NIL Keeping States-Sports Law Attorneys Busy
Pictured above: Judy Henry, who leads the sports-law practice at Wright Lindsey Jennings in Little Rock, has closed more than 60 NIL deals. (Photo by Steve Lewis)
Relegated to the vaults of history are the days when a college football fan didn’t need a program to identify players from his favorite team, save maybe for the rare impact freshmen or two.
Once freshmen became eligible to participate in varsity collegiate sports, fans could usually track players by the following well-worn path: He arrives on campus and, if not redshirted, rarely sees the field, if at all. By the time he’s a sophomore, the player is ready to start contributing; maybe just on special teams, but he’s seeing the field. By his junior year, our player is familiar to fans who’ve followed his number for the past two years. He may even be ready to start. By his senior year, he’s either a multi-year starter or regular contributor and ready to cap off his four-year college career in style.
Of course, the term “four-year college career,” at least when applied to today’s student athletes, was already antiquated before “name, image and likeness,” the transfer portal and realignment fell onto the scene like a runaway meteor. Their impact on the college game has been like that of the meteor scientists say led to the extinction of dinosaurs.
All this recent upheaval to college sports has made fans of a certain age, feel like dinosaurs.
NIL, especially, has changed the landscape of big-time college ball. While compensating athletes for the use of their names, images and likenesses was the right thing to do on paper, the lack of uniform regulation has led to what most observers consider the new Wild West.
Several Arkansas attorneys represent college athletes collecting NIL deals, including Judy Henry, a partner with the Little Rock law firm of Wright Lindsey Jennings. Henry leads the firm’s robust sports-law practice. She has closed more than 60 deals for businesses and student athletes since the NCAA lifted its right-to-work ban, thus introducing the NIL age in July of 2021.
NIL is “regulated” by individual state laws, which supersede any regulations the NCAA might have imposed, and most tend to focus on making sure college athletes will retain their amateur status by accepting NIL money. They mostly ignore the original intention of NIL, which was to allow athletes to accept compensation for allowing entities to use their names, images or likenesses to endorse a product or service.
In an unregulated NIL environment, Power 5 boosters and their agents no longer need to deliver McDonald’s bags filled with cash to prized recruits under the table. Cash deals can be made right out in the open under the pretext of NIL, which technically remains illegal under NCAA rules, if practically unenforceable.
“When the NCAA changed its stance on student athletes working, it did not change the restriction on illegal inducements to recruit a new athlete or pay one to stay,” Henry said.
Nonetheless, schools are bidding on prized recruits and transfers, and the best of these, naturally, are going with the highest bidder. For attorneys like Henry whose practices include sports law, and there are plenty of them in Arkansas, their job is simple, in theory — to look out for the best interests of their clients.
Most “players” within college athletics — as opposed to the athletes themselves — believe the current model to be unsustainable. Henry said the spirit of NIL is being outright ignored by many of them, and self-policing is not an option.
On paper, NIL attempts to right a wrong — college athletes not being compensated for the use of their names, images and likenesses. In Arkansas, think Darren McFadden and all the Razorback No. 5 jerseys sold in Arkansas since the late 2000s. That the University of Arkansas chose a generic No. 5 jersey to promote was no coincidence.
Jerseys like this replica Darren McFadden No. 5 from the 2000s were big sellers in Arkansas. (Photo provided)
The intent of NIL, of course, was to allow players like McFadden, one of the most popular Razorbacks of all time, the opportunity to endorse a product or a social media post and receive financial compensation or to benefit from the use of their jerseys being sold in team stores or nameless images used in video games. Instead, players got nil, lower-case n-i-l, free education notwithstanding.
With no uniform regulation to act as a deterrent, though, bad actors use the promise of NIL money to lure high school recruits and even players from other teams into the transfer portal with no expectation of any services being rendered. They do it because, within current NCAA rules, they can.
J.R. Carroll
“The NCAA had an opportunity to stop this NIL freight train,” said sports-law attorney and agent J.R. Carroll of Kutak Rock’s Rogers office. “It chose not to. Now everyone has to deal with the consequences of those decisions.”
Lawmakers in states where college sports are popular were quick to enact legislation in 2021 allowing athletes to benefit financially from NIL and retain their amateur status. But the disparate state laws that resulted from the nation’s knee-jerk reaction to NIL would supersede any NCAA legislation, and most state laws don’t address intent.
With no enforcement on the horizon, the bidding process will continue.
Many college officials, including Arkansas athletics director Hunter Yurachek, have lobbied Congress to enact federal legislation to provide a blanket blueprint for NIL and regulate how much athletes can accept.
From the perspective of those who cling to the notion of amateur collegiate sports, NIL left the kids in charge, and slices of pizza are flying from the ceiling fan.
“Federal legislation is desperately needed to regulate NIL deals,” Henry said. “The disparity in state laws is enormous and growing, making the need for consistency at the federal level even more important. So far, Congress has not seen fit to pass legislation to right this ship.”
Chris Turnage
Hot Springs attorney Chris Turnage, whose United Athlete Sports Agency includes five agent/attorneys spread from Provo to Wilmington, deals mostly with pro athletes but also represents college coaches and some college athletes. He represents several NFL athletes with Arkansas ties, including former Hogs Deatrich Wise Jr. of the Patriots and Dre Greenlaw of the 49ers.
He supports the NIL ideal but thinks it has evolved into outright pay-to-play.
“It’s good that these players get some money for themselves and their families,” he said, “but I wish it were a true NIL opportunity and not a chance for schools to get recruits to campus.”
Still, NIL gives schools like Arkansas an opening when recruiting against the blue bloods.
“I think it’s helped schools like Arkansas,” Turnage said. “They were losing recruiting battles to the Alabamas anyway before NIL. This gives ‘em a chance.”
But just a chance. Arkansas is a “have” in the overall picture of college athletics, but some “haves” have more than others.
“Having no standard regulation of NIL means nobody plays on the same, level playing field,” Turnage said.
Another issue for those involved in NIL is the lack of agent regulation.
“There are no continuing education requirements or anything,” Turnage said. “You pay the fee, which is $300 to $500, fill out some paperwork, and you’re an NIL agent.”
Turnage remembers an athlete who essentially signed away his lifetime rights to benefit off of NIL for $500.
Henry said athletes and businesses not working with legal counsel on NIL deals are taking a big risk.
“Many student athletes either have no representation in negotiating, assuming there is actually any give and take, or documenting NIL agreements,” she said. “Athletes often engage a marketing consultant not licensed to practice law, or a marketing firm, rather than a law firm — and importunely, some attorneys in this practice area have little experience in negotiating and documenting contracts. Every word of a contract has meaning, and without an experienced business attorney involved, the student athlete risks inadequate terms or even those that put the athlete’s eligibility in jeopardy. Wouldn’t it be awful for the parties involved — team, school, coach — if your business contract caused a student athlete’s eligibility to be questioned?”
Carroll said he doesn’t want his players doing any in-season NIL deals or activities so they can focus on the team and school. Plus, part of his job is to advise players on taking deals that seem good and deliver an immediate bang — to a player and an agent — but aren’t so good in the long run.
“We don’t trip over dollars chasing pennies,” he said.
Henry also questioned whether NIL has enabled some player representatives to practice law without a license.
“In Arkansas, you must be a licensed attorney to practice law,” she said. “I’ve wondered why the Arkansas NIL statute allows a student athlete to be represented in NIL transactions by an ‘agent’ not licensed to practice law in Arkansas. Isn’t that the unauthorized practice of law? Even worse, in this arrangement, is the student athlete getting the best representation possible?”
Henry’s points showcase the roughshod nature of NIL’s evolution, in which the priority seems to have shifted from athletes’ rights to what others can get out of it.
Another consideration is the taxes owed on all this NIL income.
“Taxes are always a discussion with the client when a WLJ attorney is involved in a NIL transaction,” Henry said. “Someone has to pay the taxes, and it is typically the student athlete working as an independent contractor. So taxes should be a consideration so there is no surprise on the backend of a deal.”
Carroll said he makes all his players sit down with a CPA, who explains everything to them pertaining to the taxes applied to their NIL payments.
“Most of these guys are good guys from good families, but when we were in college, did we understand the full gravity of the U.S. government?”
Turnage wonders if the return on investment on NIL deals — or eventual lack thereof — will play a role.
“In three years, these businesses will stop paying if players don’t deliver on the field,” he said. “The question is, if they don’t, do businesses keep pumping money into NIL?”
K.J. Jefferson, shown earlier this year at LSU, is one of the Razorback athletes represented by Carroll. (Photo courtesy of Arkansas Athletics)
For Carroll, NIL has evolved pretty much as he thought it would. He’s signed many NIL deals for current Razorbacks KJ Jefferson, Raheim Sanders, Beaux Limmer, Chris Paul Jr., Isaiah Sategna, Isaac TeSlaa, Dwight McGlothern and Jacolby Criswell and also represents pro Hogs like Treylon Burks of the Titans.
Carroll said NIL’s evolution has shifted the focus from a player’s market value to collectives, the school-specific pools into which donors and boosters drop money to create NIL opportunities. Officially, the opportunities are for existing athletes on campus to capitalize on NIL, but in practice, collectives are used to help lure high-value recruits and transfer targets. NIL collectives now are found at virtually every Power 5 school. Three collectives work NIL opportunities for Razorback athletes — the ONEArkansas fund, the Hunt family’s Athlete Advocate Consortium and the 4th and 25 Fund, the latter two of which focus on connecting Hog players with local nonprofits and philanthropic causes.
Carroll thinks the chain of falling dominos set off by NIL is far from done. Expect major changes in the next three to five years to the way college sports is structured, he said.
“There will be a clear delineation between ‘feeder schools’ and the Power 5, almost like Minor League Baseball and the Major Leagues,” he said.
With the end of the Pac 12 after this academic year and SEC and Big Ten expected to pick off the most valuable brands from the ACC, the Power 5 is expected to settle into a Power 2 or 3. Carroll thinks the “Power” schools, however many they might number in three years, could break away from the NCAA, at least for football.
“The conference commissioners have basically called the NCAA’s bluff and shown it has no power whatsoever outside of running March Madness,” he said. “They will listen to the NCAA as long as the NCAA doesn’t make a decision they don’t like.”
Carroll estimated that 80 percent to 90 percent of college athletes don’t have NIL deals, but said athletes understand that they’ll naturally go to the star players. He called the notion that NIL has created dissention in locker rooms a “myth.”
He named Georgia, Texas A&M and (incoming member) Texas as the top NIL players in SEC football and said Arkansas holds its own NIL-wise in each of the three top sports. He said Arkansas’ NIL game is equally effective for football, basketball and baseball, though, in baseball, it may have more of an advantage relative to other college baseball programs. He said the overall NIL game at Arkansas is top 20, “maybe even in the 7 to 15 range.”
As for federal legislation reigning in NIL, Carroll doesn’t see it. States won’t sit back and accept a federal regulation that could end up harming their big colleges by placing limits on NIL payments, he said.
“They’ve let Pandora out of the box,” he said, “and you can’t get it back in.”
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