United States: Kentucky's "Pay To Portray Act" Signed Into Law March 9, 2022

Senate Bill 6, titled the "Pay to Portray Act," was signed into Kentucky law by Governor Andy Beshear on March 9, 2022. The Act builds on the June 24, 2021, Executive Order that provided college athletes at Kentucky postsecondary educational institutions the opportunity to profit off of their Name, Image, and Likeness ("NIL"). The Act is Kentucky's first NIL law.

The Act was influenced by growing pressure on states to relax existing restrictions on NIL dealings. Many expected the NCAA would create a framework to regulate NIL deals after states began considering NIL laws in 2021. However, the NCAA did nothing, allowing states the freedom to craft their own NIL rules. Existing NIL laws were long considered too restrictive and the NCAA's inaction allowed athletic departments and their supporters to actively lobby legislators to limit restrictions surrounding NIL. For example, University of Kentucky athletic director, Mitch Barnhart, and men's basketball coach, John Calipari, testified before the Kentucky Legislature in support of reduced NIL restrictions.

The primary reason for the nationwide push to limit NIL restrictions is recruiting. To ensure Kentucky colleges and universities remain competitive in the ever-evolving NIL market, the Act was rushed through the Kentucky Legislature and ceremoniously signed by the Governor on March 9.

NIL opportunities will become an increasingly important factor for student athletes to consider in deciding where to continue their athletic careers. Accordingly, it is vital for Kentucky colleges and universities to understand how to operate within the rules promulgated by the Act. And, it is just as important for student athletes to understand the Act. While it is important for all interested parties to review the entire Act, there are a few key concepts that deserve particular attention:

1. The Act Expands NIL Protection for Student Athletes in Kentucky.

Like the Executive Order, the Act provides broad protection for student athletes to earn compensation for their NIL. The Act does not limit the amount of money an athlete can earn, so long as the NIL compensation is consistent with the market rate of the athlete's own NIL. This is important because it protects "high earning" athletes from scrutiny by measuring an NIL deal on the individual athlete's market rate, and not the rate of other athletes. The Act also protects NIL deals from public disclosure by stating NIL deals are not subject to the Kentucky Open Records Act. The Act protects athletes from future rules promulgated by an athletic authority (e.g., the NCAA, NJCAA, conferences, or other similar governing bodies) that would prevent the athlete from earning compensation for NIL. Further, the Act makes clear that NIL compensation will not negatively impact a student athlete's scholarship eligibility. Provided, however, income generated from NIL agreements may be considered if an athlete applies for need-based financial assistance.

2. The Act Allows Kentucky Colleges and Universities to Be Involved in NIL Deals.

Following a nationwide trend of major universities participating in students' NIL dealings, the Act expands college and university involvement in the NIL deal-making process. The Act requires student athletes to submit potential NIL agreements to a designated school official for review and approval. Thereafter, the institution has three (3) days to review the proposed agreement for conflicts with the Act 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 institution. The Act requires colleges and universities to offer student athletes an appeals process to resolve disputes surrounding proposed NIL agreements. It also creates a safe harbor protecting the employees of Kentucky institutions from liability for damages suffered by an athlete for any disapproval of an NIL deal.

3. The Act Limits Potential Liability of Kentucky Colleges and Universities for Allowing Students to Participate in NIL Dealings.

Lastly, the Act protects Kentucky colleges and universities from certain penalties for the NIL dealings of their student athletes. Specifically, Section 3(1)(b)(2) protects Kentucky colleges from enforcement by an "athletic authority", such as the NCAA, from "a contract, rule, regulation, standard, or other requirement that prevents...a postsecondary educational institution from participating in an intercollegiate athletics program as a result of the compensation of a student athlete for the use of the student's name, image, or likeness." In short, Kentucky institutions are shielded from NCAA or conference punishment for allowing their student athletes to participate in NIL dealings. The Act also prohibits any person or entity – in any state – from promising NIL compensation to Kentucky student athletes or to athletes who have signed letters of intent to attend a Kentucky college or university, for the purpose of inducing the student athlete to attend another school. This provision is aimed directly at the practice of offering NIL deals/compensation to induce a student athlete to transfer to another school or change their commitment.

In summary, the Pay to Portray Act provides a framework for all Kentucky student athletes, colleges, and universities to follow when navigating NIL dealings. It is critical to fully understand the rules prescribed by the Act to maximize the benefits of the Act while avoiding potential risks and liabilities.

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