Court Freezes NCAA’s NIL Ban for Prospective Student-Athletes

A federal judge lifted restrictions on prospective student-athletes’ ability to make name, image, and likeness (NIL) deals before enrolling at a university. The Feb. 23 ruling stops the NCAA from enforcing these rules while a lawsuit brought by the State of Tennessee and the Commonwealth of Virginia is ongoing.

Filed in January, the suit claims the NCAA’s current ban on high school athletes and current college athletes in the transfer portal discussing potential NIL opportunities before enrolling at a university restricts competition and violates Section One of the Sherman Act. The injunction freezes the ban nationwide until the lawsuit concludes.

While this ruling may open the door for high school recruits and transfers to sign NIL deals, student-athletes, universities, NIL collectives and businesses should proceed with caution. Even without the NCAA’s rules in effect, many states have enacted similar restrictions for NIL deals to avoid inducing enrollment at a particular university. This could leave contracts in limbo, with prospective student-athletes able to negotiate deals but having to stop short of signing them. After the student-athlete enrolls at a university, all parties could face legal and reputational risks as changing conditions affect the structure and success of these deals.

Putting pen to paper can help schools, businesses and prospective student-athletes limit their risk. Businesses and NIL collectives may want to consider non-disclosure agreements to protect the terms of NIL deals negotiated with student-athletes but not yet signed. While not legally binding, student-athletes can request an offer letter from potential NIL partners to evidence the negotiated terms of NIL deals before they make enrollment decisions.

It is critical for student-athletes, schools and businesses to watch this lawsuit closely as it develops. Please contact Nicholas Patti, Asa H. Toney or any member of Phelps’ Litigation or Business teams if you have questions or need advice and guidance.