In an effort to attract and retain talent and improve athletics in the Commonwealth of Kentucky, Gov. Andy Beshear signed Kentucky Senate Bill 3 (“SB 3”) to expand name, image and likeness (“NIL”) rights ahead of the House v. NCAA settlement.¹ SB 3 implements significant changes, including that Kentucky colleges and their affiliated corporations (i.e., entities organized and operated to assist the college) may pay student-athletes for their NIL rights directly through revenue sharing, with a caveat that student-athletes must now give their school a copy of any potential third-party NIL agreements. Student-athletes are now also limited in their use of school property in earning third-party NIL compensation.

Considerations when entering into an NIL agreement

Kentucky colleges and their affiliated corporations may contract with a student-athlete to use the student-athlete’s NIL in exchange for fair market value compensation (an “Institutional Agreement”). In addition to an Institutional Agreement, student-athletes may also enter into third-party NIL agreements, provided, however, that (i) the student-athlete submits the proposed third-party NIL agreement for the institution’s review and approval² of any conflicts with Kentucky Revised Statutes (“KRS”) or the institution’s reasonable restrictions, and (ii) nothing in the Institutional Agreement prohibits such third-party contract. Only after any conflicts are resolved will student-athletes be able to enter into a third-party NIL agreement.

Accordingly, student-athletes interested in partnering with third parties should arrange for terms to be added to the Institutional Agreement to include designated third parties with whom the student-athlete may enter into an NIL deal directly. Furthermore, when negotiating these NIL deals, student-athletes should keep in mind any possible negative effects that an influx of cash or cash equivalents may have on their eligibility for need-based financial assistance or academic scholarships that are determined in part on financial standing. Lastly, student-athletes should consider alternatives to liquidated damages provisions, as neither the institution’s nor its affiliated corporations’ employees will be liable for any ordinary or routine actions that negatively impact the student-athlete’s ability to enter into third-party NIL deals. In addition to the limited liability enjoyed by all Kentucky colleges and their affiliated corporations in Institutional Agreements, damages arising from an Institutional Agreement with a public Kentucky college is further limited by KRS 45A.245, which caps damages awarded to the contracted amount.

Student-athletes and institutions (and their affiliated corporations) interested in learning more about the impacts of SB 3 or their respective NIL options should contact the authors.

1. The House v. NCAA settlement is expected to be approved in April 2025, providing almost $3 billion in backpay to current and former Division I student-athletes who missed out on NIL deals, and setting the guidelines for a revenue sharing model. ↩
2. The institution must approve the third-party agreement within three (3) business days of the student-athlete’s submission of such third-party agreement. ↩