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Protecting your NIL Investment: The Kadyn Proctor Conundrum

Over the last few years, the combination of NIL and the ability of college athletes to freely transfer and be immediately eligible to play has drastically altered the landscape of college athletics. More recently, a federal judge ruling the NCAA cannot enforce NIL rules[1] means NIL collectives can offer NIL packages to players at other schools at any time of year, including during the athlete’s current season. For many this is viewed as a win, empowering players to make the maximum profit upon their image. However, for the NIL collectives and the businesses paying these players for their image this creates immense risk. Players can now collect NIL payments from one program and then without ever playing a game transfer with the cash in hand.

This is exactly what just occurred with Kadyn Proctor. Proctor, originally from Iowa, started every game at left tackle for Alabama this past year as a true freshman. Following legendary coach Nick Saban’s retirement Proctor transferred to his home state Iowa Hawkeyes. While there he collected money from a sponsor for appearing at a marketing event. Then he decided to transfer back to Alabama. While the sponsor in theory got what they paid for, Proctor’s appearance at a marketing event, they likely only entered the deal assuming his presence on the Iowa football team in the fall would bring increased exposure to their business.

This is the conundrum facing any business or NIL collective dealing with college athletes who are free to leave the school whenever they wish. Your investment could evaporate without ever receiving the benefits of the player’s endorsement. One potential way to protect your investment is through contract law. Specifically, by including restitution clauses in NIL contracts. In practice the player and NIL collective, or business, would sign a contract stating the amount to be paid, the services the player will provide, and include a clause which requires the player to return all NIL funds received, and if desired interest, if they transfer before the end of the season. This would protect the collective or businesses investment by ensuring the player will compete for the school and bring eyes to the sponsor in the coming season. 

Like with any solution there are potential pitfalls. As states enact their own NIL laws, collectives and business will need to make sure they understand the reach of other states laws when dealing with recruits from different states. Furthermore, structuring NIL deals in this manner could result in the players being considered employees of the collective or business requiring compliance with state and federal employment law, if it applies. Other issues include clearly defining what encompasses the athletes “season,” and, in the case of minors, recognizing minors may disaffirm, or void, any contract entered into as a minor. As in any evolving area of law, these questions will need to be addressed, and should be discussed with a lawyer before moving forward.

As the law in this field evolves, such protections may become obsolete. However, at present NIL collectives and business sponsors need to be evaluating options to protect their investments. A player’s name, image and likeness is only valuable to many local business as long as it is wearing the local uniform. If they leave, that value evaporates. If your business or NIL collective is interesting in working with dedicated attorneys to implement these ideas, please contact the attorney’s at Dalton & Tomich, PLC. We are highly experienced in working with non-profit organizations and small business on all manner of issues and are here to help guide you through any and all legal complexities to help achieve your goals.

[1] https://www.espn.com/college-sports/story/_/id/39585390/ncaa-enforce-nil-rules-judge-grants-injunction.

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