Tennessee’s New Law Transforms NIL Compensation for College Athletes

Nashville, Tennessee – A new state law that impacts name, image, and likeness (NIL) compensation for college athletes in Tennessee took effect on May 1, 2025. Sponsored by Senator John Stevens and State Representative Kevin Vaughan, the legislation allows Tennessee’s institutions to bypass certain NCAA rules that are seen as anti-competitive regarding NIL compensation.

The law redistributes liability for damages or claims related to noncompliance with its provisions from universities to the NCAA, effectively shielding Tennessee institutions from penalties for participating in NIL activities. This legislation allows all four-year universities in Tennessee, both public and private, to engage in NIL deals without the threat of NCAA punishment. It also means that these institutions can ignore limitations imposed by previous agreements unless bound by federal law, court orders, or specific antitrust law exemptions.

However, concerns have arisen that the University of Tennessee (UT) could face membership challenges within the Southeastern Conference (SEC) due to the new law. Power conferences, including the SEC, may consider implementing a loyalty contract that compels member schools to adhere to conference rules, even if they conflict with state laws. This loyalty contract would require universities to relinquish their rights to legally challenge enforcement actions taken by the College Sports Commission.

In January 2025, the NCAA had previously settled a federal antitrust lawsuit with Tennessee and Virginia’s Attorneys General, which involved allegations against UTC for violating NCAA rules concerning NIL compensation. The new Tennessee law could further complicate enforcement issues for the NCAA, setting a precedent that may limit its authority over the state’s universities concerning NIL arrangements.

The legislation is particularly notable as it allows schools to operate without fear of penalties from the NCAA, potentially avoiding anticipated antitrust lawsuits. Additionally, the law includes a clause permitting private institutions like Vanderbilt to opt-out of these state law protections to stay in compliance with NCAA policies.

Tennessee Governor Bill Lee signed the bill into law amid growing expectations that further changes in NCAA regulations may be forthcoming. A significant overhaul of NCAA rules, anticipated to take effect as early as July 1, 2025, is related to the ongoing House settlement. This timeline raises questions about how UT and other Tennessee universities will navigate both the state law and NCAA compliance requirements.

As lawmakers in Tennessee strive to protect the interests of their universities, they also prepare for a future system of compensation for college athletes. The new law is widely recognized as one of the most athlete-friendly NIL regulations in the United States, and it could signal a significant cultural shift in college athletics. Many stakeholders believe that Tennessee’s approach may pave the way for increased athlete compensation options across the country.

As the landscape of college athletics continues to evolve, the effectiveness and implications of this law remain uncertain. With its potential to reshape the relationship between state laws and NCAA regulations, stakeholders are keenly observing how it influences both Tennessee universities and their standing in the SEC, as well as its broader impact on collegiate sports nationwide.