Not So Alike: Current Impact of NIL Administration on the Regulation of Sports Agents

Recent name, image and likeness developments have created murky waters for sports agents across the country. Although the NCAA and many states now allow student-athletes to profit from their NIL, the rules from these bodies have generally failed to instruct sports agents on how to represent student-athletes lawfully. This lack of guidance is problematic, because federal and state statutes that govern agent conduct assume that student-athletes may not obtain agent representation without forfeiting their college athletic eligibility. Future state NIL legislation could effectively provide needed guidance to sports agents who represent student-athletes.

Background

Effective July 1, 2021, the NCAA adopted a uniform interim NIL policy, relaxing its NIL restrictions for all incoming and current student-athletes. Under this policy, a college athlete may receive compensation from third parties for his or her NIL. For example, athletes may now obtain endorsement deals, monetize their social media and sign autographs for pay.

The NCAA policy on NIL was announced in the wake of two important antitrust decisions on student-athlete compensation: the Ninth Circuit’s decision in O’Bannon v. NCAA (2015) and the U.S. Supreme Court’s decision in NCAA v. Alston (2021). In O’Bannon, the court held that the NCAA could not bar colleges from granting athletic scholarships that covered certain cost-of-living expenses. In Alston, the Court held that the NCAA could not bar colleges from giving student-athletes access to other education-related benefits, such as free tutoring and paid internships. These decisions have accelerated a loosening of limits on the compensation student-athletes can receive.

State laws on NIL illustrate this trend. As of Aug. 2, 28 states have passed NIL statutes, and many other states have NIL-related bills pending. Most of the enacted statutes, as well as the 2021 NCAA policy on NIL, allow college athletes to hire sports agents to represent the athletes on NIL issues. However, most of these state statutes, as well as the 2021 NCAA policy, regulate student-athletes and colleges, not sports agents themselves.

Sports agents are regulated under the Uniform Athlete Agents Act, a model statute that most states have adopted, as well as the Sports Agent Responsibility and Trust Act, a federal statute. Unlike the NCAA NIL policy and state NIL statutes, the state and federal agent statutes assume that sports agents are not permitted to represent student-athletes without sacrificing the athlete’s eligibility. The conflict in these sources of law leaves sports agents without adequate guidance on how they can lawfully represent student-athletes who hope to profit from their NIL.

The Uniform Athlete Agents Act and the Sports Agent Responsibility and Trust Act

The Uniform Athlete Agents Act was created in large part to provide a uniform set of rules for states to regulate sports agents seeking to represent student-athletes. It has been adopted by 42 states, including North Carolina. In its current form, the Uniform Act assumes that entering into a contract with a sports agent would terminate a student-athlete’s NCAA eligibility. The following parts of the Uniform Act illustrate this assumption:

• Sports agents are required to disclose to any student-athlete whom the agents seek to represent that the representation will cause the athlete to lose college athletic eligibility. The requirement includes the need to provide a conspicuous disclosure in the agency contract. If this disclosure is not made, the athlete is given the right to void the agency contract.
• Student-athletes are free to cancel any agency contract within 14 days after the contract is signed. It is unclear whether this right was intended to stand where there is no need for a student-athlete to forfeit his or her eligibility to enter such a contract.

Sports agents can face civil penalties for violating the Uniform Act. (The Uniform Act also carries criminal penalties, but those penalties apply to provisions that are not at issue here.) In addition, educational institutions have a right of action for damages against sports agents who violate the Uniform Act. Finally, the Uniform Act allows the Secretary of State of an adopting state to assess administrative penalties of up to $50,000 per violation. (However, this amount can vary by state.)

Like the Uniform Athlete Agents Act, the federal Sports Agent Responsibility and Trust Act seeks to protect student-athletes. Although it is not as comprehensive as the Uniform Act, the Federal Act similarly requires sports agents to disclose in writing that a student-athlete may lose his or her eligibility after signing an agency contract. A sports agent may receive fines of up to $11,000 for violating the Federal Act.

North Carolina

As is true in many states, recent NIL developments in North Carolina do not fit neatly into the preexisting statutory structure. On July 2, North Carolina Gov. Roy Cooper issued an executive order that allows athletes to profit from their NIL. Gov. Cooper’s order came just one day after the NCAA rule change went into effect. The executive order requires that a student-athlete’s “authorized representative” comply with the Uniform Act (adopted by North Carolina as the North Carolina Athlete Agent Act) and the Federal Act. The executive order also states that nothing in it modifies or supersedes the state or federal agent statutes. Several points of confusion arise for North Carolina-based sports agents under the executive order:

• The executive order does not address whether sports agents are required to disclose now-expired eligibility risks to student-athletes or whether disclosure-related statutory penalties will be enforced.
• The executive order does not say whether a student-athlete maintains the right to cancel any agency contract within 14 days of signing.
• The scope of the executive order’s provision on sports agents is unclear. The Uniform Act applies to “athlete agents.” Under the Uniform Act, the definition of an athlete agent does not include a spouse, parent, sibling or guardian of the student-athlete. In contrast, the North Carolina executive order provides that it applies to a student-athlete’s “authorized representative.” The executive order does not make clear whether this category includes a spouse, parent, sibling or guardian of an athlete. If it does, the executive order creates an inherent conflict. It would require these parties to follow the Uniform Act — an act that, by its own terms, does not apply to these parties.

Conclusion

States have made efforts to respond to recent NIL developments, but these efforts have in large part been inadequate in providing instruction to sports agents. Until the Uniform Athlete Agents Act and the Sports Agent Responsibility and Trust Act can catch up to the current NIL landscape, states should be more conscious that these acts do not square well with other law in the area.