Film Room: Executive Order strengthens NIL, eligibility and transfer rule structure

Reinforcement for Institutional and Third-Party NIL Rules

The EO buttresses the enforcement of both institutional and third-party NIL regulations by sponsoring existing rules, suggesting support for additional restrictions, and providing an avenue for federal oversight. 

The EO calls for “a prohibition on improper financial activities regarding student-athletes, including collectives or other entities or methods used to facilitate third-party, pay-for-play payments.” [Section 4(b)(vi)] In turn, the term “improper financial activities” is defined as “the following actions taken by a federally-funded higher education institution, including its officers, agents, affiliates, or representatives: 

1. intentionally devising or participating in a fraudulent name, image, and likeness (NIL) scheme;
2. knowingly accepting contributions, financial or otherwise, from persons who intentionally devise or participate in a fraudulent NIL scheme;
3. using Federal funds for NIL or revenue-sharing payments or for any type of payment or benefit to a coach, assistant coach, general manager, recruiter, or other person engaged in coaching or managing an athletic team; and 
4. tortiously interfering with a contract between a student-athlete and another federally-funded higher education institution, including a scholarship agreement.” [Section 3(a)] [Emphases added]

Notably, this section applies new restrictions on an institution’s use of federal funds. It also adds another consideration to the legal and regulatory framework applicable to the recruitment of transfer student-athletes, warning schools against tortiously interfering with now-common agreements between student-athletes and another institution.

Critically, the EO deems improper an institution’s participation in, or acceptance of contributions from those participating in, a “fraudulent NIL scheme,” defined as “a scheme to pay for goods or services, including NIL services, above the actual fair market value of those goods or services in connection with a student-athlete’s participation in intercollegiate athletics, including through the use of collectives or similar entities.” [Section 3(b)] Note here that an institution’s mere acceptance of contributions from an entity engaged in a “fraudulent NIL scheme” is itself deemed improper. This treatment goes beyond the current regulatory consideration of a booster’s (representative of an institution’s athletics interests) activity, which is generally constrained to the conduct of a booster in connection with a student-athlete or prospective student-athlete.

Aligning with and lending support to the current NIL regulatory structure, “fraudulent NIL scheme” generally excludes those institutional and third-party NIL payments and activities permitted by current NCAA and College Sports Commission (CSC) rules. [See Section 3(b)(i)-(ii).] 

Additionally, the EO directs the US Attorney General to “take appropriate measures to further meritorious actions to invalidate” state NIL laws that aim to create a homecourt advantage for its institutions. [Section 5] 

Recommended Eligibility and Transfer Requirements

The EO encourages enhanced rulemaking and enforcement regarding student-athlete eligibility and transfer procedures. Specifically, it supports the establishment of:

1. “age-based eligibility limits to promote fairness, consistency, safety, and opportunities for student-athletes under which: (A) participation in college athletics is permitted for no more than a five-year period, with limited exceptions for military service, missionary service, and other periods of absence from participation that are in the public interest; and (B) professional athletes cannot return to college athletics; [and]
2. transfer-related rules that: (A) provide for the ability to transfer one time during the five-year period with immediate playing eligibility, and one additional such time if the student-athlete obtains a four-year degree; (B) prioritize the academic development, success, graduation, and long-term well-being of student-athletes; and (C) ensure that the transfer window does not incentivize interference with athletic seasons or the academic year, or otherwise undermine the integrity of participation and competition in college athletics.” [Section 4(b)(i)-(ii)] [Emphases added]

Potential Federal Enforcement

While the EO “strongly encourage[s]” Congress “to expeditiously pass legislation that satisfactorily addresses the[] issues” covered in the EO [Section 1], the EO provides a framework for action in the absence of a federal law:

• “Agency heads that contract with or provide grants to higher education institutions, shall, as appropriate, evaluate violations of the applicable, lawful, and operative interstate intercollegiate athletic governing body rules in effect as of August 1, 2026, concerning the following, to determine whether they are a cause so serious or compelling in nature to affect the present responsibility of the recipient: 

1. eligibility limits; 
2. transfers between institutions; 
3. revenue-sharing permitted between higher education institutions and student-athletes; and 
4. permissible and improper financial activities.” [Section 4(a)(i)]

Additionally, the EO provides for the potential collection of records that would support the federal government’s review of these requirements: 

“To aid contracting and grantmaking agencies’ compliance with subsection 4(a) of this section, the Administrator of General Services shall propose, consistent with law, an appropriate, regular collection of information to evaluate compliance with the rules covered by subsection (a)(i)(A)-(D) of this section for completion by appropriate higher education institution officials.” [Section 4(c)]

Next Steps

Sections 3-6 of the EO have an effective date of August 1, 2026. [See Section 2.] Between now and then, institutions can get ahead by revisiting their current approach, ensuring alignment with existing requirements, and preparing for compliance with potential new requirements. Institutions can also track any NCAA and CSC rule updates and government agency announcements in connection with EO topics.

__________

If you have any questions about this legal briefing, please feel free to contact any of the attorneys listed under 'Related People/Contributors' or the Eversheds Sutherland attorney with whom you regularly work.