PAY TO PLAY? College Sports Commission Clarifies ‘Valid Business Purpose’ for NIL Deals

Collectives will be getting more scrutiny, which could cut both ways.

The “new-ish” framework governing Name, Image, and Likeness (NIL) compensation for student-athletes continues to mature after the NCAA-House settlement. Recent guidance from the College Sports Commission introduces new requirements for disclosure and compliance, centered on a critical concept: “valid business purpose.” For student athletes and potential sponsors, understanding this refined-but-still-tricky definition will be essential for structuring permissible and effective NIL agreements.

On June 7, 2025, a new era of oversight began, mandating that NCAA Division I student-athletes report third-party NIL deals valued at $600 or more through a new portal, NIL Go. This system, developed with Deloitte, is designed to vet agreements against key criteria, ensuring they are commercially sound and not merely a pretext for pay-for-play. The problem is that NIL Go has been functioning far from perfectly.

The oversight will continue and the new guidance may accelerate some NIL deal review. The Commission’s evaluation rests on three pillars: the payor’s association with the school, a reasonable range of compensation, and, most notably, the existence of a “valid business purpose.”

The Core of Compliance: Valid Business Purpose (VBP)

The CSC guidance specifies that a deal must have a legitimate commercial rationale. The core of the VBP requirement is that the entity paying the student-athlete must be “seeking the use of the student-athlete’s NIL for a valid business purpose, meaning to sell a good or service to the public for profit” (¶ 14).

This standard directly targets arrangements where the primary goal is to channel funds to athletes rather than to promote a public-facing commercial enterprise.

The guidance states, “An entity with a business purpose of providing payments or benefits to student-athletes or institutions, rather than providing goods or services to the general public for profit, does not satisfy the valid business purpose requirement” (¶ 15).

Deconstructing a Tricky Example

The College Sports Commission provided a specific, and potentially challenging, example to illustrate this point.

The guidance clarifies that certain activities undertaken by NIL collectives—entities often formed with the express purpose of supporting a particular school’s athletes—do not meet the VBP standard on their own.

Consider the hypothetical situation presented:

“For example, a NIL collective that has a business purpose to pay student-athletes associated with a particular school or schools does not satisfy Rule 22.1.3 when it reaches a deal with a student-athlete to make an appearance on behalf of the collective at an event even if that event is open to the general public and the collective charges an admission fee (e.g., a golf tournament).

In this example, the NIL collective’s purpose is to raise money at the event to pay that student-athlete and potentially fund deals with other student-athletes at that school, which are not goods or services available to the general public for profit.” (¶ 16)

This logic extends to merchandise sales. If the “whole purpose in selling merchandise is to raise money to pay that student-athlete and potentially other student-athletes at a particular school or schools,” it is not considered a valid business purpose (¶ 17).

The distinction is subtle but significant. The primary purpose of the transaction determines its validity. If the collective’s activity—be it a golf tournament or a t-shirt sale—is fundamentally a fundraising mechanism to pay players, it fails the VBP test. The “good or service” (the event ticket or the merchandise) is incidental to the non-compliant purpose of athlete payment.

A Path Forward for Collectives and Brands

This CSC guidance does not foreclose opportunities for collectives or the businesses that support them. Instead, it directs them toward an allegedly more compliant operational model.

The Commission notes that these same deals would be permissible if the entity paying the student-athlete and receiving the public’s money were a genuine business with a purpose beyond paying athletes, such as “a golf course, an apparel company” (¶ 18).

This points to a viable path: NIL collectives—if they still exist—can potentially function as marketing agencies. They can broker deals between student-athletes and legitimate businesses that seek to use an athlete’s NIL to promote their actual goods and services.

The guidance explicitly allows for this, mandating that there is “documentation establishing that the sources of those specific funds were the entities with a valid business purpose that received the benefit of the student’s NIL” (¶ 19).

For schools, athletes, and the brands they represent, this clarification underscores the importance of proper structuring and documentation—good for all the lawyers and agents. When engaging a student-athlete, especially through an intermediary like a collective, the commercial logic needs to be clear. (Disclaimer: This is provided for informational purposes only and does not constitute legal or financial advice.)

It sounds like the agreement should demonstrate that the athlete’s NIL is being used to drive sales or promote a bona fide business, not simply as a pass-through for compensation.

While these new rules introduce compliance burdens for unsophisticated student-athletes, they may also offer a clearer, if narrower, path for legitimate commercial partnerships in the collegiate sports arena.

If certain programs are gaming the system (e.g., football-focused schools) to exceed the $20.5 million revenue sharing cap, then perhaps this enforcement catches or deters using unclean NIL funds for pay-to-play salaries.