On March 9, 2022, the Senate Bill 6 – the Kentucky NIL law – was signed into law by Governor Andy Beshear. The new law will allow Kentucky NCAA student athletes to earn compensation from the use of their Name, Image, and Likeness (“NIL”), an opportunity formerly prohibited by the NCAA. Kentucky student athletes can now be paid for a variety of activities, including among others: sponsorships, endorsements, appearances, autographs, podcasts, private lessons and crowdfunding.
The law amends sections of Kentucky Revised Statutes Chapter 164 and expands upon the June 24, 2021, Executive Order which allowed college athletes to enter into contracts with companies who want to use the athlete’s NIL to promote their products and services.
The Kentucky NIL law applies to collegiate student athletes, universities, the NCAA, and third parties participating in the emerging industry of NIL marketing. The following is a summary of the new law:
Guidelines for Student Athletes
The law allows a student athlete to receive compensation for their NIL and does not limit the amount of money an athlete can earn. However, the new law prohibits a student athlete from entering into NIL agreements endorsing or promoting
- sports betting;
- a controlled substance;
- adult entertainment;
- a substance the NCAA forbids the athlete from using; or
- products or services that would be illegal for the athlete to possess or receive.
The new law also requires student athletes submit any potential NIL agreement to a designated school official for approval, pursuant to the university’s policies and procedures. Additionally, the law removes NIL contracts from being subject to Kentucky Open Records Act requests which protects NIL deals from public disclosure.
Guidelines for Universities
The Kentucky NIL law sets various requirements and guidelines for universities. For example, the law prohibits a university from taking the athlete’s NIL compensation into consideration when awarding scholarships, except in certain circumstances. It further forbids the universities from giving, promising, or directing NIL compensation and negotiating any part of the athlete’s NIL agreement.
The new law allows universities to adopt a reasonable policy governing the NIL agreements of the student athletes and provides examples of reasonable restrictions that universities may implement, including: prohibiting NIL agreements for products or services that conflict with the mission of the university, establishing conditions for the athlete’s use of the university’s intellectual property, and creating a schedule for the athlete’s participation in the NIL activities that does not conflict with official team activities.
Once the student athlete submits the NIL agreement to the university, the new law allows the university three (3) days to review the proposed agreement for conflicts with the new NIL law or the school’s rules and provide written notice of any identified conflicts to the student athlete. If a conflict is identified, the student athlete may not enter into the proposed NIL agreement until the conflict is resolved, and the modified agreement is approved by the school. The new law also requires schools to offer student athletes an appeals process to resolve disputes concerning proposed NIL agreements. It also specifically exempts employees of Kentucky schools from liability for damages to a student athlete resulting from the disapproval of an NIL deal.
Interestingly, the law also mandates that the university provide the athlete with a financial literacy and life skills education workshop for a minimum of five (5) hours at the beginning of the athlete’s first and third academic years. The workshop must include information relating to financial aid, debt management, saving and budgeting practices, time management, academic resources, and social media and brand management education.
Student athletes and college administrators in Kentucky should familiarize themselves with the rights and restrictions imposed by Senate Bill 6 in order to ensure compliance with Kentucky NIL law. Understanding the Kentucky NIL rules is critical for navigating this new landscape and avoiding potential penalties for noncompliance. For more information, contact Commonwealth Counsel Group attorney Greg Healey.