Guidance on Valid Business Purpose

MEMORANDUM

On July 10, 2025, the College Sports Commission (“CSC”) issued a memorandum that included guidance on the valid business purpose (“VBP”) requirement of NCAA Bylaw 22.1.3. Based on further discussions between Class Counsel and counsel for Defendants in the House litigation, the CSC is providing revised guidance herein to replace the earlier memorandum. The CSC is in the process of reviewing deals that were not cleared under the standard articulated in the prior guidance and will clear deals consistent with this revised guidance.

In furtherance of the existing prohibition of pay for play, the House settlement allows the Defendants to adopt the VBP test as a standard to review NIL licenses or payments between student-athletes and associated entities or individuals. As such, NCAA Bylaw 22.1.3 provides that “[a]n associated entity or individual shall not enter into an agreement with or provide payment to a prospective student-athlete or student-athlete unless the agreement or payment terms, as determined by the name, image and likeness clearinghouse, are for a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit . . .” To meet this requirement, the NIL payment or license must be for a valid business purpose related to the promotion or endorsement of goods or services to the general public and those goods or services must be sold “for profit.”

The CSC’s “for profit” inquiry focuses on whether the sale of goods or services is for profit and not whether the entity itself is operating at a profit or a loss at any given time. As part of this inquiry, the CSC may require student-athletes or the entities with whom they seek to enter NIL agreements to provide information and documentation to establish compliance with the requirements, including the entity’s efforts to profit from the deal. Refusal to provide this information or the provision of insufficient information to establish compliance may result in deals not being cleared by the CSC.

Even if the deals mentioned above satisfy the VBP requirement, they would still be subject to the requirement in Bylaw 22.1.3 that compensation to the student-athlete must be “at rates and terms commensurate with compensation paid to similarly situated individuals with comparable name, image and likeness value who are not prospective student-athletes or student-athletes of the institution.”

In addition, an associated entity or individual can serve as a marketing agent matching student-athletes with businesses offering NIL opportunities.

If you have questions about anything in this memorandum, please reach out to your conference’s general counsel or compliance lead or to the NCAA’s compliance staff. In the coming months, the CSC will grow its staff to the point where it can receive inquiries directly from schools. Thank you for your patience.