College Athletics, NIL and Nonprofits

One of the hottest topics in college athletics turns out to be about nonprofits. This episode unpacks how nonprofit colleges and third-party NIL collectives support individual student athletes, the governance and tax questions that follow, and what the recent NCAA settlement means for oversight and compliance. We also look ahead to emerging federal regulation and how nonprofits might engage in shaping what comes next.

 

Attorneys for this Episode

·      Tim Mooney

·      Victor Rivera

 

Why NIL Is a Nonprofit Issue 

·       Define NIL: athlete rights to monetize their brand (name, image, likeness).

·       Distinguish third-party deals vs. institution-linked compensation

·       Why nonprofits are in the mix: NIL collectives, booster organizations, independent sponsorscirculating capital in the ecosystem.

• College athletics live inside nonprofit institutions — universities and colleges are almost all 501(c)(3)s.
• Enter third-party NIL collectives — many of which are also nonprofits, often organized as 501(c)(3)s or seeking that status.
• When nonprofits move money, governance and tax law always follow — NIL is no exception.
• In October 2025, a settlement in House v. NCAA settlement centralized review mechanisms (the College Sports Commission – or CSC) now oversee deal approvals & compliance.
• Ongoing federal intervention: the proposed SCORE Act is NCAA-backed and would stop athletes from being considered employees and shield the NCAA from the kinds of class action lawsuits that got us to the current NIL landscape

 

How Nonprofits End Up Supporting Individual College Athletes

• Nonprofits can and do financially benefit specific individuals (scholarships, disaster relief, housing aid, fellowships).
• NIL collectives operate on a similar theory:
• Supporting athletes through appearances, community engagement, or promotional activity
• Often tied (explicitly or implicitly) to institutional athletic programs
• The tension:
• Supporting individuals is allowed
• But private benefit, inurement, and mission drift are still red lines
• Issue with compensating individuals using their “fair market value”
• Key question for nonprofits:
• Are we advancing a charitable purpose (legal) or just subsidizing compensation (questionable)?

Governance Questions Nonprofits Can’t Ignore

Board-level responsibilities

• Mission alignment
• How does athlete support further the stated charitable purpose?
• Is this education, community engagement, economic equity or something else?
• “Amateur athletics” does a lot of heavy lifting here, but sometimes the collectives compensate the athletes for promoting charitable events/causes.
• Board oversight
• Who approves NIL strategy?
• How are conflicts of interest handled (especially boosters, alumni, donors)?
• Controls and accountability
• Criteria for selecting athletes
• Documentation of services provided
• Fair market value analysis
• Transparency
• What are donors told?
• What is disclosed publicly vs. internally?

Regulation on the Horizon After the NCAA Settlement

• The NCAA settlement signals:
• More centralized oversight
• More formal review of NIL arrangements
• Less tolerance for “wink-and-nod” structures
• Likely regulatory pressure points:
• Standardized deal review
• Clearer definitions of permissible activity
• Increased scrutiny of nonprofit status and operations

Should Nonprofits Weigh In on What Comes Next?

• The NCAA settlement last fall quieted things down by creating reporting structures, arguably with some teeth. But as things evolve, there’s more space for nonprofits in particular to notice.
• Will the College Sports Commission (CSC) continue to have conference support so it can enforce the NIL rules? The agreement hasn’t been fully adopted yet, but the CSC is already knocking down some NIL deals.
• Federal legislation (SCORE Act or SAFE Act)
• Recent controversies surrounding eligibility of former pro-basketball players (Amari Bailey, Charles Bediako) may force Congress to act
• NCAA-adjacent rulemaking
• State-level NIL frameworks particularly regarding their institutions
• Other structures could allow potential pathways for unionization for student-athletes
• 501(c)(5)s like AFL-CIO have come out against SCORE Act
• Previous attempts have failed by student-athletes in Northwestern and in other universities and the SCORE Act has a provision that bans college athletes from being considered employees

Resources

NIL Compliance Tightens: What the NCAA's New Rules Mean for Institutions and Sponsors – Steptoe and Johnson

College Sports Watchdog Will Enforce Rules Without Legal Backing – Front Office Sports

NIL regulations for college athletes face hurdles in Congress – Spectrum News

Letter Opposing Legislation That Would Be A Bad Deal for College Athletes – AFL-CIO