College NIL in Late 2026: The Legal Landscape

Summary

• Schools pay athletes directly. The 2026-27 revenue-share cap is about $21.3 million per school, rising 4% a year.
• Third-party NIL is policed. Deals of $600 or more go through the CSC’s NIL Go clearinghouse, which had denied about $157 million in deals by Aug. 31, 2026.
• There is still no federal statute. The Senate passed the Protect College Sports Act 77–22 on Sept. 28, 2026; the House returns Nov. 9. Also, some argue that the utility of a federal law governing NIL is questionable.
• Schools are suing their own players. Duke, Ole Miss, and Cincinnati have all sued over transfers. No court has held a revenue-share buyout enforceable on the merits, at least not yet.
• Athletes’ best claims are contract and fraud. Rashada survived dismissal and settled; collective defaults and oral promises remain the most common fights.
• Employee status is the unexploded bomb. Johnson v. NCAA is still pending, and every lawsuit that treats a revenue-share deal like a services contract with a non-compete helps the plaintiffs.
• “Bag men” still exist. Alongside the legal structures, the time honored “booster with a bag of cash” persists. Top players continue to get paid through illegal booster mechanisms that are effectively impossible to police.

The new architecture: House, revenue sharing, and the CSC

Since July 1, 2025, schools that opted into the House v. NCAA settlement pay athletes directly, up to a cap of roughly $21.3 million per school for 2026-27. A private enforcement body, the College Sports Commission (CSC), polices third-party NIL through its NIL Go clearinghouse. Judge Claudia Wilken approved the settlement on June 6, 2025, and it runs for ten years.

The CSC’s biggest weakness is the fact that participants must consent to its authority. Its University Participation Agreement asks schools to waive suits over clearinghouse enforcement, set aside conflicting state law, and accept CSC penalties. As of late May 2026, the Big 12 was the only power conference with every school signed (On3). Tennessee AG Jonathan Skrmetti led a multistate letter against it in December 2025, and Texas AG Ken Paxton told Texas schools not to sign as the penalties clauses would unconstitutionally encumber state assets (Tennessee AG; Texas AG). CBS reported in October that the agreement is unlikely to be adopted broadly, and one GM said the CSC does not “have teeth to enforce it.”

For practitioners, the practical effect is a two-track market. School revenue-share contracts are now the core of most top-end packages. Collective and booster money supposedly survive only as deals that look like real marketing: a public-facing product, actual activation, and a defensible price. However, the CSC’s analysis of deals utilizes some unconventional metrics, such as the reputation / reach of the member school itself, that have recently been used by the CSC to justify jumbo NIL deals.

The federal picture

There is still no federal NIL statute. The Senate passed the Protect College Sports Act (S. 4668) 77–22 on Sept. 28, 2026, but the House does not return until Nov. 9, 2026, and the bill dies if it is not enacted before the new Congress convenes on Jan. 3, 2027 (Duane Morris; ESPN).

What the Senate bill would do. The bill would preempt state NIL, transfer, and eligibility laws, while preserving state tort, contract, civil-rights, and consumer-protection claims. It codifies the House cap, gives the CSC statutory teeth against cap evasion, and requires third-party deals to have a “legitimate commercial purpose” at market value. It also creates a federal agent registry with a 5% fee cap, limits athletes to one free transfer and a five-year window ending at age 24, and requires reporting of deals over $600 within five days.

Two provisions matter most for disputes. Athletes would get a private right of action after a 30-day notice-and-cure period, and pre-dispute arbitration clauses would be barred. The bill is silent on employee status, which is the main point House Republicans want to change.

The executive order. EO 14400 directs agencies to weigh governing-body rule violations when judging whether a school is a “presently responsible” federal contractor or grantee. It bars federal funds from NIL and revenue sharing and tells the Attorney General to challenge state laws that conflict with governing-body rules under the Commerce and Contracts Clauses. Like most executive orders, it promises more than it can deliver: It cannot itself preempt state law or grant antitrust immunity (Burr & Forman).

Employee status. Johnson v. NCAA remains the most tangible threat to the current student-athlete paradigm. The Third Circuit held in 2024 that athletes can be FLSA employees under an “economic realities” test and sent the case back to Judge John Padova in Philadelphia, where it is still at the pleading stage, with class certification and discovery ahead (Sportico).

Title IX. The Department of Education withdrew the Biden-era guidance that treated NIL as athletic financial aid in early 2025, so there is no current federal rule on how revenue-share money must be split by sex. The female-athlete objectors’ Ninth Circuit appeal of the House approval remains pending, and back-damages payments are paused until it is resolved. The current Supreme Court seems unlikely to strongly support Title IX, although stranger things have happened.

State by state: the SEC footprint

State NIL laws in the SEC footprint have shifted from limiting athletes to protecting schools: authorizing direct payment, shielding schools from NCAA enforcement, and, since 2025, hiding revenue-share payments from public-records requests. Almost all of it would be preempted by the Protect College Sports Act except for state contract, tort, and consumer-protection claims.

North Carolina in focus

North Carolina has no comprehensive college NIL statute. Its framework is a set of narrower pieces: the House settlement, a 2025 law that hides NIL contracts from public-records requests and regulates NIL agents, the Athlete Agent Act, and ordinary contract and Chapter 75 law. North Carolina is also home to the first school-versus-athlete NIL lawsuit, Duke v. Mensah.

Revenue sharing in practice. UNC-Chapel Hill announced it would put $13 million into football, $7 million into men’s basketball, and $250,000 each into baseball and women’s basketball (The Assembly). That allocation is exactly the kind a Title IX plaintiff would cite.

Duke v. Mensah. Duke sued quarterback Darian Mensah in Durham County Superior Court in January 2026, after he transferred to Miami. His two-season NIL agreement ran through 2026 and required arbitration. The court entered a TRO that let him enter the portal but barred him from enrolling elsewhere or agreeing to play for another school. Mensah moved for reconsideration, arguing the hearing date exceeded Rule 65’s 10-day limit, and the parties settled within days. It is rumored, but not confirmed, that the contractual damages in Mensah’s Duke contract were paid by Miami’s collective. The takeaway is that a North Carolina court will preserve the status quo pending arbitration, but no court has yet ruled that a transfer restriction is enforceable on the merits.

North Carolina doctrine that will decide these cases.

• Liquidated damages are enforced only when actual damages are hard to ascertain and the amount is a reasonable estimate; otherwise the clause is a penalty (Knutton v. Cofield, 273 N.C. 355 (1968)).
• If revenue-share deals are ever treated as employment, transfer restrictions become non-compete agreements. North Carolina will not rewrite these agreements, and enforces them only if written, supported by consideration, and reasonable in time and territory (United Laboratories, Inc. v. Kuykendall, 322 N.C. 643 (1988)).
• Chapter 75 claims (G.S. 75-1.1, 75-16, 75-16.1) carry treble damages and possible fee-shifting against collectives, agencies, and agents acting in commerce.
• The State waives sovereign immunity for its valid written contracts (Smith v. State, 289 N.C. 303 (1976)), so UNC System revenue-share agreements can be sued on in state court.
• Duke and Wake Forest are private, so the public-records fight does not reach their contracts at all.

Issues in modern deals

The typical top-end package is now a school revenue-share agreement, framed as a license of the athlete’s NIL rights, plus a few third-party deals (usually through collectives) that must survive NIL Go. The revenue-share agreement is where the litigation risk sits, because schools have started writing and enforcing exit terms.

The agreements now in court show the template: Cincinnati’s deal with Brendan Sorsby licensed his NIL for two seasons, required exclusive good-faith renegotiation with the school, barred promotions that conflicted with the school’s interests, and carried $1 million in liquidated damages (Sportico). Ole Miss conditioned payments on enrollment, good standing with the team, and an active athletic aid agreement, with an early-termination payment due if the athlete transferred within 90 days of signing (Kutak Rock).

Agents. State athlete-agent statutes still govern registration, disclosure, and the right to cancel. The CSC registers athlete representatives in NIL Go (more than 4,200 by January 2026), and both the Senate bill and EO 14400 push toward a national registry and a 5% fee cap (Yahoo Sports).

Tax. NIL and revenue-share income is generally taxable, usually as self-employment income reported on a 1099. Arkansas became the first state to exempt certain NIL earnings from state income tax, and an Alabama legislator has proposed similar relief (MultiState; CPA Practice Advisor). Athletes who receive large advances often have no withholding and face a surprise April bill.

International athletes. F-1 visa holders generally cannot perform NIL work in the United States without risking their status. Whether a school’s revenue-share payment for a license of rights is permissible passive income remains unsettled, and the House Republicans’ list of changes to the Senate bill includes limits on international players.

Minors. High-school recruits and 17-year-old freshmen can generally disaffirm contracts. Schools and collectives that sign minors should have a parent or guardian co-sign and should not rely on a buyout the minor can void.

Claims athletes can bring against schools and collectives

The strongest athlete claims are still contract and fraud claims over money that was promised and never paid. The Rashada case proved the fraud theory can survive a motion to dismiss; the newer risk for schools is that revenue-share creates contractual duties athletes can sue on.

Who is the right defendant. Collectives are often thinly capitalized LLCs or nonprofits, and several have folded as donor money shifted to school revenue sharing. Rashada sued the coach and a booster personally. Plaintiffs’ lawyers should map every person who made a promise and every entity that was supposed to pay before filing.

Public-school defenses. State universities raise sovereign immunity, notice-of-claim rules, and limits on tort damages. In North Carolina, the State waives immunity when it enters a valid written contract (Smith v. State, 289 N.C. 303 (1976)), so a written revenue-share agreement with a UNC System school is suable in state court, but an oral promise by a coach is a much harder case.

Claims against athletes who transfer, underperform, or breach

Schools are now suing their own former players, almost always over a transfer rather than poor play. No court has yet ruled on the merits that a revenue-share buyout is enforceable, so every one of these cases is a test.

Remedies schools are using. Money damages under a liquidated-damages or early-termination clause are the main tool. A negative injunction, barring the athlete from playing elsewhere, is possible in theory, but courts do not order specific performance of personal services and are wary of blocking a student’s enrollment. Restitution of advances that were not yet earned is the fallback when the buyout clause fails.

Defenses that are working their way into the record.

1. Penalty: the buyout bears no relation to the school’s actual loss, or the loss was easy to calculate.
2. Prior breach: the school or collective stopped paying, cut playing time in a way the contract forbade, or changed the coach the athlete was promised.
3. Failure to mitigate: the school replaced the player through the portal.
4. Capacity and unconscionability: a theoretical argument, since most high-end players are adequately represented and well past age 18. Sorsby was 21 and represented, which weakens this defense for him.
5. Public policy and state NIL law: restrictions on a student’s enrollment, or on NIL activity a state statute protects.

Suing the school that took the player. Ole Miss demanded the buyout from LSU, which says it was not a party and owes nothing. A tortious-interference claim against a recruiting school requires proof that it knew of the contract and intentionally induced the breach without justification. Competition is a recognized justification, so these claims will be hard to prosecute unless the poaching school promised to cover the buyout or contacted the player while he was under contract and before the portal window.

“Fails to perform.” Poor play is almost never a breach. Revenue-share and NIL agreements pay for a license and for promotional deliverables, not for statistics, and pay-for-performance from an associated entity will not clear NIL Go. What schools can enforce is the athlete’s actual obligations: appearances, social posts, exclusivity, enrollment, team-rules compliance, and eligibility. Contracts should say what happens to unpaid installments if the athlete is injured, cut, suspended, or loses eligibility.

Pitfalls on the horizon

The next six months turn on three dates: the House’s return on Nov. 9, the January 2027 transfer portal, and the Jan. 3, 2027 end of this Congress.

Two slower-moving problems also deserve attention. More than half of states with legal sports betting still allow some college-athlete prop bets, which keeps harassment and integrity risk high (MultiState). And eligibility rules are moving toward a five-year window, which will shift recruiting toward older transfers and produce more eligibility litigation.

Before anyone signs: a checklist

For athletes and families

• Get every number in a signed writing. Oral promises from coaches and boosters are what Rashada had to sue over.
• Find the exit terms first: when money is earned, what must be repaid, and what a transfer, injury, roster cut, or coaching change triggers.
• Compare the buyout to the money actually received. A buyout larger than the payments is a red flag and a likely penalty.
• If a new school promises to cover a buyout, get that promise in writing from the school, not the recruiter.
• Ask who is paying. A collective’s promise is only as good as its balance sheet; a school’s written contract is usually actionable.
• Confirm every third-party deal will clear NIL Go, or contract for contingencies if they don’t.
• Check exclusivity conflicts with the school’s apparel and sponsor contracts before signing outside deals.
• Use a registered agent where state law requires it (Louisiana now does), and know the 14-day cancellation right under North Carolina law (or cancellation rights in other states).
• Set aside money for taxes; most of this income has no withholding and is subject to personal income tax.
• International athletes should get immigration advice before any NIL activity in the United States.

For schools and collectives

• Pay in installments tied to deliverables and enrollment, not lump sums.
• Tie liquidated damages to a documented estimate of the loss, and say why actual damages are hard to measure.
• Avoid language that reads like an employment non-compete or pay for athletic performance.
• Assume the contract will be read by a jury and, in some states, by a reporter: confirm what your state’s records law exempts.
• Plan for the arbitration ban and private right of action in the Senate bill.
• Document fair-market value and business purpose for every associated-entity deal before it goes to NIL Go.
• Have a minor’s parent or guardian co-sign, and do not rely on a buyout a minor can void.
• Review revenue-share allocations for Title IX exposure now, while the law is unsettled.

Sources and disclaimer

This article is general information current through late October 2026. It is not legal advice, and NIL law is constantly changing; confirm current statutes and case status before relying on any point.

Federal framework and the CSC: Duane Morris on S. 4668 · Morgan Lewis on the SCORE Act and EO 14400 · EO 14400 text · Bradley on CSC enforcement · Yahoo Sports on NIL Go data · CBS Sports on CSC investigations · CBS Sports on Big Ten self-governance · On3 on the Big 12 participation agreement · Sportico on the Nebraska–Playfly arbitration · On3 on the Georgia arbitration · Sportico on the MMR ruling · Sportico on the Ninth Circuit appeal · Fisher Phillips on paused back pay · Sportico on Johnson v. NCAA · MultiState on state NIL economics

Litigation: Sportico on the Duke–Mensah settlement · AP via News4Jax on the Mensah TRO · Kutak Rock on the Ole Miss suits · SI on Ole Miss–LSU · Sportico on Cincinnati v. Sorsby · HottyToddy on buyouts · Sportico on the Rashada settlement · CBS Sports on the FSU players’ suit · Athlon on Gillespie

North Carolina: UNC SOG on H 378 · UNC SOG on S 229 · UNC SOG on S 563 · The Assembly · Carolina Journal · EssentiallySports on S.L. 2025-46 · Spry on EO 223 · Poyner Spruill on high-school NIL

SEC states: Louisiana Illuminator · SC Daily Gazette · Oklahoma EO 2025-01 · Kentucky Senate on SB 3 · KERA via HPPR on Texas HB 126 · Eccker Sports on Tennessee SB 536 · TurboTax on Arkansas · WUSF on Florida · On3 on Alabama tax bill · Romano Law on Alabama

Attorney advertising. This article is provided for informational and educational purposes only and does not constitute legal advice. No attorney-client relationship is created by reading this article. Laws and plan terms vary. Do not act or refrain from acting on anything in this article without first consulting qualified legal counsel. Prior results do not guarantee a similar outcome.