School Revenue Sharing for NIL Rights Raises Title IX Questions
The Department of Education’s Jan. 16 memo argues that revenue sharing and school-provided name, image and likeness (NIL) funds must be allocated equally across female and male sports. The guidance highlights the evolving landscape of collegiate athletics and the web of considerations institutions must navigate to finalize NIL agreements.
Under Title IX, students at any school that receives federal funding are protected from sex-based discrimination. Title IX also provides that schools must provide male and female athletes with equal treatment and benefits. In its memo, the Department of Education maintains that revenue generated from an institution to a student-athlete for NIL rights is classified as “financial assistance.” Because the financial assistance is coming directly from an institution (not a private collective), schools risk violating Title IX if the money is not proportionally divided.
Questions remain how exactly Title IX will affect the changing landscape of collegiate sports following the introduction of NIL agreements. An NIL agreement is a contract that allows a student-athlete to control and receive compensation for the use of their NIL. Today, most student-athletes receive NIL opportunities through collectives that may be loosely related to institutions, but are private entities. But the pending House v. NCAA settlement, which has been preliminarily approved, likely allows schools to pay student-athletes directly through NIL or other revenue sharing.
The preliminary settlement allows for a 10-year revenue-sharing plan. It permits, but does not require, NCAA schools to share 22% of annual revenue with student-athletes. If schools opt into an “athlete pay” model of sports revenue, the amount each school can share with student-athletes is capped at $22 million annually. Schools will have to decide how to divide that $22 million between all athletes in their athletic programs. The revenue-sharing figure is expected to grow up to $32.9 million by the end of the 10-year revenue-sharing agreement. Many schools have indicated they plan to allocate $15 to $17 million to their football programs alone, which often garner the most revenue for schools.
The Department of Education’s memo could complicate these plans. The memo explains that revenue sharing is still subject to Title IX requirements. NIL agreements between schools and student-athletes, including those through revenue-sharing models, qualify as “athletic financial assistance” subject to Chapter 38 of the U.S. Code. In other words, when allocating the $22 million to athlete revenue sharing under the House v. NCAA settlement, schools must allocate equally to female teams and male teams, regardless of the amount of revenue generated by those sports.
It is important to note that the memo is not binding. Moreover, the current presidential administration could bring changes to this guidance. That said, institutions should be mindful of how NIL and other financial agreements with student-athletes may be affected by Title IX, including potential litigation exposure.
Institutions should consider their own policies and seek guidance from counsel as they maneuver in this new age of collegiate athletics. Contact Patrick Judd or any member of the Phelps litigation, media, sports and entertainment, or education teams with questions or for advice and guidance.
