were for far less than $13.5 million, he may have questioned whether the Gator Collective had the means to pay him.
Certain states have already attempted to address these issues by establishing reporting requirements for NIL contracts. Texas’s law governing NIL contracts requires a student-athlete who attends school in Texas to disclose to his or her school “any proposed contract the studentathlete may sign for use of the student-athlete’s name, image, or likeness” before entering into the contract.[16] The NIL law that Florida enacted in 2021 required students to disclose any NIL contracts to their college or university and prohibited NIL deals that lasted longer than a studentathlete’s participation in a school athletic program.[17] Surprisingly, those specific provisions were removed in the 2023 amendment to Florida’s NIL law.[18]
These laws are a step in the right direction, but they fall short in myriad ways. For instance, some of these laws require students to provide NIL contracts to the schools before they are signed. But the laws do not establish the schools’ powers or obligations to review or revise the contracts. These laws also do not require the schools to compile or disseminate information about the NIL contracts once they have been signed, including the services provided and the compensation received by the student-athletes. That information is critical for increasing transparency into these negotiations and establishing market terms and value for services provided by student-athletes.
Even if these state NIL laws did require the schools to do so, students would only have access to that information on school-by-school basis, creating a substantial burden on student-athletes to aggregate such information from across the state, without mentioning the country. Additionally, these laws do not make clear how the schools or the students would be penalized for violations, or who would enforce such penalties.
A Federal NIL Law Should Adopt Detailed Reporting Requirements and Establish a National Clearinghouse
The current patchwork of reporting requirements in state NIL laws provides studentathletes with incomplete access to information, and therefore leaves them vulnerable. Even if every state enacted an NIL law containing effective reporting requirements with actionable enforcement policies, a federal NIL law would have at least two additional benefits for student-athletes. First, the enforcement of the federal NIL law would be left to one body and thus more consistent. Second, a federal NIL law requiring the dissemination of information about NIL deals would provide a complete view into market value and terms. Therefore, a federal NIL law should expand upon the reporting requirements of certain state NIL laws and establish a national clearinghouse.
Specifically, a federal NIL law should require student-athletes to submit all NIL contracts to their respective schools. The law should require the schools, in turn, to submit those NIL contracts (with no identifying personal information) to a national clearinghouse run by an independent entity, which the federal law should also arm with the power to investigate and enforce violations of the federal NIL law. The federal NIL law should require the clearinghouse to maintain a public database of all NIL contracts and publish a semi-annual report of all NIL contracts entered into during the prior six months. The database and report should include all the essential provisions of the NIL contracts, including, but not limited to, (i) services provided by the student-athletes; (ii) compensation received by the student-athletes; and (iii) duration of the contract.
This type of law would make transparent an otherwise opaque market, which, in turn, should help establish market terms and value for services by student-athletes; reduce the risk that schools, boosters, and collectives will offer contracts they cannot fulfill; and, ultimately, protect student-athletes from exploitation.
Some of the federal NIL bills that have been introduced already include aspects of this proposal by requiring student-athletes to disclose NIL deals or establishing a national clearinghouse for NIL contracts.
• The Fairness in Collegiate Athletics Act (“FCAA”) would require the NCAA to establish procedures that require student-athletes to disclose to the NCAA and the student-athlete’s school any compensation or NIL contract.[19] The FCAA does not, however, specifically mandate the compilation or proliferation of any data related to the NIL contracts submitted to the NCAA.
• The Student Athlete Level Playing Field Act (“SALPFA”) would require (i) the Federal Trade Commission (“FTC”) to establish a clearinghouse for “endorsement contracts,”[20] (ii) student-athletes to disclose to the clearinghouse each endorsement contract,[21] and (iii) the clearinghouse to make “such disclosures available to the public on a regular basis.”[22]
• The Protecting Athletes, Schools and Sports Act (“PASSA”) would require studentathletes to disclose NIL contracts to their schools[23] and require the FTC to create a website containing anonymous data about NIL deals.[24]
• The College Athlete Protection and Compensation Act (“CAPCA”) would require student-athletes to disclose NIL contracts to their school[25] and would create the College Athletics Corporation, which would be required to publish an annual report containing information from colleges and universities, such as revenues and expenditures of athletic programs.[26] The CAPCA does not purport to establish a clearinghouse of information related to NIL contracts, however.
Despite its benefits, this proposal will face opposition. Some may argue that the market for NIL contracts should have little to no regulation, especially regulation that would force willing parties to disclose the details of their private deals. Such regulation, the argument may go, may disincentivize sponsors from entering the NIL market altogether, which may lower the price for student-athletes’ services and consequently undermine the entire purpose of NIL.
The reality is that this type of regulation is necessary here. NIL is in its infancy. Market terms and value for student-athletes’ services have not been set, and thus the market is ripe for bad actors to offer young people ostensibly attractive, but actually predatory NIL deals. If the market stays a black box, the downside risk of signing NIL contracts that fall below market terms or are predatory or unconscionable will fall squarely on the shoulders of student-athletes, a class of individuals who, due to their age, are likely to have had very few or no opportunities to negotiate a sophisticated commercial agreement, like an NIL deal. It would be simply unfair and naïve to allow student-athletes to remain vulnerable when we already have concrete examples in Gervon Dexter, Sr. and Jaden Rashada of how NIL deals can go wrong for student-athletes.
Conclusion
State NIL laws have exposed student-athletes to newfound opportunities and risks. Enacting a federal NIL law that expands upon the reporting requirements that certain states have introduced and creates a national clearinghouse that aggregates anonymous information about NIL deals will promote transparency in an otherwise opaque market, ensure student-athletes reap the fruits of their hard work, and limit their exposure to continued exploitation.
John Kane, Esq. is the first-prize winner of the 2023 Conduct Detrimental NIL Writing Competition. He is an associate in the litigation group of Akin, Gump, Strauss, Hauer & Feld LLP's New York office. Mr. Kane received his J.D. from the University of Virginia School of Law in 2015, where he was a member of the Senior Editorial Board of the Virginia Law and Business Review. He received his B.A. in History from Boston College in 2010.
References:
[1] See, e.g., FLA. STAT. § 1006.74 (2023) (“[P]articipation in intercollegiate athletics should not infringe upon an intercollegiate athlete’s ability to earn compensation for her or his name, image, or likeness. An intercollegiate athlete must have an equal opportunity to control and profit from the commercial use of her or his name, image, or likeness, and be protected from unauthorized appropriation and commercial exploitation of her or his right to publicity, including her or his name, image, or likeness.”).
[2] See BIG LEAGUE ADVANTAGE, https://bigleagueadvantage.com (last visited Nov. 10, 2023).
[3] Complaint at ¶ 40, Dexter v. Big League Advance Fund II, LP, (No. 1:23-cv-00228-AW-HTC) (N.D. Fl. Sept. 1, 2023), ECF No. 1.
[4] Id. at ¶ 29. [5] Id. at ¶¶ 53, 54.
[6] Id. at ¶ 56.
[7] See “Penalty Flag Thrown: Former Florida Gators Sues to Void Controversial NIL Contract,” Jonathan D. Wohlwend, September 7, 2023, https://www.natlawreview.com/article/penalty-flag-thrown-former-florida-gatorssues-to-void-controversial-nil-contract.
[8] See FLA. STAT. § 1006.74(2)(a); Complaint at ¶¶ 68, 69, Dexter (No. 1:23-cv-00228-AW-HTC), ECF No. 1. The Complaint also alleges the NIL contract was an agent agreement, but that BLA and the individual agents of BLA who interacted with Dexter were not licensed in Florida as athlete agents. As a result, the Complaint also seeks a declaratory judgment that the NIL contract is null and void because it violated multiple provisions of the Florida athlete agent act,
including the provision that requires agent agreements with student-athletes to contain specific language regarding the student-athlete’s eligibility. See Complaint at ¶¶ 43, 75–82, Dexter (No. 1:23-cv-00228-AW-HTC), ECF No. 1.
[9] See Stewart Mandel & Andy Staples, Jaden Rashada’s unprecedented recruitment: How a 4-star QB went from $13.85 million to no NIL deal, THE ATHLETIC (February 6, 2023), https://theathletic.com/4149181/2023/02/06/jadenrashada-nil/.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Id.
[15] See, e.g., Gilman v. Chase Manhattan Bank, 72 N.Y.2d 1 (1988) (noting the high standard to prove a contract is unconscionable under New York law).
[16] See TEX. EDUC. CODE ANN. § 51.9246(g)(1); see also N.Y. EDUC. LAW. § 6438-c 6(b) (2023) (“A student-athlete who enters into a contract providing compensation to the student-athlete for use of the student-athlete's name, image, or likeness shall disclose the contract in advance of executing it to an official of the college, as designated by the college.”); VA. CODE ANN. § 23.1-408.1(G) (2022) (“Prior to executing an agreement concerning the use of his name, image, or likeness, a student-athlete shall disclose such agreement to the institution at which he is enrolled in a manner designated by the institution. If a student-athlete discloses a potential agreement that conflicts with an existing institutional agreement, the institution shall disclose the relevant terms of the conflicting agreement to the studentathlete.”); MICH. COMP. LAWS § 390.1737(1) (“A student who intends to enter into a verbal or written opportunity or contract that would provide compensation to the student for use of his or her name, image, or likeness rights shall disclose the proposed opportunity or contract to a designated official of the postsecondary educational institution that the student attends[.]”).
[17] See FLA. STAT. § 1006.74(2)(i), (j) (2021).
[18] See generally FLA. STAT. § 1006.74 (2023).
[19] Fairness in College Athletics Act, S. 4004, 116th Cong. (2020) § 3(2)(A) (“[A]ny intercollegiate athletic association shall establish . . . rules and programs for the administration the policy described in paragraph (1), including . . . requiring student-athletes to report any compensation described in such paragraph, or any agreement to receive such compensation, to the institution of higher education in which they are enrolled and the intercollegiate athletic association within a reasonable period following . . . (i) the date on which an agreement to receive such compensation is reached between the student-athlete and the third party; and (ii) the date on which such compensation is received by the student athlete[.]”).
[20] See Student Athlete Level Playing Field Act, H.R. 3630, 118th Cong. (2023) § 5(b)(2)(A).
[21] See H.R. 3630 § 5(b)(2)(B)(i).
[22] See H.R. 3630 § 5(b)(2)(C).
[23] See Protecting Athletes, Schools and Sports Act of 2023, S. --,118th Cong. (2023) § 6(a).
[24] See Protecting Athletes, Schools and Sports Act of 2023, S. --, 118th Cong. (2023) § 6(e).
[25] See College Athletes Protection and Compensation Act of 2023, S. --, 117th Cong. (2023) §§ 4(b)(4)(A), (B).
[26] See College Athletes Protection and Compensation Act of 2023, S. --, 117th Cong. (2023) § 8.
