It has been just over a year since the Texas Legislature passed SB No. 1385, which lifted prior restrictions on a College Student Athlete’s ability to receive compensation from the use of his or her Name, Image, or Likeness (“NIL”). Student athletes across the state can now have unprecedented capabilities to monetize their personality, similar to their professional counterparts.

Since the introduction of NIL in Texas, as well as similar legislation passed in other states, businesses of all shapes and sizes have sought to capitalize on this new foray of marketing opportunities. International companies such as Dr. Pepper and Lamborghini have struck deals with Heisman hopefuls Bryce Young (QB, Alabama) and Bijan Robinson (RB, Texas), respectively. Other local businesses in college towns have inked deals with student athletes to promote their businesses in more creative ways. For instance, Wright’s Barbecue in Arkansas partnered with several of the University of Arkansas Razorbacks’ offensive lineman, designating them as the “Official Protectors of the Pit.”

The introduction of the NIL landscape builds a new and exciting avenue for companies to market their brand. However, businesses operating in Texas, or seeking to partner with Texas Student Athletes, must be aware of the law’s limitations and restrictions on NIL agreements.

State law limits what can and cannot be included in these contracts. Any business looking to capitalize on NIL opportunities must be aware of the following issues they must navigate through when working with student athletes.

No Pay for Play

SB No. 1385 states that a student athlete “may not enter into a contract for the use of the student athlete’s name, image, or likeness if the compensation for use of the student athlete’s name, image, or likeness is provided in exchange for athletic performance or attendance at the institution.”

An NIL deal cannot be based on student athletes’ on-field performance. NIL contracts are marketing contracts solely to compensate student athletes for their publicity in the marketplace. It is impermissible to base an NIL contract on the student athlete’s on-field performance. This means no incentives or bonuses for scoring touchdowns or winning championships can be included in an NIL contract.

NIL is not a Recruiting Tool

In a similar vein, businesses cannot induce student athletes to attend their favorite school with the promise of forthcoming NIL opportunities.

Additionally, businesses must be aware that the contract with these students will remain binding regardless of the students’ affiliation with the school’s athletic program. This means contracts cannot include language that terminates the agreement should the student transfer schools, even if it is to a rival college. So long as the student athlete upholds his or her obligations under the contract, the business must do the same. 

Intellectual Property Issues   

Lastly, businesses should be aware of what comes with a student athlete when entering into NIL agreements. Students do not have a right to use their school’s intellectual property without prior consent, such as in a licensing agreement. Businesses should consider this aspect when developing its marketing campaign to avoid any conflicts with the athlete’s school.

Overall, the introduction of NIL can undoubtedly be a great thing for both student athletes and businesses alike. However, failure to comply with the applicable laws and regulations will present steep consequences for both sides to any NIL deal. With the NIL landscape so young and constantly changing, businesses should be advised to consult legal counsel to assist in navigating these uncharted waters.