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Here's how you can pay college recruits to play for your favorite school

Here's how you can pay college recruits to play for your favorite school

3/3/2024


tl;dr: the rules around recruiting college athletes have changed yet again, and we're launching a company to give fans the power to help build their team's future.
🏟️ www.fancave.me 🏟️

Imagine you’re job hunting, deciding between three job offers. But there’s a catch:

  1. All the offers were verbal, and they refuse to put it in writing
  2. You signed an NDA that terminates the contract if you share the terms with anyone
  3. When you accept one offer, they can change the terms with no recourse

Welcome to the life of a college student athlete.

Sure, they’re not employees (different topic). But until three years ago, it was illegal for college athletes to get paid at all. Any other college student could have a job or make money from YouTube. College athlete though? You’d lose eligibility in your sport.

But as of July 1, 2021, the National Collegiate Athletic Association (NCAA) officially passed it’s Interim NIL (name, image, and likeness) Policy, featuring:

Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.

What these guidelines were originally intended to be — a way for athletes to make a few bucks from, say, a sponsorship with a local restaurant — only took two months to unravel. And fast forward two years, college athletes are enduring the worst job search of all time.

How? Read on.

NIL divulging from endorsements to inducements

Compensation for college athletes through brand endorsements and custom merch became pennies compared to the real money: NIL Contracts from ‘Collectives.’

It only took a few months and some smart donors to figure out some key NIL bylaw loopholes—enabling big-pocket donors to pool their money, and use this pool as financial leverage to pledge money to top recruits to entice them to come to their school.

This entity founded on the grounds of this legal loophole was called a ‘Collective.’ While the NCAA later updated their guidelines to try to reel this behavior in, the genie was already out of the bottle:

  • $8 million NIL deal inked with a 17-year-old QB for Tennessee (source)
  • Texas’s backup QB allegedly made more via NIL last year than Brock Purdy, the starting Super Bowl QB (source)

What began as a legal way for athletes to endorse their local restaurant turned into six-figure contracts from ‘NIL collectives’ to entice the best players to their school. And the same regulatory gray area that made Collectives ‘legal’ reflects the gray area in which they operate:

  • Not Inclusive: Collectives restrict membership to specific athletes in select sports (top 1%)
  • Not Transparent: Collectives aren’t transparent about how and where donor money goes
  • Not Fan-Friendly: Collectives control allocations and only let donors donate to ‘the general fund’

Even though the rules technically didn’t allow Collectives to use NIL as a recruiting tool… think that stopped them? It’s no secret that NIL drives recruitment decisions, and that’s where these shady Collective practices give them the upper hand:

  • Behind-closed-doors conversations that ‘technically never happened’
  • Under-the-table contract values that are predatory and non-negotiable
  • Controlling terms via short-term contracts, payback clauses, and forced exclusive NIL rights ownership

And one week ago today, everything changed yet again.

The NIL Injunction Heard ‘Round the (College Sports) World’

The Eastern District of Tennessee announced a preliminary injunction on Friday, February 23 that officially blocked the NCAA’s ability to enforce any of its NIL bylaw rules. Any. Rules.

What does this mean? The future of college athletics is closer than we thought: Pay-for-play is here. Universities (through collectives) can offer contracts directly to recruits, and recruits have the power to negotiate those contracts before they commit.

While this injunction applies only to Tennessee and Virginia on paper — it practically applies in 22 states.

How?

There are 22 states with laws that directly contradict the NCAA’s NIL policy. These states (1) prohibit “athletic associations”—aka, the NCAA—from penalizing any party on the basis of any NIL violation while (2) not explicitly banning the use of NIL negotiation during recruitment.

Here’s a breakdown:

  • Arkansas is an example of a state with NIL, that explicitly prohibits using NIL as a tool for recruitment or inducement (1 of 7 states)

    A person or entity, regardless of residence, shall not give or promise compensation for the use of the name, image, or likeness… with the purpose of recruiting or inducing the student-athlete to enroll at another institution of higher education. (HB1649, pg. 5)

  • Oklahoma is an example of a state that is actively amending its preexisting law to redline any suppression of ‘NIL for use in inducement’

    Compensation shall not be provided as an inducement for athletic performance or to attend or enroll at a particular institution. (SB1786, pg. 2, [proposed redline] )

  • Nebraska is an example of a state that explicitly prohibit the NCAA from penalizing any institution, official, or student-athlete on the basis of any NIL violation in their states (1 of 23 states)

    No collegiate athletic association shall penalize a student athlete or prevent a student-athlete from fully participating in an intercollegiate sport because such student-athlete earns or intends to earn compensation… (LB1393, pg. 3, line 14)

Why are states contradicting NCAA policy in the first place? The arms race of college athletics is a powerful force, even in state politics. Getting re-elected means not inhibiting your public university’s recruiting prowess.

In summary, many states have their own, bespoke NIL laws. But, by combining:

  1. The precedent set by Friday’s injunction, removing the NCAA’s NIL-recruiting ban
  2. The protection from states with laws that (1) simply don’t ban inducements and (2) block NCAA from penalizing any party

22 states are now green-lit with the newest competitive advantage: NIL-recruiting.

The 22 States Where NIL-Recruiting Inducement Is Now Legal

With this combination of precedent and protection, we went state by state (so you don’t have to) to understand each state’s stance on NIL-based recruitment inducement:

Updated: Feb. 29, 2024. This is not legal advice.

What’s next? A better college athletics landscape

Some say NIL-based recruitment ruins college athletics (‘inducement’ is a pretty scary-sounding word). But, honestly? A more open NIL makes college sports better.

Why? Because college sport’s true pageantry lies in its unique ‘free agency’ model. Unlike any other sports leagues in the world, athletes ultimately decide where they want to go to school. No drafts, no trades. Pure pageantry.

With this in mind, and if money (NIL) is now in the equation, shouldn’t this mean:

  • Athletes deserve to openly assess their NIL value on a per-school basis
  • Fans—a team’s true lifeblood—deserve to have a real part in assembling their team’s future

It sounds crazy, but this new open free agency of college sports gives fans real ways to directly support and assemble their team.

I’m personally excited for the future of a free and open NIL-driven recruitment process, but the reality is that NIL collectives still exist. Under-the-table NIL offers still exist. Predatory contracts still exist.

What is now possible is not yet a reality.

That’s why my co-founder, Nick, and I are building FanCave.

FanCave is building the first, online, public ‘collective’—that lets fans pledge to specific recruits and get re-credited if they don’t commit. This means fans now directly decide the future of their teams and athletes can negotiate safely on terms they understand:

  1. Top prospects (recruits, portal targets) earn a verified FanCave page
  2. Fans offer their favorite high school prospects
  3. Funds offered are displayed on a public leaderboard—tracked per-fanbase and per-recruit
  4. Recruits cash out when they commit (earn the commitment fanbases’ pledged funds). Other fanbases are re-credited.

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On FanCave: May the best fans win.

Starting today, fans can tap in and support their favorite prospects—just in time for the Spring Portal & Class of 2025 commitments.

  • Fans can easily sign up & commit to their fanbase at: www.fancave.me
  • Purchase credits, and begin supporting your favorite prospective student athletes in minutes
  • Show the world the power of your fanbase, only on FanCave

About FanCave

We’re backed by Y Combinator (of Airbnb, Reddit, and others) to sustainably pursue the mission of building the first open platform for collegiate free agency. And we’re just getting started.

  • Want to play a part in building your team’s future? sign up at www.fancave.me
  • Want to hear more? Reach out at hello@fancave.me
  • Want to follow the journey? Follow @lukebogus + @siscoe_

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Onward,

Luke Bogus, CEO @ FanCave. www.fancave.me

FanCave is powering the free agency of college athletics. Backed by Y Combinator, we empower fans to directly build their teams’ future—while allowing athletes to safely understand, own, and grow their NIL.

🏟️ Fans? Support your team here → www.fancave.me

🏆 Recruit? Begin your journey here → www.fancave.me/recruits