Two Commonly Overlooked NIL Contract Issues

Paula Nagarajan, AGG Corporate partner and member of the Entertainment & Sports industry team, authored an article for Law360 titled “Attorneys Beware: 2 Commonly Overlooked NIL Contract Issues,” published on June 3, 2024.

In the article, Paula emphasizes the importance of having a solid contract for high school and college athletes as name, image, and likeness (“NIL”) deals, which involve the commercial use of a student-athlete’s name, image, or likeness, become more prevalent in sports.

Paula points out two of the commonly overlooked NIL contract issues that can significantly affect student-athletes. The first issue she covers involves contracts that fail to properly tie payment to NIL, potentially jeopardizing a student-athlete’s NCAA eligibility. She cites the case of twin brothers Matt and Ryan Bewley, who were deemed ineligible to play college basketball at Chicago State University due to the contracts they had signed with Overtime Elite (“OTE”), a basketball league for 16- to 20-year-olds. The NCAA interpreted the contracts with OTE as agreements to compete in professional athletics for a professional team with pay-for-play compensation, leading to the NCAA’s decision to deny the brothers’ eligibility.

The second issue Paula highlights focuses on the complexity of state-specific NIL contracts and the need for student-athletes and their representatives to navigate the differing state laws in accordance with NCAA rules. The NCAA’s interim policy allows NIL activities consistent with state laws, making it crucial for students to comply with both. Varying state laws create challenges for legal counsel to ensure compliance. For example, New York requires advance disclosure of NIL contracts, while Florida removed this requirement. Virginia’s new law allows schools to directly pay student-athletes for NIL deals, which is not permitted in other states. Athlete advisers must stay informed about these evolving regulations to represent their clients effectively.

“There are many important issues that a student-athlete’s lawyer should be aware of when reviewing and negotiating such contracts,” Paula explains. “Preserving an NIL client’s NCAA eligibility would likely be at the top of the list. As such, lawyers for these student-athlete clients should ensure that the contract and structure of a deal do not reflect a payment in exchange for services or a pay-for-play model and instead are payment in exchange for NIL rights.”

The article underscores the vitality of student-athletes and their representatives being well-versed in the potential pitfalls in NIL contracts — as seen with numerous case examples. It also stresses the significance of a comprehensive understanding of the contract provisions to safeguard student-athletes’ future in sports.

To read the full article, please click here.