NCAA

College Athletes Suffered When Schools Weren’t Ready For NIL

By Josh Planos

Jun. 30, 2022, at 6:00 AM

As reports of seven-figure name, image and likeness (NIL) deals for teenagers have swirled on social media — and while fans of The Good Old Days have derided those announcements as shameful evidence of how the NCAA landscape had irrevocably changed — some college athletes were asking journalists on social media how to file their taxes.

Lost in the shuffle of pay-for-play accusations, big-pocketed collectives and transfer portal hysteria is the reality that as the NIL era celebrates its first year in the books, many college athletes continue to navigate unfamiliar, complicated terrain without inclusive guidance. 

“Honestly, in terms of the legal stuff, we don’t have a lot of help at all,” said Hanah Smrt, a graduate track and field athlete at University of Nevada. “I’m a psychology major. I’m sure there’s plenty of athletes who are business marketing majors, but I don’t know what deals to not do…In the end, it’s like, we’re not being told that we’re basically being taken advantage of. There’s really not a lot of guidance.”

Some athletic departments have invested in third-party companies such as INFLCR and Opendorse to facilitate NIL services, including booking, disclosure and education, and some schools even offer for-credit academic courses on NIL-related matters. “They want to make sure that we’re all eligible to play,” said Terrell Brown Jr., a fifth-year senior who earned all-conference basketball honors last season at the University of Washington. Opendorse and INFLCR represent a vast majority of Power Five programs — Opendorse alone claims to represent more than 1,000 college teams, athletic departments and conferences.

But a number of Group of Five programs might not have that luxury — and even the ones with contracts in place cannot guarantee that athletes are prepared for this moment, which calls for at bare minimum financial literacy and life skills education. Countless athletes are afforded little assistance in avoiding situations that directly threaten their eligibility and, in some cases, freedom.

“You have other institutions in the country — especially kind of on the lower level — that don’t have anything in place, that don’t educate their athletes as much or don’t have a disclosure requirement,” said Chris Aumueller, CEO and founder of FanWord, an athlete branding company. “They pretty much leave it up to the athletes.”

These are the inevitable repercussions of an organization — duty-bound to keep its membership safe — that chose not to face a predictable, seismic transition impacting hundreds of thousands of athletes and opted instead for a “wait it out” approach, then was forced to frantically roll out a slapstick framework, devoid of regulation, at the 11th hour.

A year after the Supreme Court’s watershed ruling in NCAA v. Alston, the organization still has not provided a comprehensive educational program centered on NIL, according to Kam Cox, who coordinates the INFLUENCE Program at the University of Illinois. The justification for this information vacuum is that there still isn’t a federal law in place, allowing state laws to run the show. “I just don’t think you’ll see that national standard where a large company can feel really confident that not only do we have one standard to comply for everybody, but also it’s something that won’t change tomorrow, which is what we keep running into,” Cox said. “Therefore they can’t put together a true educational infrastructure.”

Be that as it may, a desire for educational resources dedicated to financial literacy is top of mind for thousands of athletes. A 2021 athlete survey conducted by the NCAA showed that 49 percent of respondents wanted help on tax and financial literacy, and 40 percent wanted help on navigating NIL. 

“We had somebody at our school have a $35,000 deal,” said Smrt. “How are they just supposed to figure out what to do with that amount of money when they have no education on it?”

Most of the athletes monetizing their NIL aren’t generating life-changing sums of money, but they might be moments away from making decisions with profound consequences without a true understanding of what is involved. Pell grant eligibility could be compromised by those who have never so much as seen a 1099 before. One college basketball player at a top 25 program didn’t know who to ask about tax filing assistance. Another nearly signed over exclusive rights to an agency without knowing what they were about to do.

“I had a player come to me in tears,” an SEC recruiting coordinator told On3’s Jeremy Crabtree. “He had no clue that he had to pay taxes for his NIL income. … I asked him where his 1099s were. He stared at me with a blank face and said, ‘I don’t know what you’re talking about, coach.’ We later came to find out that he had gotten some 1099s. But he threw them all away.”

“I’m very concerned about deals that athletes are entering into that are extremely exploitative,” said attorney Darren Heitner, who helped write Florida’s NIL law. “I’ve looked at over 100 [NIL contracts], and I’ll be honest, there’s not a single deal — not a single one — where I said to my client, ‘Sign this.’”

Every variable from compensation to grant of rights to dispute resolution deserves to be inspected, Heitner said. But in his experience, few are. The vast majority of athletes likely don’t have legal counsel. “And not just any lawyer, but one who understands this process,” Heitner said. “If they’re hiring a personal injury lawyer, what help is that going to be for someone who needs an expert on intellectual property protection and rights?”

Contracts can follow athletes for years after the ink dries. “We don’t think it’s the best idea in the world to align yourself with Barstool,” Cox said. Brand building is hindered when an athlete partners with a questionable organization, or agrees to promote a controversial product or service; think Gonzaga star Drew Timme dribbling a basketball between slot machines.  

“If you sign up for a partnership today, especially if you’re in those high-profile sports, that might follow you for the next couple of years of your life,” Aumueller said. “I think athletes need to be more mindful of who they partner with, and what the campaign should look like.”

University staff like Cox can answer athletes’ questions, but they cannot approve or deny the deals. “A lot of times what happens is student-athletes want to know stuff about their contract, and so I can explain to them how it works.” Cox fields roughly five inquiries per week, on average. “If we’re doing our jobs really well, they don’t ask questions, right? Our student-athletes are really well educated, and our community is really, really well educated, and everybody feels empowered.”

Student autonomy is at the heart of NIL, which complicates matters, said Cox. “I don’t set the prices,” he said. “Even if I could, I won’t do that. I think it’s antithetical. On one hand, for me, I never want our student-athletes to sign anything that they shouldn’t, like a ridiculous noncompete or some sort of absurd grant of rights or whatever. But at the same time, it’s up to them to be able to negotiate terms that are favorable for them.

“One of the things that we struggle with here is: To what degree should our educational program be mandatory? And like, how does that work? We have to understand these are adults.”

All agree that the education process is lacking and that it needs to begin before athletes arrive on campus. 

“I think we as a society need to rethink whether or not athletes or individuals in general are receiving important practical education even earlier in their lives,” Heitner said. “Whether it be middle school or high school, prior to enrolling at university. I don’t recall receiving that important information about properly managing finances and preparing for filing tax returns, and the importance of legal language within a contract — all of which I think is especially important in today’s day and age.”

It was essential for Heitner that Florida’s state law include a requirement for schools to provide adequate training in financial literacy and life skills. “I do think schools need to be very proactive in this area, to educate the athletes and make sure they understand that they should be setting aside money to pay their taxes, understand the value of properly diversifying your portfolio and not keeping it perhaps totally in cash and not doing very risky investments,” Heitner said. “I put at least some responsibility on the educators.”

But a focus on education may not pay off for athletic departments. Shortly before Wichita State athletic director Darron Boatright was fired this spring amid concerns that the university was unable to compete in the NIL market, he said his department’s struggles could be traced to a collective decision to focus “on educating our athletes about NIL and not just collecting cash and paying kids to come to Wichita State.” 

“It’s really, really important to instill a true educational infrastructure within your NIL program,” Cox said. “You need to have a partnership with your business school, or you need to have a partnership with some sort of local law firm or consulting firm or something where people repeatedly come in and are able to provide that service to your student-athlete. If you don’t have that, you can’t really have a sustainable system.”

That framework simply isn’t in place at far too many campuses.