NIL Collectives Find Loopholes for Alcohol Companies

Pennsylvania Pure Distilleries in Glenshaw has created Happy Valley Vodka to help support the Happy Valley United Collective serving Penn State University's NIL interests.

As reported by Sports Illustrated's FanNation, Penn State is just "the latest school to jump on the newest trend taking over NIL collectives: offering novelty alcohol products to fans in exchange for NIL kickbacks."

Swarm Golden Ale, a product at the University of Iowa, has an agreement by which 20 percent of revenue from sales is donated to the Iowa Swarm collective. Created through a partnership between the Iowa Swarm collective and Exile Brewing, Swarm Golden Ale has been wildly successful and incredibly transparent, according to Noah Henderson, a Loyola University Chicago sports management professor, who reports for FanNation that Swarm Golden Ale has raised $60,000 for Hawkeye athletes in its first two months on the market.

Many collectives have inked partnerships with alcohol companies, predominately in the craft beer space. In March, Boise State’s Horseshoe Collective was the first to implement the idea in its partnership to create the Horseshoe Golden Ale. Since then, Iowa, Northern Iowa, Iowa State, Indiana, Cincinnati, West Virginia, and South Carolina have followed suit.

Penn State is not the first down the liquor aisle, either. Collectives at both the University of Tennessee and the University of Alabama have partnered with distilleries to create similar vodka products, Henderson reported.

"Football and beer are a match made in heaven; however, there is no denying that alcohol distributors are using these partnerships to get a footing in the NIL economy, which they have long been denied," Henderson wrote. "The majority of states have implemented language within their respective NIL legislation that prevents student-athletes from engaging with companies in morally scrupulous industries. Inherently, student-athletes who engage in brand partnerships impute the university’s goodwill to the endorsement, even if there are no university trademarks, insignia, or mentions of the school in the advertisement."

In the case of Happy Valley Vodka, Pennsylvania NIL law articulates its morality clause as:

§ 3706 (d):

Prohibition.--A college student athlete may not earn compensation as a result of the use of the college student athlete's name, image or likeness in connection with a person, company or organization related to or associated with the development, production, distribution, wholesaling or retailing of any of the following:

(1) Adult entertainment products and services.

(2) Alcohol products.

(3) Casinos and gambling, including sports betting, the lottery and betting in connection with video games, online games and mobile devices.

(4) Tobacco and electronic smoking products and devices.

(5) Prescription pharmaceuticals.

(6) A controlled dangerous substance.

According to Henderson, Happy Valley Vodka an 80-proof potato vodka now on presale for $26.95.

This product is the same recipe as the company’s flagship product, Boyd and Blair Vodka, the only difference being the rebranding of the 750-milliliter bottle, which includes a blue and white Penn State color scheme. "Happy Valley Vodka has yet to disclose how much money from profits/revenue/sales will be given to the collective," Henderson wrote.

Henderson's report for FanNation concludes as follows:

Collectives are not subject to the same regulations as student-athletes when entering into partnership agreements. The asymmetry between athletes and collectives opens the door for companies previously shut out from marketing products via NIL campaigns to partner with collectives and benefit from NIL marketing.

While players can not advertise these products in states with morality restrictions, the ultimate goal of these companies can still be achieved through partnerships with NIL collectives –– leveraging the athletic programs’ goodwill and fans' desire to support NIL.

This trend is troublesome as collectives are separate entities from the schools they partner with and, therefore, have the power to enter into agreements with companies that do not reflect the values of the schools they associate with.

NIL collectives offer brands outlawed from entering deals with student-athletes (in jurisdictions with morality clauses) the ability to circumvent legislative intent that aims to protect the reputation of universities from morally scrupulous NIL endorsements.

Alcohol sales have become enmeshed within the collegiate athletic tradition; 80% of Power Five schools sell alcohol at college football games.

It is unlikely that partnerships of this nature will raise any moral red flags; however, if this partnership structuring is extended to other morally scrupulous industries, it could quickly become problematic.

While it is yet to be seen, if the use of this loophole is extended to sports gambling companies or companies that offer products on the NCAA banned substances list, a partnership with a NIL collective — which by its nature is directly related to both a university and a college athletic department — would undoubtedly raise public policy concerns.