Tech & Sourcing @ Morgan Lewis


“March Madness” started early this year as the US District Court for the Eastern District of Tennessee recently granted a preliminary injunction enjoining the National Collegiate Athletic Association (NCAA) from enforcing rules prohibiting student-athletes from negotiating name, image, and likeness (NIL) agreements with third parties, including NIL collectives (i.e., “organizations created by alumni, boosters, or businesses with the purpose of providing NIL opportunities to their school’s athletes”), before the student-athlete enrolls in a particular college or university.

Prior to the court’s ruling, NCAA rules permitted student-athletes to negotiate NIL commercial transactions, such as endorsement or appearance agreements, after enrolling in a school. The main purpose of these rules was to shield against “pay-for-play” scenarios where a student-athlete’s enrollment in a school was contingent on the receipt of compensation.

The State of Tennessee and Commonwealth of Virginia challenged these rules, arguing that they violated Section 1 of the Sherman Antitrust Act by restraining and suppressing competition in the marketplace. The court agreed and granted the preliminary injunction, which is applicable nationwide, reasoning that

  • student-athletes were not allowed to participate in the give and take of the free market prior to enrolling in a school, which caused them to have “no knowledge of their true NIL value,” particularly at a time when their negotiating leverage was at its highest; in turn, NCAA rules “irreparably harm[ed] student-athletes by stripping them of their negotiating leverage and blinding them to their true NIL value”;
  • the NCAA would not face substantial harm from student-athletes negotiating NIL transactions with third parties prior to enrolling in a school; and
  • the injunction would limit anti-competitive behavior.

The court also enjoined the NCAA from enforcing its Rule of Restitution (NCAA Bylaw against schools whose NIL collectives negotiate with student-athletes before enrolling during the injunction period, even if the injunction is later vacated.

NCAA Response

In response to the court’s ruling, NCAA President Charlie Baker sent a letter to NCAA Division I schools, stating that the NCAA was pausing all “investigations involving third-party participating in NIL-related activities.” While President Baker stopped short of fully embracing the court’s ruling, he did acknowledge that “there will be no penalty for conduct that occurs consistent with the injunction while the injunction is in place.”

Key Takeaways

  • Student-athletes are now allowed to negotiate NIL transactions with third parties before enrolling in a school, whether that’s directly from high school, via transfer, or otherwise.
  • Schools will not be retroactively penalized for their NIL collectives negotiating NIL transactions with student-athletes before their enrollment in school in the event the injunction is later vacated.
  • The landscape of college sports continues to shift at a rapid pace, making it critical for all applicable parties, including those actively engaged in the negotiation of NIL transactions, to stay up to date on all applicable laws, rules, and regulations surrounding NIL issues.