Special Master Declines Categorical Exemption Of MMRs And Brand Sponsors From Associated Entity Designation Under House Settlement

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Following the House settlement, traditional boosters and collectives engaging in NIL activity were reclassified as “Associated Individuals” and “Associated Entities.” Under the terms of the settlement and the corresponding NCAA Bylaws, these are defined to include individuals and entities known to a school’s athletics staff to exist for the purpose of supporting the program, major donors with lifetime giving amounts in excess of $50,000, those directed or otherwise assisting in recruiting or retention, and any affiliates of such individuals or entities.

NIL deals between athletes and Associated Individuals or Entities are treated differently from other “non-institutional” third parties for purposes of clearinghouse review by the College Sports Commission (CSC). This heightened scrutiny is intended to combat efforts to circumvent the negotiated revenue-sharing limits or to facilitate disguised pay-for-play compensation.

In May, a neutral arbitrator upheld the CSC’s rejection of prospective NIL agreements between members of the University of Nebraska football team and the school’s multimedia rights partner (MMR), ruling that the deals constituted impermissible “warehousing” or the purchase of NIL rights without a clear plan for their activation or use. The decision further confirmed CSC’s determination that the MMR qualified as an Associated Entity and that the contracts lacked a valid business purpose, as required by NCAA rules.

Immediately following the arbitrator’s ruling, counsel for the plaintiffs in the House litigation filed a motion in the U.S. District Court for the Northern District of California to enforce the settlement agreement, which included two requests aimed at narrowing the universe of deals subject to CSC review. Specifically, the motion sought a declaration from the special master that: (1) MMRs are not Associated Entities unless the party that ultimately receives and pays for the athlete’s NIL is itself an Associated Entity; and (2) brand sponsors are not Associated Entities merely because a school helped arrange the deal. 

A hearing on the motion was held on June 10, during which Defendants pointed to certain MMR arrangements, including campus-specific entities housed within athletic departments, MMR employees embedded in recruiting offices, and upfront NIL payments followed by a matching deal — all of which had the practical function of assisting in the recruitment or retention of student athletes. In denying the plaintiffs’ motion, the court specifically noted that the parties had never discussed a categorical exemption for MMRs and that there was no record support for reading one into the settlement.

The court similarly declined to adopt a bright-line rule for consumer brand sponsors. While Judge Wilken referred to companies like Disney and Nike as “poster child unassociated entities” during final approval proceedings, she never issued an explicit carve-out. Because the text of the settlement itself does not exempt brand sponsors from Associated Entity status, the special master likewise held that school involvement in arranging a sponsor deal does not, by itself, immunize that deal from CSC scrutiny.

Going forward, the review of MMR involvement in a prospective NIL deal will necessarily require a fact-specific look at the MMR’s actual conduct rather than the application of any bright-line rule. The authority of the CSC in this regard remains unchanged and, if anything, reinforced. Consequently, institutions and athletes should continue to expect individualized scrutiny of MMR and sponsor-arranged deals rather than relying on categorical exemptions. At the same time, the structuring of MMR relationships and agreements is more crucial than ever. MMRs that maintain arm's-length, multi-institution operations operate on firmer ground than those with embedded staff in a single athletic department, or that otherwise function as a de facto extension of a school’s recruiting apparatus — for example, by offering upfront payment for subsequent activation of a player’s NIL rights.

For institutions and athletes relying on noninstitutional payor attestations to the CSC via the NIL Go platform, the court’s decision also confirms that attestation forms cannot simply categorize a payor as “not an Associated Entity” simply because a deal involves an MMR or “brand sponsor.” Attestations and supporting compliance files should continue to document the specific facts bearing on the relevant factors set forth in Article 1, Section 1(c) of the settlement: namely, any direction or request by the school, recruiting or retention assistance, and the timing and sequencing of payment relative to deal-sourcing. This approach is informed by recent concerns over prohibited “warehousing,” both as specifically raised in the Nebraska arbitration and within the context of the NCAA’s broader compliance regime.

Whether either of the parties decides to appeal the special master’s ruling to Judge Wilken, and how the CSC applies this newly announced fact-intensive standard, bears monitoring. In the meantime, Buchanan offers continued guidance to clients who seek to remain compliant and competitive in this rapidly changing market.