Last week, the College Sports Commission (CSC) won its first major challenge to its ability to regulate NIL deals in the post-House v. NCAA era. We previously discussed the background of the case—an arbitration initiated by the University of Nebraska and 18 of its football players challenging the CSC's refusal to clear NIL agreements with the university's multimedia rights partner, Playfly Sports.
The deals, totaling approximately $7.5 million, were structured to compensate players for future, undefined NIL opportunities. The CSC rejected the agreements, finding Playfly qualified as an "associated entity" under the House settlement, and the deals violated the Valid Business Purpose and Warehousing rules. On May 11, an arbitrator issued an opinion agreeing with the CSC.
How the Associated Entity Framework Applies to NIL Deals
The dispute focused on the NCAA's associated entity rule, which imposes heightened scrutiny on NIL deals between student-athletes and entities closely tied to a particular institution. Under the rules developed under the House settlement, an entity is "associated" if it is or was known or should have been known to exist "in significant part" for promoting or supporting the institution's athletics program or student-athletes, or if it has been directed or requested by the institution to assist in recruitment or retention.
Deals with associated entities must be for "a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit, with compensation at rates and terms commensurate with compensation paid to similarly situated individuals." Deals must also include "direct activation" of NIL rights, precluding "warehousing" or acquisition of rights without reasonably specifying their ultimate use.
In practice, NIL deals involving associated entities are subject to substantially more rigorous compliance review than deals with non-associated entities.
Why Playfly Was Deemed an Associated Entity Under NIL Rules
Under the first prong of the associated entity rule, the arbitrator relied on the university's own April 2025 disclosure identifying Playfly as an associated entity. Although the university later withdrew that designation, Playfly still "is or was known" to be an associated entity under the rule. Furthermore, under the arbitration's procedural rules, each party must affirmatively establish its position by a preponderance of the evidence; the arbitrator found that the university did not adequately explain the subsequent change, and thus, the withdrawal had no practical effect.
Alternatively, the arbitrator found that Playfly "is … or should have been known" to be an associated entity. The associated entity rule requires only that an entity exist "in significant part" to promote or support the athletics program or student-athletes."
"Significant" has no special meaning under the rule, so the arbitrator applied its generally accepted meaning, e.g., "having meaning" or being "important." In finding Playfly's relationship with the university was "significant," the arbitrator emphasized the agreement's scope, which effectively positioned Playfly as a pass-through for paying student-athletes, and the embedding of Playfly employees within the athletics department to serve university interests. Given this integration, it was difficult to discern where Playfly's interests stop and the university's begin, making it unreasonable to conclude that Playfly's interests were insignificant.
The arbitrator rejected the argument that Playfly's status as a private, for-profit company with diverse interests across multiple institutions made a difference, reasoning that the associated entity definition "is not limited to prototypical boosters or collectives," that profit-making is "not an exclusionary factor," and that an entity can have multiple significant interests across college athletics without discounting its significant interests in a specific institution.
Under the second prong, the arbitrator found that Playfly had been directed or requested by the university to assist in recruitment and retention, pointing to evidence that the university presented NIL deals alongside revenue-sharing commitments as components of each student-athlete's compensation package during recruiting.
The arbitrator rejected the argument that Playfly's NIL payments are mere "table stakes" that cancel out across institutions, finding instead that the "NIL payments undeniably are a critical part of those efforts." Notably, the university had a voice in selecting which student-athletes should be offered NIL deals through Playfly.
How the Arbitrator Applied the Valid Business Purpose and Warehousing Rules
Having established Playfly's associated-entity status, the arbitrator turned to the substantive compliance rules. On the Valid Business Purpose Rule, the arbitrator found that while Playfly had a legitimate profit motive, the deals failed because Playfly was not itself offering goods or services to the general public. Playfly's role was to acquire NIL rights as inventory for future sale to unidentified sponsors, and its relationship to any eventual consumer-facing offering was indirect and non-specific, which did not satisfy the test.
On the Warehousing Rule, the arbitrator found the deals were "precisely the type of associated deals targeted by this rule," as Playfly structured them to acquire NIL rights without fixed activation obligations, intending to hold the rights for deployment at the most advantageous times. The arbitrator acknowledged that Playfly's business model was commercially logical and not inherently improper but held that the rule "plainly precludes associated entities from warehousing inventoried NIL rights in precisely the way that Playfly intends, notwithstanding what a non-associated entity is permitted to do."
The arbitrator underscored that this result reflected the settlement's inherent compromise: student-athletes gained expanded NIL rights, but those rights came with restrictions that, while potentially "overdrawn" in the eyes of some, "nevertheless admit of clear application."
What the CSC's First Major NIL Arbitration Means for Future NIL Deals
This decision underscores that deeply integrated multimedia rights partnerships can trigger associated entity classification, even when dealing with for-profit entities partnering with multiple institutions. The Associated Entity Rule analysis looks at the specific relationship at issue regardless of additional interests. And this decision emphasizes the breadth of relationships that rule can cover. Universities structuring NIL facilitation through multimedia rights partners should expect heightened scrutiny, particularly where the institution retains collaborative control over which student-athletes receive deals and funds are redirected to the student-athletes through the partner.
The decision also underscores the importance of the procedural rules governing these arbitrations. It is not enough to simply disprove the other's position; rather, both sides must affirmatively prove their positions by a preponderance of the evidence.
If you or your company would like to discuss how this decision may affect multimedia rights agreements and the structures of multimedia rights partnerships, please contact the authors or visit the Venable Sports Law team's web page and subscribe to Chalk Talk.