NIL NETWORK INSIGHT
Recap: Justin Casey discusses the New Jersey Fair Play Act and then hypothesizes why states continue to propose and pass their own NIL legislation. He mentions that 30 states (as of November 2020) have either proposed or publicly announced their intention to do so and the potential recruiting advantages that come along with early adopters. Casey then discusses the various federal bills that have been proposed.
Observations: Casey further demonstrates the need for a federal and/or NCAA bill that would create a competitive recruiting balance across all the states. As it’s likely Florida’s bill will go into effect prior to a federal bill, it will be interesting to see if a higher percentage of elite athletes start committing to Florida schools, regardless of the strength and reputation of the program.
By Justin Casey
New Jersey Governor Phil Murphy recently signed into law the New Jersey Fair Play Act, making New Jersey the fifth US state, following California, Colorado, Florida, and Nebraska, to enact legislation that allows student athletes to receive compensation for the commercial use of their name, image, and likeness (NIL) without jeopardizing their NCAA eligibility.
Similar to its counterparts, the New Jersey Fair Play Act allows collegiate athletes to profit from their NIL by prohibiting colleges or universities in New Jersey from upholding any rule, requirement, standard, or other limitation that would prevent a student athlete from participating in intercollegiate athletics on account of their having received compensation for the use of their NIL.
In addition, it prohibits New Jersey schools from providing compensation directly to student athletes in relation to their NIL rights and further restricts schools’ ability to prevent student athletes from seeking professional representation in connection with NIL-related matters.
The competitive landscape among states
It is highly unlikely that any state legislator would admit to passing NIL legislation with the intent to provide a competitive advantage to his or her state’s universities. But it is also undeniable that the potential for athletes to profit from the commercial use of their NIL could provide a massive recruiting windfall for schools in those states.
To illustrate: a football player at the University of Michigan would theoretically have his earning potential capped at the amount of grant-in-aid he receives from his university, whereas at Rutgers that same player might receive both grant-in-aid and additional income in the form of a fair market value endorsement deal with a local restaurant chain.
While a recruit may weigh a multitude of factors in selecting a school, the opportunity to earn substantial endorsement income could tip the scales in favor of schools located in states where collegiate athletes can monetize their NIL rights.
This potential for competitive imbalance could explain why more than 30 states have either introduced legislation regarding NIL rights or have publicly announced their intention to do so. Given the substantive uniformity of the laws passed so far, early adoption may be what gives a state a competitive edge: the sooner a state’s NIL laws become operative, the likelier it is that schools in that state could reap a recruiting advantage.
At the moment, Florida and Nebraska look to hold the timing advantage. Nebraska’s “Fair Pay to Play Act” gives each postsecondary institution in the state until July 1, 2023 to choose when the law will apply to it and its student athletes. In other words, Nebraska schools could provide these protections to their student athletes today, although no school has opted to do so yet.
Justin Casey is an associate attorney in Foley & Lardner LLP’s Transactions Practice and member of the firm’s Sports & Entertainment Group.