By Panayiotis Constantinou, The Sports Financial Literacy Academy
Most NIL deals look simple from the outside. A post here. An appearance there. Some free gear. Maybe a few thousand dollars in your account. But behind these opportunities are financial risks that many student-athletes never think about until it is too late. NIL can boost your income, but it can also create complications that follow you long after a season ends.
Understanding the risks is not about fear. It is about protecting the future you are working so hard to build.
Contracts Contain Commitments Athletes Often Miss
An NIL deal is a legal contract, and legal contracts always have fine print. Some agreements give brands long-term rights to use your name or image even after the partnership ends. Others require specific deliverables that athletes may not have time to complete during the season.
In 2023, compliance officers across multiple conferences reported increasing cases of athletes accidentally breaching contracts because they misunderstood deadlines, exclusivity rules or usage rights. A single mistake can cost income or, worse, eligibility.
A signature is never “just” a signature. It is a binding obligation.
The Tax Bill Arrives Whether You Are Ready or Not
NIL income is taxable. Not sometimes, not depending on the deal, but always. Whether you receive money, merchandise or other benefits, the IRS treats it as income.
Many student-athletes learned this the hard way in 2023 when they received unexpected tax bills on digital payments and free products. The IRS released specific reminders about NIL, emphasizing that athletes earning through content, events or sponsorships must report their income.
Ignoring taxes does not make them disappear. It only makes them more expensive later.
Compliance Mistakes Can Cost Eligibility
Some NIL risks are financial. Others affect your entire career. The NCAA still prohibits pay-for-play and improper recruitment inducements, and recent NCAA enforcement actions show that athletes can unintentionally cross compliance lines if they are not educated.
The investigations involving multiple NIL collectives in 2023 revealed how easy it is for deals to become noncompliant if compensation is tied to athletic performance or recruiting outcomes. Even when athletes act in good faith, a poorly structured offer can jeopardize their status.
Understanding what “compliant NIL activity” actually means is one of the most important protections an athlete can have.
Hidden Costs Reduce the Real Value of the Deal
A $1,000 partnership rarely means $1,000 in your pocket. Student athletes often overlook the expenses attached to fulfilling a deal.
These can include:
• taxes
• travel for appearances
• production costs for content
• agent or representative fees
Opendorse reports that many student-athletes overestimate the true net value of their NIL deals because they forget to account for everything it takes to complete them. The result is disappointing and sometimes stressful when the realized income is far lower than expected.
Conclusion
NIL is an incredible opportunity, but every opportunity comes with responsibility. Contracts, tax obligations, compliance rules and hidden costs are part of the new reality of college athletics. When athletes understand these risks, they protect their earnings, their eligibility and their future.
NIL is not dangerous. It is simply complex. And the more you understand, the more it can work for you rather than against you.
The Money Smart Athlete® Blog is established and run by the Sports Financial Literacy Academy® (SFLA). Through its education programs, the SFLA has the vision to financially educate and empower athletes of all ages to become better people, not just better athletes. For more information on our courses, our SFLA Approved Trainer Program®, and how they can benefit you and your clients, please get in touch with us at info@moneysmartathlete.com.