Why NIL Deals Are Being Rejected and What Universities, Foundations, and Businesses Should Do Next

The recent announcement that the College Sports Commission's NIL clearinghouse has rejected millions of dollars in proposed NIL agreements marks a shift in the Name, Image, and Likeness landscape since NIL became a reality.

For universities, athletic foundations, businesses, and organizations working with student-athletes, the message is becoming clearer. A contract alone is no longer enough.

Reports indicate that many rejected agreements failed because reviewers concluded they lacked a legitimate business purpose or were not supported by fair market value. While every agreement depends on its own facts, the trend demonstrates that regulators are increasingly focused on substance rather than labels.

That changes how NIL agreements should be approached.

Instead of asking, "Can we pay this athlete?" organizations should first ask:

• What business objective does this agreement accomplish?

• What services will actually be performed?

• How was compensation determined?

• How will performance be documented?

• Would this arrangement make sense if reviewed by an independent regulator?

Those questions are not unique to college athletics. They are governance questions, contract questions, and risk management questions.

Anyone who has worked with nonprofit organizations has seen a similar concept before. Although the legal standards differ, the IRS doesn't simply accept that an expenditure advances a charitable purpose because an organization says it does. The underlying facts and documentation matter. The emerging NIL framework reflects the same practical lesson: if an agreement is intended to serve a legitimate business purpose, organizations should be prepared to demonstrate it.

This is particularly important for businesses entering sponsorship agreements, university-affiliated organizations navigating changing regulations, and nonprofit entities seeking to understand where charitable missions intersect with evolving NIL rules.

As the regulatory framework continues to develop, organizations should expect increased attention to documentation, contract structure, and the actual commercial purpose behind NIL agreements.

For organizations, this isn't simply a college athletics issue. It's another reminder that regulators often evaluate transactions the same way experienced boards and advisors should: by looking beyond the contract to whether the facts support the purpose the parties have identified.

That's a principle that extends well beyond NIL, and one that is likely to shape this area of the law for years to come.