Crackdown on collectives? College Sports Commission says deals must serve ‘valid business purpose’

Name, image and likeness collectives — a staple in the college landscape since 2021 – must do more than simply pay college athletes under new guidance from the College Sports Commission.

The commission, created by the four biggest revenue-generating conferences to enforce terms of the House settlement, said collectives or any entity wishing to pay players must meet a “valid business purpose” standard. The commission sent a letter to athletics directors at NCAA Division I schools Thursday with an update on the number of deals approved and the additional guidance.

“An entity with a business purpose of providing payments or benefits to student-athletes or institutions, rather than providing goods or services to the general public for profit, does not satisfy the valid business purpose requirement,” the commission wrote in its letter and posted on its website.

More than 1,500 deals have been cleared, including seven-figure agreements. More than 12,000 athletes have registered and been approved to use the NIL Go system, which functions as a clearinghouse for NIL deals worth more than $600. In recent days, the commission has begun telling athletes that their deals were not cleared.

“Since many of these deals cannot be cleared for similar reasons, we are providing additional guidance,” the commission wrote.

The commission included examples of deals that won’t be approved, including paying an athlete to promote the sale of merchandise in order to raise money to pay the athletes or others at the school. Or paying an athlete to make an appearance at an event, such as a golf tournament, since the purpose of the collective is to pay athletes associated with a particular school.

The commission said that NIL collectives “may act as marketing agencies that match student-athletes with businesses that have a valid business purpose and seek to use the student’s NIL to promote their business.”

Bryan Seeley, a former MLB executive, is the chief executive officer of the commission, and former Washington Nationals executive John Bramlette is its head of operations and deputy general counsel.

Leaders in college athletics hoped the new structure would limit the money flowing into college sports and provide some guardrails.

“The idea that you’re going to be a social media influencer or you’re going to be able to create economic value for a business and, therefore, monetize your name, image and likeness, that’s what the intent was,” UNC athletics director Bubba Cunningham said in May. 

“But the collectives were really collecting money so that we could pay players to play on our team, and we’ve done that now for three or four years.”

The House settlement – under which the NCAA and its member schools will pay nearly $3B to former athletes – allows for schools to directly pay athletes up to $20.5 million this year. 

And with a new NIL Go clearinghouse, deals will face scrutiny.

“To ensure that it is a fair-market value test, that there is a range of compensation that is actually legitimate, that you can’t get paid $5,000 to sign an autograph,” Cunningham said.

Brand deals such as those signed by former Duke star Cooper Flagg to endorse Gatorade or New Balance must also go through the clearinghouse. But those clearly meet the “valid business purpose” standard.

Deals in NIL Go are either cleared, not cleared or flagged for additional review, according to the commission. NIL Go is reportedly holding up deals, frustrating some around college athletics.

The One Pack NIL Collective at NC State sells memberships to fans and supporters. The membership packages start at $10 per month and range up to $500 per month. Each membership level comes with certain benefits, including, for top donors, lunch or dinner with One Pack athletes. The collective pays athletes with the money it generates from membership sales.

“We’re in the business of providing fan experiences and those moments people want to pay for to drive revenue so the collective has the resources it needs to attract and retain the players that are going to have the most impact at NC State,” Chris Vurnakes, the collective’s executive director, told WRAL last year.

The collective saw a huge jump in memberships around the hiring of new men’s basketball coach Will Wade. The additional money helped Wade stock the Wolfpack roster. Wade said NC State men's basketball has yet to submit a deal through NIL Go.

Schools, including NC State, front loaded contracts to execute before July 1 when the House settlement terms took effect. Those deals didn’t have to be approved by the clearinghouse nor did they count against the $20.5 million revenue sharing cap.

“We will continually work to serve NC State and our student-athletes like we have for the past three years,” Vurnakes told WRAL on Thursday.

North Carolina, which hasn’t offered memberships to its fans through a collective, consolidated its NIL offerings under the Carolina NIL brand last year.