Full Paper: US College Sports: NIL deals for foreign student athletes
The National Collegiate Athletic Association (NCAA) in the United States (US) is no longer a purely amateur pursuit for student athletes. In a dramatic change, the NCAA announced that athletes can earn from the promotion of ‘name, image, likeness’ (NIL) deals. The abruptness of the change from amateur status athletics to being able to earn from NIL deals was stark. It was chaotic. An industry sprang up overnight. Whilst athletes can earn, there is also the ability to pay agents, managers, NIL deal companies, advisers and the hangers on. There is a lot to manage for the unwary.
The complaint for the amateur athletics purist is, if you focus on the money, you can lose sight of the game. This is a real concern. The NIL deal race is a blessing and potentially a curse. It is a blessing in the sense that athletes can earn back some of the value they generate for their respective college and the NCAA. Conversely, it can also be a curse, with more responsibility, more administration, the balance of obligations to sponsors and college, managing conflict between the two, taxation and ultimately athletic performance all whilst studying and keeping up the necessary grades.
For the foreign athlete looking at college opportunities, there are additional matters to think about. Firstly, can a foreign athlete also benefit from NIL deals? Yes and no. The answer is not straight forward. Secondly, are the rules consistent across the country? Unfortunately, no. This article will focus on what the NIL opportunity brings and what foreign athletes need to consider. The considerations are complex. Athletes need to assess a web of rules and practices with federal and state legislation, sports commissions, college rules and the potential conflicts between them.
The vexed history of amateur status in the NCAA
It will not come as a shock to learn that sport and money has a vexed history in US college sports. The primacy of winning and lack of regulation can lead to less-than-ideal outcomes. In the 19th century, the big sports battles between colleges could draw up to 40,000 spectators. Reports of ‘graduate students and paid ringers’, inducements and short-term enrolments to secure victories was not uncommon.[1] Winning was valuable. Reportedly, one college football player quipped that he would “become known as the first college player ever to take a cut in salary to play pro football.”[2]
By 1948, a new code restricting payments set the NCAA on its 70-year course to protect amateurism. In fact, protecting amateurism and paying very little for the assets generating the fan base, sponsorship dollars and sales, was a great business. It was a free labour market in a country with a history of such issues. The NCAA has become a sports giant with 1,100 college members separated into three divisions, Divisions I, II and III.[3]
Division I houses the elite sports universities that are separated into 32 conferences. Basketball and football are the main attractions. Just from the March Madness basketball tournament, the NCAA pockets USD$1.1 billion (2022) (and reportedly USD$1.5 billion from the 2023 tournament) for the broadcast rights. The college football playoffs generate USD$470 million per year. Even one of the South East Conference (SEC) of Division I generates separate revenues of USD$650 million.[4] Whilst approximately 30% of all NCAA revenue comes from student fees, over USD$10 billion of revenue is generated from the promotions of licensing, broadcast rights and advertising. It is a big money game for the organisation and the leading members of the administrations. For example, the president of the NCAA earns nearly USD$4 million per year and the Commissioners for each of the 32 conferences reportedly receive USD$2 to $5 million per year. Prior to the NCAA’s announcement, the pay could be big but only for a few. Now that is changing.
2021: time for change
On 21 June 2021, the US Supreme Court handed down a decision in NCAA v Alston[5] that triggered a major change and afforded student athletes the right to earn. The plaintiffs in the case were a collection of current and former Division 1 basketball and football ‘student-athletes’. The challenge focused on anti-trust, in that, the NCAA’s rules violated section 1 of the Sherman Act prohibiting contracts or conspiracies in the restraint of trade. Indeed, in the case, the NCAA had to accept that its members enjoyed a monopsony power for student-athlete services.
In his concurring judgment, Kavanaugh J helpfully summarised the situation:
“The NCAA couches its arguments for not paying student athletes in innocuous labels. Bu the labels cannot disguise the reality: The NCAA’s business model would be flatly illegal in almost any other industry in America...
...Price-fixing labor is price-fixing labor. And price-fixing labor is ordinarily a textbook antitrust problem because it extinguishes the free market in which individuals can otherwise obtain fair compensation for their work...
...The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year. Those enormous sums of money flow to seemingly everyone except the student athletes...
...But the student athletes who generate the revenues, many of whom are African American and from lower-income backgrounds, end up with little or nothing...
...The NCAA is not above the law.”[6]
With that last line, the dye was caste. The NCAA found itself in the middle of a pincer movement between the Supreme Court judgment and more than a dozen States set to affect the same standards.[7] On 1 July 2021, just one week after NCAA v Alston, the NCAA issued an interim NIL policy allowing student athletes to participate in NIL activities and earn.[8]
The flood gates are open
Within a month of the interim NIL policy, student athletes were signing NIL deals. Some of the more celebrated deals were reaching near the USD$1 million mark.[9] Basketball and football players were the early recipients of the benefits. The types of NIL activities include advertising, social media posts, apparel, appearances, signing autographs and releasing non-fungible tokens (NFTs).
However, the speed of the release of the interim NIL policy and the inconsistencies between State legislation has created confusion. It has also created an unlevel playing field between States and colleges. When the States began passing NIL legislation before the decision in NCAA v Alston, there were restrictions prohibiting types of NIL deals. These restrictions were not uniform. When the interim NIL policy was published by the NCAA making compliance with State law, a paramount obligation, this meant athletes could shop for better deal rules depending on the State where the college was based. It created a hierarchy of advantages and disadvantages.[10]
Conflicts between athletes and colleges
When we look at these deals there are obvious winners and losers. The winners of the NIL deal ‘gold-rush’ are basketball and football student athletes. These sports garner the most attention and so, understandably, the advertisers go to them because of the reach. The system also creates disparity between the sexes.[11] The NIL deal lists show a higher proportion of the NIL deals and the value overall favours male student athletes over female.
The other major area for conflict is between college and student athletes. Previously, the college could rely on the entire student athlete body to represent the sponsors of the college exclusively. Everything was very clear, if you sponsored the college then the entire student athlete membership would consistently be good ambassadors putting out imagery that did not conflict with the sponsors. However, now student athletes can compete for the NIL dollars. A sponsor might reduce the team deal and increase the individual deal for key student athlete members. The risk for colleges is to manage that inherent competition openly with the players.[12] The other concern is for student athletes to endorse competing and conflicting company sponsors and advertisers to that of the college, by representing individual student athlete ‘IP’ in a separate NIL deal.
Conflict is inevitable. The value of student athletes is quickly gaining momentum. For the 2023 March Madness tournament, the top 10 male basketball earners for NIL deals all exceeded USD$540,000 and the top was close to the USD$1 million mark.[13]
What does this mean for foreign student athletes?
For the foreign student athlete, which college, which conference and which State matters a lot. The foreign student athlete needs to think about:
· The possible visa options to enter, remain, study and possibly work in the US;
· Taxation – where is the place of earning?
· The State legislation - what earnings are allowed and what is not?
What type of deals are prohibited?
· The college – what contracts are allowed and what is not?
Can the intellectual property of the college be used by the student athlete in any NIL deal?
· The Conference – any imposed restrictions?
· The sport – any imposed restrictions from governing bodies?
With NIL deals, foreign student athletes have the ability to fund and survive in the US. This is an important aspect. Living hardship can take a toll on sports performance. If there is an ability to remove hardship from the sports performance equation, then the decision on the target college becomes all too important.[14]
Conflicting rules
California was the first to sign NIL legislation into law, quickly following by Florida.[15] The interim NIL policy refers to the relevant State law as having paramountcy but the State NIL laws ‘contain more differences than similarities’.[16] For example, some States prohibit NIL deals that conflict with sponsors of the college and other States leave the question open to the purview of the college.
Some States prohibit the use of college intellectual property being co-branded with the student athlete whilst others leave this open to the institution to manage its own NIL rules.[17] The University of North Carolina (UNC) has embraced NIL deals and partnered with The Bandr Platform to allow student athletes join a voluntary group licensing program where UNC intellectual property can be used with the student athletes NIL activities.[18]
There are also differences on what can and cannot be promoted. Some States have few restrictions and others are clear (understandably) on prohibiting the promotion of alcohol, tobacco, and gambling.[19]
Visa considerations
Most foreign student athletes enter the US using a F-1 visa. Traditionally, this is the most attractive visa class as there are no annual caps on the number of visas granted, relatively easy to obtain and allows for the student to remain for the entire duration of study.[20] The US Citizenship and Immigration Services describes the visa as:
The F-1 Visa (Academic Student) allows you to enter the United States as a full-time student at an accredited college, university, seminary, conservatory, academic high school, elementary school, or other academic institution or in a language training program. You must be enrolled in a program or course of study that culminates in a degree, diploma, or certificate and your school must be authorized by the U.S. government to accept international students.
However:
F-1 students may not work off-campus during the first academic year, but may accept on-campus employment subject to certain conditions and restrictions. After the first academic year, F-1 students may engage in three types of off-campus employment:
· Curricular Practical Training (CPT)
· Optional Practical Training (OPT) (pre-completion or post-completion)
· Science, Technology, Engineering, and Mathematics (STEM) Optional Practical Training Extension (OPT)
F-1 students may also be eligible to work off-campus on a case-by-case basis as a result of special situations such as severe economic hardship or special student relief.
For F-1 students any off-campus training employment must be related to their area of study and must be authorized prior to starting any work by the Designated School Official (the person authorized to maintain the Student and Exchange Visitor Information System (SEVIS)) and USCIS.
(emphasis added)
On-campus employment through the college for NIL activities is not permissible with the F-1 visa.[21] Any on-campus work must be directly linked to the provision of services to students.[22] Further, with respect to off-campus work outside of the restrictions set, the F-1 visa foreign student athlete needs to demonstrate severe economic hardship caused by unforeseen circumstances. This is a difficult standard to prove.[23] Considering the F-1 visa holder needs to demonstrate a level of funds to successfully study in the US, the unforeseen circumstances would need to be extraordinary. In short, any US based NIL deal is prohibited for a foreign student athlete participating in the NCAA with a F-1 visa.
To avoid the issue, in one reported case, Australian student athlete, Lou Hedley, flew over 20,000 kilometres to his home State of Western Australia to earn from an NIL deal.[24] The F-1 visa restrictions meant that Hedley could not ‘work’ in the US. As such, he made the 37-hour journey to the city of Perth to sign the NIL deal, perform the work and pay the taxes on the earning in Australia. For approximately 20,000 foreign student athletes in 2022,[25] they do not enjoy parity with their US teammates. Visa restrictions effectively prohibit earning in the US.
Fellow Australian basketball players with Nebraska, Jaz Shelley and Isabelle Bourne have also made the trip home to enjoy NIL deals. However, the issue is not clear cut. The definition of ‘work’ can be construed in different ways and there is conflicting information. Some colleges like West Virginia do not allow foreign student athletes to participate in NIL deals.[26] Some like the University of Florida, allow it provided there is strict documentation including proof of location with I-94 arrival and departure records.[27]
In the above cases, all of the work was performed in the home country. The danger is posting or re-posting something on social media on campus in the US that is connected to the NIL deal carried out in the home country. The US authorities have notice of a foreign student athlete’s social media accounts as these are noted in the visa application process.[28] This US social media actions may violate the F-1 visa conditions and be considered ‘off campus work’.[29] Further, if any of the online social platforms are monetised like YouTube, TikTok or Instagram, prior to entering the US, it is advisable to switch off the monetisation feature whilst in the US.[30]
The foreign student athlete has to be careful. If there are any social media postings following on from the NIL work in home country, a third-party manager or agent should carry out the postings from the home country.
There are other visa options for foreign student athletes, namely the P visa, O visa and EB-1 visa. However, these visas have particular criteria and higher levels of scrutiny where the foreign student athlete could fall foul of an adverse decision causing longer term issues regarding entry to the US.
Summary
NIL deals have created revenue opportunities for foreign student athletes. However, access to those deals is a complex path of evaluating State, college, sport and conference rules. Once the situation is determined if and what NIL opportunity is possible, then there needs to be careful consideration of the immigration and taxation rules. All actions by the foreign student athlete should be taken with advice. The consequences for a breach of immigration rules can mean expulsion and long-term problems including being prohibited from entering the US in the future to compete. The risks cannot be overstated but with careful planning and management a foreign student can have some participation in NIL deal activities.
July 2023
Note: The information in this article is provided for general informational purposes only. No information contained in this post should be construed as legal advice from Pachmann AG or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this article should act or refrain from acting on the basis of any information included in, or accessible through, this article without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s jurisdiction.
[1] NCAA v Alston (2021) 594 U.S. at 3.
[2] Ibid at 4.
[3] Ibid at 7.
[4] Ibid.
[5] (2021) 549 U.S.
[6] NCAA v Alston, Kavanaugh J at 4 and 5.
[7] ‘What is NIL in College Sports? The NCAA Rules Explained.’ by Rios, J. (30 June 2022) Best Colleges
[8] Fort, A. and Kriz, L. ‘College sports in the NIL era: what has transpired and what is to come’, (14 July 2022) Eversheds Sutherland, Thomas Reuters.
[9] Ibid.
[10] Baker, M. ‚The impact of NIL: What we’ve seen – and what to look for’ (31 May 2022), Genova Burns LLC.
[11] Dees, W., Cianfrone, B. and Damon, A. ‘Show me the money! A review of current issues in the new NIL era’, Journal of Applied Sport Management at 4.
[12] Ibid.
[13] Evans, D. ‚March madness 2023: Top-10 Most Valuable Players in the NCAA Tournament by NIL Value’ (13 March 2023) Basketball Insiders
[14] Smith, S. ‘The NIL Agreement and Social Media: A Content Analysis’ (2022) University of Mary Washington.
[15] Moorman, A. and Cocco, A. ‘College Athlete NIL Activities and Institutional Agreements at a Crossroads: An Analysis of the Regulatory Landscape and “Conflicting Language” in State NIL Legislation’ (2023) Journal of Legal Aspects of Sport 33, at 60.
[16] Ibid.
[17] Silahian, G.‘EA Sports: It‘s in the Federal Legislation’ (2023) 45 Hastings Comm. & Ent. L.J. 75 at 91.
[18] Ibid.
[19] `NCAA NIL Update: With a Semester of NIL Opportunities in the Books, Trends Emerge and Confusion Reigns’ (1 May 2022) Ropes & Gray.
[20] Haneman, V. and Weber, D. ‘The Abandonement of International College Athletes by NIL Policy’ (2022) to be published in Volume 101 of the North Carolina Law Review at 12-13.
[21] Ibid at 14.
[22] Ibid.
[23] Ibid at 15.
[24] ‘It’s all legal: Foreign college athletes cash in at home’ (30 May 2022) Associated Press.
[25] Solomon, B., Jolly, K., Stokowski, S., Ehrlich, S. and Arthur-Banning, S. ‘Who Is NIL Leaving Out? Challenges and Solutions for International Student-Athletes’ Sports Innovation Journal 2022 69 at 71.
[26] Ibid.
[27] Ibid.
[28] Supra ftn. 20 at 32.
[29] Supra ftn. 25 at 73 and 74.
[30] Supra ftn. 20 at 32.
