Name, Image, and Likeness Legislation Reaches New York State

Download PDF

by Bennett Liebman *

The Government Law Center’s explainers concisely map out the law that applies to important questions of public policy.

September 1, 2022, updated December 1, 2022

Introduction

The New York State legislature passed a bill in 2022 authorizing name, image, and likeness (NIL) rights for college student-athletes.[1] Governor Kathy Hochul signed the legislation on November 21, 2022. With the passage and signing of the bill, New York State has become one of approximately 30 states that have passed NIL legislation.[2]

The legislature began introducing NIL bills in 2019. Neither house took any action on an NIL bill in 2019 and 2020.[3] In 2021, the State Senate passed NIL legislation,[4] but the Assembly failed to take any action. Both houses passed the NIL legislation during the 2022 session.

The rationale for NIL legislation in New York is simply stated. If the major colleges are profiting from sales and revenue from their athletic events and for the related sports merchandise sales, why shouldn’t the student-athletes who have enabled this revenue also receive their fair share? The NIL legislation allows student-athletes to profit from sales of their names, images, and likenesses. The memorandum of support for the 2022 legislation states, “This legislation is not saying that college student athletes should be millionaires but allows them to profit alongside their colleges and universities off their names and images, provides for them if they should become injured, and offers them a percentage of the profits made from fans and family paying to cheer them on.”[5]

Emergence of the NIL Issue

The NIL issue has been many years in the making. The confluence of collegiate revenue, antitrust litigation, and state NIL legislation has propelled the NIL issue into increased prominence. That mixture of lucre, litigation, and legislation has continued the prominence of NIL to this day.

Lucre

The first element of the NIL mixture is the sheer amount of revenue that has poured into the National Collegiate Athletic Association (NCAA),[6] which fundamentally controls the major college sports at the Division I level. As Pulitzer Prize-winning historian Taylor Branch wrote over a decade ago:

For all the outrage, the real scandal is not that students are getting illegally paid or recruited, it’s that two of the noble principles on which the NCAA justifies its existence—“amateurism” and the “student-athlete”—are cynical hoaxes, legalistic confections propagated by the universities so they can exploit the skills and fame of young athletes. The tragedy at the heart of college sports is not that some college athletes are getting paid, but that more of them are not.[7]

Revenue generated by NCAA athletic departments in 2019 added up to $18.9 billion.[8]

The Big Ten schools are in the process of negotiating a media rights contract providing “$1 billion annually, giving each school anywhere from $80 million to $100 million per year.”[9] College football coaches like Jimbo Fisher (Texas A&M University) and Brian Fisher (Louisiana State University) have contracts paying them in excess of $9 million per year.[10] Kirby Smart, the coach of the national champion football team at the University of Georgia now has a salary of $110 million for 10 years.[11] Sports columnist Jerry Brewer notes, “This season, the 10 highest paid coaches in college football all will earn at least $7.5 million each.”[12] Duke University basketball coach Mike Krzyzewski was credited with $13.7M in compensation in 2020, his next-to-last season.[13]

Litigation

Besides the extensive revenue earned by major college sports—especially Division I football and basketball—and the enormous salaries paid to coaches, the NCAA found itself involved in major antitrust cases which have questioned the limits on the benefits made available to student-athletes. The first major antitrust case on this issue was O'Bannon v. National Collegiate Athletic Association.[14] In O’Bannon, former college student-athletes brought an action challenging the sale of licenses which used the names, images, and likenesses of these student-athletes on video games. The NCAA had banned student-athletes from receiving compensation for the use of their NIL rights and limited compensation to grant-in-aid scholarships.[15] The federal district court found that the NCAA’s restrictions were subject to antitrust scrutiny and constituted an unreasonable restraint of trade in violation of the Sherman Act.[16] The court’s remedy “enjoined the NCAA from prohibiting its member schools from giving student-athletes scholarships up to the full cost of attendance at their respective schools and up to $5,000 per year in deferred compensation, to be held in trust for student-athletes until after they leave college.”[17]

On appeal, the Ninth Circuit upheld the ruling that the NCAA’s amateurism rules were subject to antitrust scrutiny and that the rules violated the Sherman Act. Applying the Rule of Reason test, the court upheld the remedy that allowed greater compensation to current student-athletes up to the full cost of college attendance, but vacated the $5,000 future fund payment to the student-athletes. It found that paying compensation to the student-athletes in a manner unrelated to their collegiate expenses “would vitiate their amateur status as collegiate athletes.”[18] Accordingly, it was not proper under the Rule of Reason to establish a compensation fund to pay student-athletes for use of their NIL rights.

O’Bannon was followed in June 2021 by the United States Supreme Court decision in National Collegiate Athletic Association v. Alston.[19] In Alston, a unanimous court applying the Rule of Reason test affirmed a trial court decision that that had struck down the NCAA’s rules barring payment of certain non-grant-in-aid student-athlete academic benefits (e.g. reimbursements and pay for academic-related expenses) on antitrust grounds. The Court determined that the NCAA was subject to antitrust review, and that its rules on amateurism were subject to Rule of Reason analysis, under which limitations on education-related student-athlete benefits constituted unlawful restraints on trade in violation of the Sherman Act.[20]

With the decision in Alston, added pressure was placed on the NCAA to act on its NIL policies by laying the groundwork for future legal challenges against the NCAA’s amateurism rules.[21]

State Legislation

Starting in 2019, states began passing legislation granting student-athletes NIL rights. The pioneer state was California, which enacted S. 206, the Fair Pay to Play Act, on September 27, 2019.[22] The legislation was passed by unanimous votes of both the California Assembly and Senate. The bill—which was scheduled to go into effect on January 1, 2023—established the following state policies:

• Bars California colleges from penalizing students who elect to monetize their name, image, and likeness (NIL) rights.
• Prevents colleges from modifying a student's athletic scholarship based on the student receiving income from their NIL rights.
• Prohibits the NCAA from banning California colleges from intercollegiate sports if student athletes elect to exercise their NIL rights.
• Recognizes the right of colleges to generate revenue for their athletic programs by forbidding student athletes from deals that undermine their school's existing endorsement contracts.[23]

The California legislature subsequently amended the Fair Pay to Play Act in August of 2021 by changing its effective date to September 1, 2021.[24] By the time Governor Gavin Newsom signed the 2021 amendment, 17 states had enacted NIL laws. Colorado was the next state to enact NIL legislation in March 2020.[25] However, the march to NIL legislation took full swing when Florida passed NIL legislation in June 2020 with a July 1, 2021, effective date. Following Florida, the NIL laws in Alabama, Georgia, Mississippi, and New Mexico all had effective dates of July 1, 2021.[26]

The NCAA Takes Action on NIL

Faced with the June 2021 Supreme Court decision in Alston and the state NIL laws coming into effect on July 1, 2021, the NCAA took action. On June 30, 2021, the NCAA issued interim rules which authorize student-athletes to receive compensation from use of their NIL and to engage with companies and agents that manage NIL activities. However, the policy requires student-athletes to report any NIL activities to their respective schools, which in turn are required to ensure compliance with any applicable state laws.[27] In states without NIL laws, student-athletes are able to engage in NIL activities without violating NCAA rules.[28] The NCAA rules prohibiting “pay-for-play” and improper recruiting inducements are still in place.[29] While the NCAA interim rules were supposed to be short-term, they remain in effect.

The First Year of NIL

With a year of NIL under its belt, are there any conclusions that can be reached on the NCAA’s experience with NIL? Certainly, NIL policies are providing significant revenue to numerous student-athletes. Opendorse has estimated that $917 million was paid to student-athletes within the first 12 months of NIL.[30] The problem may be that NIL is arguably an overwhelmingly disruptive force that has proven too easy to manipulate. What started in the summer of 2021 as a student-athlete driven movement where students were paid for their “social media promotions, merchandise sales, camps, clinics, [and] appearances”[31] has turned into a method of enabling a school’s athletic backers to find ways to induce or retain athletes to attend their favored college. More and more donor-driven collective organizations are proposing and delivering “pay-for-play” deals where college donors and boosters offer large incentives to potential recruits and transfers.[32] Sports reporter Laine Higgins describes such collectives as “companies, usually founded by well-connected and well-resourced alumni, whose sole aim is to pool the financial resources of a university's fan base and direct funds to athletes who are now able to profit from their name, image and likeness under new rules that went into place last year.”[33] In order to legally support their athletic programs, many colleges have begun forming marketing clearinghouses or hubs of their own to facilitate NIL deals[34] and to maintain some control over the collectives.

The NCAA also seems to have limited ability to enforce limitations on “pay-for-play.” While the NCAA is reportedly investigating Miami University booster John Ruiz, who has arranged 115 NIL deals encompassing millions of dollars, most of them for Miami University, no actions have been taken against Ruiz.[35] There is a belief that the NCAA is generally reluctant to engage in a full-fledged effort to curtail NIL violations.[36] The NCAA has even noted that much of its enforcement will be aimed at only the most severe violations of NIL that occurred prior to May 2022.[37]

The first-year data suggests that the majority of NIL revenue flowed to college football and to men. Of all first-year NIL compensation, 49.9% went to college football. Men completed 62.7% of the NIL deals disclosed on the platform. Nonetheless, once football is taken out of the equation, 52.8% of the NIL deals went to women. In terms of NIL compensation, women’s basketball trailed only football and men’s basketball.[38]

What Is the Overall State of NIL Legislation in the U.S.?

The answer is that we have a hodgepodge of laws on NIL. Three-fifths of states have NIL laws. Two-fifths lack any NIL laws. Efforts by the NCAA to enact a uniform federal law have thus far proven unsuccessful. In the big football states, such as Alabama and Georgia, the movement has been to ease up on the NIL provisions governing marketing collectives. The legislators clearly do not want to put their college football teams at a disadvantage in attracting and keeping top recruits.[39] Under the NCAA interim policy, states that enacted NIL laws were placing a greater burden on student-athletes than states that had not enacted such laws. This, in combination with growing interest from schools to take a more hands-on approach with NIL, has resulted in an increase in proposals, amendments, and repeal efforts in the 2022 legislative cycle.[40] Most significantly, some states are now allowing schools to work with student-athletes to help arrange NIL compensation.

Some high school athletes have NIL rights, but most do not. Additionally, the decision to allow high school athletes to have NIL rights is generally made by state high school athletic associations, not by state legislatures.

What are Common Features of State NIL Laws?

State NIL provisions are far from uniform.[41] They have been described as “rapidly evolving.”[42] Nonetheless, while they may not be uniform, there are certain provisions that are typical to most state NIL laws. The rights granted to student-athletes generally provide that schools and associations cannot limit a student-athlete’s ability to receive NIL compensation, that student-athletes are entitled to professional representation, that NIL participation does not affect a student-athlete’s scholarship, and that schools and conferences cannot compensate student-athletes for their NIL.[43]

As to restrictions, student-athletes often must disclose their NIL agreements to their schools, student-athletes’ NIL agreements cannot conflict with a school’s contracts, and student-athletes cannot enter into agreements that depend on their athletic achievements. Schools also may restrict student-athletes from participating in contracts with certain arguably immoral industries, such as tobacco, gambling, adult entertainment, firearms, and alcohol.[44]

NCAA Sports Success and New York State Colleges

In the overall pantheon of NCAA revenue-producing colleges, New York State is not a major player. It has only one college within the Power 5 of college football’s top conferences. That is Syracuse University in the Atlantic Coast Conference, and Sports Illustrated has recently rated Syracuse as the 60th most desirable school of the 69 colleges in the Power 5.[45] In 2019, Syracuse University’s overall revenue from athletics totaled $86.4 million.[46] Syracuse has traditionally been a powerhouse in college basketball, where it won the NCAA championship in 2003 and has been in six Final Four competitions.[47] Syracuse has been a respectable team over the years at the top levels of major NCAA college football. While they are not significant revenue-producing sports, Syracuse has often been a top men’s and women’s lacrosse power. With ten titles, no college has won more NCAA lacrosse championships than the Syracuse men’s team

Few other New York colleges have been major successes in NCAA sports.[48] Cornell University, Rensselaer Polytechnic Institute, and Union College have won NCAA ice hockey championships. Cornell has won three men’s lacrosse championships and finished second on four occasions. St. John’s University and St. Bonaventure University have made their way into the final four of the NCAA basketball tournament, but the last New York team to win the NCAA basketball tournament, before Syracuse’s 2003 victory, was The City College of New York in 1950. New York State has 24 colleges that are part of the NCAA, but without Syracuse, the state is simply not a major force in the world of NCAA revenue-producing sports. In total, there is only Syracuse in the Atlantic Coast Conference, St. John’s playing basketball in the Big East Conference, and Fordham University and St. Bonaventure playing basketball in the Atlantic 10 Conference.

The New York State NIL Bill

The New York Collegiate Athletic Participation Compensation Act applies not only to NCAA schools. It applies to all colleges in New York State, including community colleges. Its substantive provisions go into effect on January 1, 2023.

The law is silent on the issue of whether high school athletes may participate in NIL activities. That silence effectively leaves the decision to the athletic associations in the State. In October 2021, the New York State Public High School Athletic Association took the position that high school athletes under its purview could profit from NIL.[49] While the Public High School Athletic Association represents the public schools and many of the private schools in New York State outside New York City, it hardly represents all New York State high schools. The public-school students in New York City are represented by the Public Schools Athletic Association. The New York City Catholic schools are represented by the New York Catholic High School Athletic Association, and the New York State Association of Independent Schools Athletic Association represents certain independent schools throughout New York State. Thus, there is no uniformity in the application of NIL in the high schools of New York State.[50]

The law provides certain basic rights to student-athletes. They are entitled to earn compensation from NIL,[51] and they can utilize professional representation as long as the agents are properly authorized under law.[52] Colleges may not revoke a student's athletic scholarship based on the student asserting NIL rights.[53]

NCAA Division I schools are required to offer a student assistance program to student-athletes. Such a program could include financial literacy training, mental health support services, leadership training, degree completion assistance, and/or a dedicated financial distress fund.[54]

On the other hand, there are certain limitations on NIL compensation. A college, or other entity with authority over intercollegiate athletics, cannot provide NIL compensation.[55] The legislation also requires the student-athlete to provide advance notice of an NIL contract to the college and blocks NIL compensation when there are certain conflicts between the student-athlete’s NIL activities and the interests of the school.[56] These conflicts may involve time commitments where the student’s NIL commitment runs counter to the team contract, team activities or the student’s scheduled classes,[57] college institutional conflicts where the student’s NIL contract runs contrary to a college contract or the college’s sponsorships,[58] or where the NIL contract utilizes the college’s logo, brand or trademark.[59] Finally, there is an omnibus provision which would disallow a NIL contract where the “proposed contract would reasonably be judged to cause financial loss or reputational damage to the college.”[60]

The law is also silent as to how the decision is to be made regarding whether the NIL contract presents a conflict. For example, is the conflict decision made by the college alone, or is there some meaningful participation by student-athletes and their representatives? Do the student-athletes have any appeal rights? The law also does not address whether student-athletes can receive NIL compensation for engaging in iniquitous or immoral activities (also commonly known as “sin” endorsements).[61]

What Are the Next Steps?

The bill was sent to Governor Kathy Hochul on November 21, 2022. The Governor signed the bill that same day. The Governor did not issue an approval memorandum for the bill.

The Governor’s Office did, however, issue a press release announcing her approval of the legislation. The press release stated, “Governor Hochul today signed legislation (S. 5891-F/A. 5115-E) that allows New York collegiate student athletes to receive compensation for their name, image, or likeness without the risk of forfeiting their scholarships or eligibility to participate in collegiate athletics.”[63] The press release is overstating the effect of the bill, since under the NCAA interim policy, student-athletes already possess the right to receive compensation for NIL without risking their scholarships or their athletic eligibility. It might have been more accurate to explain that the legislation codified a separate and independent state right which protects the ability of all student-athletes to receive compensation for use of their names, images or likenesses.

The enactment of the New York NIL legislation still leaves a considerable number of unresolved issues. On October 26, 2022, the NCAA issued new guidance on NIL, outlining what steps an institution might take to assist student-athletes and collectives, without engaging in a forbidden pay-for-play violation.[64] Colleges may facilitate NIL arrangements, and they may create a marketplace to match student-athletes with NIL options. Specific state statutes take precedence over the NCAA guidance, and there is the potential that New York’s ban on college compensation[65] could be interpreted broadly to prevent colleges from even serving as NIL facilitators and establishing hubs or marketplaces. Thus, the New York law may be more restrictive than the current NCAA guidance.

Additionally, there are some issues that were not resolved by the legislation. The remaining issues include overall high school NIL, the “sin” endorsements, and the process- or lack thereof - for determining whether there is a conflict between the NIL contract and the college’s interests. It is likely that we will see further legislative activity on NIL issues in New York.

Notes