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What is NIL? Understanding Name, Image, and Likeness Rules

How college and high school athletes can monetize their NIL

Fact checked by Vikki VelasquezReviewed by David KindnessFact checked by Vikki VelasquezReviewed by David Kindness

What Is NIL?

NIL is a set of rules governing the right of college and high school athletes to benefit financially from the use of their name, image, or likeness for commercial purposes, such as product endorsements. The National Collegiate Athletic Association (NCAA), which formerly prohibited athletes from entering into such agreements, changed its rules in 2021. Many states now have NIL laws as well, covering both high school and college athletes.

In 2024, the NCAA agreed to further changes and to pay damages of nearly $2.8 billion to current and former athletes who had lost out financially as a result of its rules, going as far back as 2016. The settlement currently awaits a judge’s approval before it can become effective.

Key Takeaways

  • NIL refers to the rights of college and high school athletes to monetize their name, image, and likeness through product endorsements and other activities.
  • The three elements of NIL—name, image, and likeness—are protected by the legal concept of “right of publicity.”
  • For many years, the National Collegiate Athletic Association (NCAA) prohibited student athletes from making money off of their NIL, but it changed its rules in 2021, following a U.S. Supreme Court decision.
  • In addition to the NCAA rules, many states now have NIL laws covering college and high school athletes.
  • State laws and NCAA rules are sometimes in conflict, suggesting the need for a federal NIL law.
  • In May 2024 the NCAA agreed to pay close to $2.8 billion to athletes who had suffered financially as a result of its prior rules and to further change its rules going forward.

Understanding the Elements of NIL

NIL evolved from a legal concept known as the “right of publicity.” While the law varies from state to state, the right of publicity generally recognizes that individuals have the right to decide whether their name, photograph, or other likeness can be used by others for commercial purposes and to be compensated for such uses. Celebrity endorsements are the best-known examples, but the concept applies to everyday individuals, as well. A person’s right of publicity can even outlive them and be passed along to their heirs.

For years, the NCAA specifically barred athletes from receiving money for the use of their “name, image, and likeness” in order to maintain their amateur status. Instead, the schools, teams, and leagues were able to capitalize on the popularity of their star athletes. Over time, that became a big business.

However, a landmark Supreme Court ruling in 2021 effectively torpedoed the practice, based on antitrust laws. In a written opinion, Justice Brett Kavanaugh charged the NCAA with building “a massive money-raising enterprise on the backs of student athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate.” While the Supreme Court ruling didn’t use the phrase “name, image, and likeness,” as the NCAA pointed out at the time, it was clear that the long-time ban had to be modified.

What, exactly, did the NCAA mean by “name, image, and likeness”? While the use of an athlete’s name would seem straightforward, the distinction between “image” and “likeness” is less obvious.

To help differentiate it from “image”—as in a photograph or recognizable drawing of a particular athlete—USA Volleyball, that sport’s governing body, describes “likeness” as “your ‘semblance.'” It elaborates: “Think the outline of Michael Jordan on the Jordan brand. Arnold Palmer’s signature on Arizona Iced Tea. Think EA Sports’ popular and profitable video games that depicted former NCAA athletes by using their height, body type, number and playing style—but never their name or exact image.”

NCAA Rules and Policies on NIL

The NCAA’s website spells out its current policies as far as student athletes as concerned. At their core, are these four guidelines, reprinted here verbatim:

  • Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.
  • College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to name, image, and likeness.
  • Individuals can use a professional services provider for NIL activities.
  • Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.

While those guidelines defer largely to state NIL laws, there remains some tension between those laws and NCAA rules governing its member schools. “The Association has been clear and maintains that schools must adhere to NCAA legislation (or policy) when it conflicts with permissive state laws. In other words, if a state law permits certain institutional action and NCAA legislation prohibits the same action, institutions must follow NCAA legislation,” the NCAA says on its website.

At present, the NCAA rules don’t limit how much money athletes could receive through NIL deals with outside companies. They do, however, prohibit the schools themselves from paying their athletes. If the May 2024 court settlement is approved, that would change, as well.

Many state NIL laws now apply to high school as well as college athletes. As of October 2023, at least 30 states and the District of Columbia had such laws on the books.

Opportunities for College Athletes Under NIL 

As a result of all these changes, college athletes (and even some high school stars) have the opportunity to monetize their name, image, and likeness in a wide variety of ways. Those include:

  • Endorsement deals, including through their social media accounts, which often have large numbers of followers
  • Merchandise licensing, such as T-shirts, bobbleheads, and all the rest
  • Public appearances and speeches
  • Video games, by allowing their “likeness” to participate in the on-screen action

According to Licensing International, “By some estimates, college athletes’ endorsement deals represent close to 90% of the NIL business, with merchandise accounting for the remainder.” In addition, the group foresees video games becoming a “major money-maker” in the future.

Some commercial opportunities, however, remain off limits. Under Texas law, for example, athletes are not allowed to endorse “alcohol, tobacco products, e-cigarettes or any other type of nicotine delivery device, anabolic steroids, sports betting, casino gambling,” and several other products and services.

Impact of NIL on College Athletics

Little more than two years in, the expansion of NIL rights is already starting to have a profound effect on college athletics. As the journal Inside Higher Ed put it in a 2023 article, “While the long-feared death of college sports hasn’t occurred, critics and supporters alike see problems on the horizon, particularly with a patchwork of state laws that provide more financial freedom for college athletes in some states than others.”

A major concern on the part of colleges is the impact NIL is likely to have on recruitment. Specifically, will promising athletes be more likely to sign on with schools based on their NIL earning potential rather than other factors?

NIL could prove lucrative for some college athletes. One study estimated that in the first year after the NCAA ruling college athletes took in a collective $917 million in NIL payments.  

Of course, the most popular players in the most popular sports stand to benefit the most. A study by AthleticDirectorU and Navigate Research looked at the numbers of Instagram followers of certain top college athletes, figuring that each follower was worth roughly 80 cents in terms of endorsement value. By that measure, a top football player, with a huge Instagram following, could make as much as $700,000 in endorsement revenue, while less popular teammates might earn in the $5,000 to $30,000 range. 

The NCAA, meanwhile, has found itself scrambling to keep up with new and ever-changing state laws. In January 2024 the states of Tennessee and Virginia sued the NCAA over its prohibitions on the use of NIL as a recruiting tool, and in May 2024 Florida, New York, and the District of Columbia joined the suit. It’s no wonder that the NCAA has become a prominent voice in calling for a federal law to establish national standards.

Legal and Financial Considerations for College Athletes

While the new rules governing NIL rights have created new opportunities for college athletes, they have also resulted in considerable confusion.

As might be expected, that has created a cottage industry of legal and financial advisers specializing in NIL matters—what the NCAA refers to in the guidelines above as professional service providers. By official NCAA definition, “A professional service provider is an individual who provides third party services to an individual regarding their name, image and likeness. A professional service provider includes, but shall not be limited to, an agent, tax advisor, marketing consultant, attorney, or anyone who is employed or associated with such persons.”

Just as professional athletes have agents, star college and high school athletes, and their families, may find it worth their while to consult such advisers to make sure that any arrangements they enter into treat them fairly. Under current NCAA guidelines, the schools themselves are limited in the advice and other services they can offer. For example, the NCAA says, they can’t “provide free services (graphic designers, tax preparation, or contract review) to student-athletes unless those services are available to the general student body.”

In addition, the NCAA’s new rules gave rise to so-called NIL collectives. These are independent groups of donors to a particular school that arrange for NIL payments to athletes, getting around the limitations put on the schools themselves. According to a December 2023 Associated Press report, there are some 200 such groups across the country.

NIL Success Stories

While the current NIL rules are still relatively new, some athletes have already managed to cash in. For example, before turning pro in 2024, Iowa Hawkeyes women’s basketball star Caitlin Clark reportedly had endorsement deals with Buick, Gatorade, Goldman Sachs, H&R Block, Nike, and State Farm, among others.

The terms of these deals are often undisclosed, but at least a handful of athletes are likely making millions of dollars a year from endorsements and other NIL-related activities. The website On3, which covers college sports and NIL, produces widely publicized “NIL Valuations” of 100 top players based on actual deals and other factors, such as their performance and social media reach.

On3’s rankings change weekly, but the top five college athletes based on their NIL Valuations in late May 2024 were:

  • Shedeur Sanders, University of Colorado, football, $4.6 million
  • Livvy Dunne, Louisiana State University, gymnastics, $3.9 million
  • Bronny James, University of Southern California, basketball, $3.7 million
  • Travis Hunter, University of Colorado, football, $2.7 million
  • Arch Manning, University of Texas, football, $2.4 million

All told, 21 athletes on that week’s list had valuations of over $1 million.

Future Outlook and Potential Developments

The rules currently governing NIL are a hodgepodge of state laws and NCAA pronouncements. Much of the confusion might be resolved by the enactment of a uniform national law. Several such bills have been proposed, but no federal law has been enacted as of May 2024.

Meanwhile, other initiatives to alter the balance of power between college athletes and the schools they play for have been moving through the courts. In its May 2024 settlement, the NCAA also agreed to drop its prohibition against schools paying their athletes directly.

In a joint statement, NCAA President Charlie Baker and five conference commissioners called the settlement, “an important step in the continuing reform of college sports that will provide benefits to student-athletes and provide clarity in college athletics across all divisions for years to come.”

Other commentators described it in more dramatic terms. “Amateurism, long a fragile and fleeting notion in the billion-dollar college sports industry, is officially dead,” writer Pete Thamel observed on ESPN.

As mentioned above, the settlement still needs to be approved by the judge in the case.

On another front, the National Labor Relations Board has suggested that college athletes should be classified as employees under the law. That, in turn, would give them the right to unionize and bargain collectively with their employers, the schools.

How Does NIL Impact College Athletes’ Earning Potential?

Before the NCAA’s about-face on NIL, athletes basically had no earning potential from their sports activities. Now some of them have the potential to earn millions of dollars a year, although most are likely to see just a small fraction of that.

What Are the Legal Considerations for College Athletes Engaging in NIL Activities?

College athletes looking to cash in on their NIL rights need to be mindful of the fact that they are subject to both NCAA rules and the laws of their state. For that reason, they may want to seek professional financial and legal advice, especially if a substantial sum of money is involved.

What Are the Potential Long-Term Implications of NIL on College Athletics?

NIL, together with some still-pending lawsuits, is changing the relationship between athletes and their schools in fundamental and likely permanent ways, giving athletes considerably more bargaining power than in years past. If some athletic programs become less profitable as a result, the schools may begin to rethink their importance and even their existence. But at this point, it is far too early to tell.

The Bottom Line

Still less than three years old, the new rules governing the use of athletes’ names, images, and likenesses have given players a piece of the action in the multibillion-dollar industry that college sports has become. For critics who have long decried the exploitation of college athletes, NIL is a major step toward leveling the playing field.

Read the original article on Investopedia.

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