College sports entered an entirely new, and entirely unprecedented, era on July 1 when the House v. NCAA settlement finally took effect. For the first time ever, schools can directly pay players for performance via revenue sharing contracts.
To coincide with the change, the College Sports Commission (CSC) was created to handle regulation and enforcement of player compensation issues. Among the CSC's responsibilities, in cooperation with Deloitte, is the policing of name, image and likeness deals.
The CSC and Deloitte launched an NIL Go portal to ensure "fair market value" and valid business purpose based on an actual endorsement. While the technicalities and qualifications of a valid NIL deal were nebulous for the first week of the revenue sharing era, the CSC released information Thursday clarifying exactly what qualifies as a legitimate NIL deal.
The NIL Go portal allows student-athletes a way to report third-party NIL deals to be evaluated for rules compliance. An athlete can do this before accepting a deal to ensure that their eligibility will not be impacted.
NIL deals will be judged on a set of three criteria:
Payor Association: "The relationship between the payor and the student-athlete's school"
Valid Business Purpose: "Whether the payor is seeking the use of the student-athlete's NIL for a valid business purpose, meaning to sell a good or service to the public for profit"
Range of Compensation: "Whether the compensation paid to the student-athlete is commensurate with compensation paid to similarly situated individuals"
Payor Association
The "Payor Association" category is especially important given that, under previous NIL guidance, boosters could facilitate deals with prospective athletes. Under the new NIL Go guidelines, boosters would be classified as an "associated entity."
The CSC also classifies "associated entities" as:
Those that are known or "should have been known" to an athletic department that exist with the express purpose of either promoting an institutions athletics programs or creating NIL opportunities for an institution's student-athletes -- i.e., an NIL collective.
An entity that has been directed by an athletics department to assist in recruitment or retention of athletes.
An entity controlled by someone or something other than a publicly traded corporation.
Valid Business Purpose
The Valid Business Purpose qualification is rather self-explanatory. Instead of just handing an athlete a contract under the mask of an NIL deal, any deal that an athlete enters into must demonstrate "Evidence of using the student-athlete's NIL to promote a good or service being offered to the public for profit."
Specifically, NCAA Rule 22.1.3 -- the valid business purpose requirement -- prohibits NIL collectives from paying athletes to appear on behalf of the collective at an event, even if said event is open to the public. The purpose of the event would be to raise money for the collective, which does not provide a good or service to the general public for profit -- even those collectives that sell merchandise.
Now were a restaurant or an apparel company to strike a similar bargain, it would satisfy the valid business purpose requirement, since the aforementioned industries do provide a service to the public in exchange for money. Collectives can still act as quasi-marketing agencies that match athletes with businesses.
Range of Compensation
The CSC will also ensure that an athlete's NIL compensation is "commensurate with compensation paid to similarly situated individuals with comparable NIL value." Essentially, is the deal a fair deal from a numbers perspective?
Several factors will be taken into consideration when calculating an athlete's Range of Compensation (RoC), including "the deal's performance obligations, the student-athlete's athletic performance and social media reach, the local market and the market reach of his or her institution and program." So, an athlete like Texas quarterback Arch Manning will have a higher RoC than, say, a freshman punter and, therefore, he'll have an easier time pitching deals with a considerably higher monetary value.
Deal Review
Once an athlete submits a third-party NIL deal to the NIL Go portal, the CSC will analyze the information provided. There are three outcomes that can be reached:
Cleared: The deal can proceed.
Not Cleared: The deal does not meet necessary requirements, but there are other options.
Flagged for Additional Review: If there are legitimate concerns about any of the above categories, the athlete will be notified and and investigation will be launched to review the terms.
An athlete does have some recourse if the deal is simply "Not Cleared." They can revise the deal to ensure that it meets all three of the requirements, they can cancel the deal and return any money they may have already received, or they can appeal the decision to a neutral arbitrator.
It should be noted that athletes risk punishment, including a potential loss of playing eligibility, only if they go through with a deal that was "Not Cleared" without addressing any of the concerns identified by the CSC.
