Bryan Seeley, CEO of the College Sports Commission — which, as discussed in Part I of this series, is the new oversight body charged with regulating and approving NIL deals — offered this assessment of the market his agency regulates: “I think it’s fair to say that the NIL market in college athletics is not a normal organic market. It’s a market in which schools are manufacturing NIL for their student athletes.”
Data released by the CSC the same day showed that school-affiliated deals, including those from booster-funded collectives, accounted for 63 percent of NIL deals and 78 percent of their value in January and February 2026.
If schools are, in effect, “manufacturing NIL,” as opposed to money coming in organically from independent third parties, that money raises a question every employment and tax lawyer will recognize: When a third party pays someone for defined services on defined terms, is that person running an independent business or working as an employee? Part 1 of this series asked that question about schools. Part 2 asks it about the collectives.
The answer is the threshold issue, because whether athletes are employees, and whose, decides whether wage-and-hour rules, payroll tax obligations and labor law apply at all, and to whom. It also shapes the antitrust picture. If athletes are not employees, schools, conferences and the NCAA remain exposed to Sherman Act claims and to state common-law theories that can vary from state to state. If they are employees, collective bargaining and the established labor exemptions offer a way to address those claims, not by making them disappear but by moving pay and eligibility rules into a framework courts already know.
Congress has offered a third path. The Protect College Sports Act, which Sept. 28 passed the Senate 77-22, would create a framework unique to college sports. But it is expressly neutral on whether athletes are employees, and whether it passes is itself part of the impasse.
For now, an athlete paid by a collective could be an employee, an independent contractor or something entirely new.
I. From Booster Club to the Clearinghouse
A. Alston and the 2021 NIL Opening
In June 2021, a unanimous Supreme Court of the United States held in NCAA v. Alston that certain NCAA limits on education-related benefits violated federal antitrust law. Days later, the NCAA dropped its prohibition on name, image and likeness compensation. Athletes could now be paid for endorsements, appearances and the like. Schools, however, still could not pay them directly, at least not yet.
B. The Rise of the Collective
That restriction left boosters who wanted to support their school’s athletes without an obvious way to do it, and collectives quickly filled the gap. They are organizations “structurally independent of a school” that pool money from boosters, businesses and fans to fund NIL deals for that school’s athletes. In those early years, some were nonprofits; others were for-profit LLCs free to pay any rate for any commercial activity.
C. House and the New Rules for Outside Money
The payment structure changed again in June 2025, when a federal court approved the settlement in House v. NCAA, an antitrust class action challenging the NCAA’s limits on athlete compensation. As discussed in Part 1, that settlement allowed schools, for the first time, to share up to $20.5 million a year directly with their athletes. A cap on school payments would mean little if boosters could simply route more money through collectives, so the settlement also set rules for outside money. NIL payments from “associated entities or individuals,” including collectives, must serve a “valid business purpose” and be on terms comparable to those offered to non-athletes.
D. NIL Go: The Clearinghouse in Practice
The settlement also created the CSC to enforce those rules, which it does through NIL Go, a clearinghouse built by Deloitte that launched in June 2025. Athletes must report any third-party deal of $600 or more. For deals involving a school-linked payor, NIL Go also asks whether there is a valid business purpose and whether the pay falls within a range of compensation for comparable athletes. The definition of a school-linked payor is broad enough to reach individuals who have given more than $50,000 to that school’s athletics program.
II. What Clearing a Deal Takes
A. What a Deal Must Show
A deal with a collective or other school-linked payor clears only if it serves a valid business purpose and pays within the range for comparable athletes. In practice, that means tying the money to real commercial activity, such as selling athlete-branded merchandise, signing autographs or appearing at events. So before reviewers ever reach the amount, they need to know what the athlete actually does for the money.
That review has turned out to be heavier than anyone planned. The system’s designers expected as many as 90% of deals to clear automatically, but deals tied to schools have flooded in, and many of them get a closer look. Collectives therefore have every reason to put it all in writing: what the athlete will do, when and for how much.
B. The Paperwork as Proof of Control
That written record is where the classification fight begins. Collective contracts commonly require exclusivity, content approval, mandatory appearances and performance benchmarks. To those who see athletes as employees, those are exactly the kinds of control that courts and agencies weigh when deciding whether someone is an employee or an independent contractor.
They also point to how uniform many of these deals are. When the CSC consolidates arbitrations, its CEO has explained, it is often because the cases involve “the same or identical deal” offered to different athletes at the same school. To the pro-employee status camp, form contracts look less like negotiated endorsements and more like the standard terms an employer sets for its workforce.
C. The Paperwork as Proof of Commerce
Collectives see the same documents differently. In their view, the settlement’s own standard treats these as commercial deals: an athlete’s pay is measured against what non-athletes earn for similar endorsement work, which is how one would value any ordinary commercial deal. They also argue that content approval proves less than it seems. Any brand paying for an endorsement expects to sign off on how its name is used, and that kind of review protects the brand rather than directing the work. And many athletes have agents, sign with more than one payor and run their NIL income through their own LLCs or S corporations, much like people in business for themselves. Which view carries the day depends on the tests a court or agency applies.
III. Endorser or Employee? Putting the Tests to Work
A. Does Johnson Reach Collectives?
As Part 1 explained, the Third U.S. Circuit Court of Appeals in Johnson v. NCAA held that athletes may be employees under the FLSA when they perform services for another party, primarily for that party’s benefit, under its control, in exchange for compensation or in-kind benefits. But Johnson involved schools and the NCAA, and nobody has yet tested whether the same reasoning applies to a booster-funded collective. Those who think it does point out that nothing in the Johnson elements is specific to schools. A collective pays for services, and it often dictates when and how those services are performed. Critics go further. They see much of the collective money as pay for playing that is routed through an endorsement contract, a view that gained traction when the CSC’s own CEO described schools as “manufacturing NIL” for their athletes.
Those who disagree argue that Johnson turned on the athlete’s participation in the school’s athletic program — its practices, games and schedule — none of which a collective controls. A collective instead pays to use the athlete’s name and likeness, an arrangement that more closely resembles a license than employment.
B. The IRS Puts Control at the Center
The IRS has recognized that an athlete paid for NIL work could be either an employee or an independent contractor. Its current guidance notes that payments for an athlete’s services are generally subject to Social Security and Medicare taxes either way, as FICA for employees or self-employment tax for independent contractors. If the athlete is “being paid as an employee of the school or the company paying” the athlete, the payor withholds those taxes and issues a Form W-2. Whether the athlete is an employee, the IRS says, “depends on several facts and circumstances, including the degree of control that the school or the company paying you exercises over your services.” That puts the same contract terms the two sides disagree about at the center of the tax analysis.
C. Not Every Deal Is the Same
How a deal is structured may matter more than who signs it. A pure licensing deal, such as a royalty on a jersey or trading card, is the easiest case for treating the athlete as a business owner. Royalties reported on Form 1099-MISC aren’t even subject to self-employment tax. One-off appearances and autograph signings look like ordinary freelance gigs. The hardest cases are year-long, roster-wide service contracts with exclusivity and performance terms, and the same athlete may hold deals that fall on both sides of the line.
IV. If They Are Employees, Whose?
Suppose a court or agency decides that an athlete paid by a collective is an employee. The next question is who the employer is, and the answer may not be clear. The collective signs the contract and writes the checks, so it is the obvious candidate. But the House settlement rules treat collectives as “associated entities” of a particular school. That label could support an argument that the school and the collective are joint employers, which federal wage law allows when more than one business shares control over the same worker.
The facts on the ground are making this harder to sort out. Some schools have started handling NIL in-house instead of through outside collectives. The University of Texas at Austin, for example, created the Longhorn Sports Agency, which operates within Texas Athletics and works much like an on-campus talent agency. Other Power Four schools, including the University of Georgia, Ohio State University and the University of Alabama, have announced similar programs.
When the school itself is the payor, the joint-employer question largely falls away, and the issue becomes the one Part 1 addressed: whether the school employs its athletes. Sponsors that pay athletes through a collective raise the same question in a weaker form. A brand that only approves how its logo is used is far from an employer. A brand that sets an athlete’s schedule week to week may be closer to the line.
V. W-2 or 1099? What Rides on the Answer
The IRS has made clear that classification usually decides who pays payroll tax and how, not whether it is owed. Even so, the practical stakes are considerable on both sides. An employer withholds income tax, pays its half of Social Security and Medicare, and owes federal and state unemployment taxes. An independent contractor pays the full 15.3 percent in self-employment tax but can deduct business expenses such as agent fees.
The consequences go beyond taxes. Employees covered by the FLSA are entitled to minimum wage, and their employers must track hours, which raises practical questions for an athlete paid a flat fee to post content and sign autographs between practices. Employee status would also bring workers’ compensation, benefits eligibility and unemployment coverage, protections a contractor goes without. And a wrong call cuts both ways. A collective could owe back taxes, penalties and wages for every athlete on a form contract, while an athlete treated as a contractor could find those protections unavailable when they are needed.
VI. The State of Play and What Comes Next
No court or agency has decided whether a collective employs the athletes it pays. Johnson is back in the Eastern District of Pennsylvania, where the defendants are arguing that differences between sports make a single answer impossible. Whatever that court decides will most directly affect schools, but collectives will be looking for signals about how much weight a court gives to control.
Washington has not answered the question either. Executive Order 14400, signed in April, targets “fraudulent NIL schemes” and directs fair-market-value safe harbors, but it says nothing on employee status. The Protect College Sports Act, which has passed the Senate but still awaits House action, is expressly neutral. And the IRS has addressed the issue only in general guidance that turns on facts and control.
The next decision point is in the House. If the Protect College Sports Act is not enacted by Jan. 3, it dies with the current Congress. Some House Republicans want language barring employee status outright, which the Senate version does not include. Others worry about the time-reporting obligations schools and collectives would face if athletes were ever treated as employees.
Outside Congress, the answer may come from agency guidance rather than legislation. The IRS could issue more specific guidance on NIL payments, and the Department of Labor could address athletes as part of its independent-contractor rulemaking. Either step would give collectives, schools and athletes something more concrete to plan around than the analogies they rely on now.
VII. Structuring Deals for Either Answer
With no definitive ruling yet, the sensible course is to build deals that hold up under either answer. For collectives, that starts with the paperwork. Licensing rights and service obligations can be separated into distinct agreements, so a royalty arrangement is not dragged into a services dispute. Control terms deserve a second look. A brand-approval clause is easy to defend, while a clause dictating practice-week appearances on short notice is harder.
Schools that bring NIL in-house should assume their deals will be examined alongside revenue-sharing payments and the rest of the athlete relationship. Keeping NIL agreements separate from athletic obligations, with their own terms and their own documentation, gives a school a better record if the question is raised. Sponsors, for their part, can limit their exposure by paying for defined deliverables at market rates and leaving scheduling to the athlete. In each case, the goal is a record that shows what the athlete was paid to do and who decided how it got done.
VIII. Unresolved, for Now
The CSC was built to decide whether an NIL deal reflects real commercial value. It was never meant to decide whether the athlete is an employee, and so far no one else has either. Until a court, an agency or Congress does, collectives, schools and athletes are making real tax and wage decisions on assumptions that may or may not hold.
That label will also decide what body of law governs the rest of the relationship. Part 3 takes up the other side of that choice: the antitrust suits athletes have brought against eligibility rules, the split results in federal court, and the move by some athletes to state courts and contract claims instead. For now, the market Seeley described is still running on a question no one has answered: Are college athletes employees, contractors or something else altogether?
Marc D. Katz is a partner at Vartabedian Katz Hester & Haynes in Dallas. For over 30 years, he has represented numerous professional sports teams, media and entertainment entities, and other employers throughout all industries, as well as colleges and collegiate athletes in classification disputes, wage-and-hour litigation, and complex contractual and employment matters. He is a frequent speaker and a subject matter expert with respect to issues at the intersection of sports and employment law.
Maria A. Garrett is a senior associate at Vartabedian Katz Hester & Haynes in Dallas, where she represents employers in high-stakes employment litigation—including executive disputes, restrictive-covenant enforcement, and trade-secret protection—and counsels companies on classification, hiring, and separation strategy.