A new company co-founded by former NBA champion Kendrick Perkins is offering college athletes upfront cash in exchange for a portion of their name, image and likeness deals, an arrangement some consumer protection experts and financial advisers say could prey on young athletes.
The company, Nilly, offers athletes upfront payments ranging from $25,000 into the hundreds of thousands, said Perkins and his co-founder, Wall Street veteran Chris Ricciardi. In return, Nilly gets the exclusive rights to use or sell the athlete's name, image and likeness for up to seven years, and the company and its investors receive between 10% and 50% of the player's NIL earnings during that time period.
While other companies sell investors a stake in athletes' future professional salaries, Nilly says it is the first and currently only company to offer cash advances on college NIL dollars. Several agents, athletic department employees and others who work in the college sports industry told ESPN they were unaware of any other company that was paying college athletes in exchange for a cut of their NIL earnings.
Perkins, who works as a basketball analyst for ESPN, says he wants to reduce financial stress for athletes by providing immediate and guaranteed money.
"You have so many athletes and their parents who are struggling day-to-day," Perkins said. "Because we're actually taking a bit of a gamble on what the student-athlete is going to make in the NIL space, the benefit is the kid -- the student-athlete -- is able to get financial security so they don't have to rush."
The NCAA has allowed college athletes to make money through endorsement deals since July 2021. Some athletes have earned hundreds of thousands -- and even millions -- of dollars annually by endorsing products, making public appearances or signing deals with boosters who use NIL arrangements to attract talent to their school's teams. College sports leaders have said the new and largely unregulated opportunities could leave athletes vulnerable to exploitation.
So far, Nilly has signed contracts with 20 athletes who are either in college or high school, all football and men's basketball players. ESPN sent messages to 10 of the athletes who have publicly mentioned their deals with Nilly but did not find any who were willing to discuss the company.
ESPN obtained a copy of one Nilly contract that lays out a $50,000 payment to a high school senior in exchange for the exclusive rights to sell his name, image and likeness for seven years. In that contract, Nilly and its investors will receive a 25% cut of the player's NIL earnings for the length of the contract, or until Nilly earns a total of $125,000 (2½ times its initial investment), whichever comes first. Ricciardi said the percentage of NIL money that Nilly takes from an athlete can be as high as 50%, and a spokesperson said Nilly's share can be as low as 10%.
A trio of consumer finance experts who reviewed the Nilly contract said parts of the deal resemble a high-interest loan, and multiple financial advisers who work with college athletes raised concerns about whether the company is offering quick cash that comes with too steep a price.
"To me it feels like you are preying on people who need the capital now and using that to cloud their focus on the future," said Michael Haddix Jr., whose company Scout provides financial education seminars to college athletic departments. "It feels predatory, and it's capitalizing on young people who need money and haven't thought through the long-term implications."
Utah law professor Chris Peterson, who was previously an adviser for the federal government's Consumer Financial Protection Bureau, said several parts of Nilly's contract reminded him of other financial products that are labeled as investment opportunities but function as loans.
"These are trashy products designed to take advantage of young kids," Peterson said.
Ricciardi said -- and the athlete contract states -- that Nilly's deals are not loans but licensing agreements. If an athlete doesn't earn enough NIL money within the contracted time frame for Nilly to recoup its investment, he or she is not responsible to pay back any part of the upfront money. Ricciardi compared the deals to advance payments musicians receive in exchange for future royalties.
"There's no interest rate. There's no requirement to pay back," Ricciardi said. "It's purely a licensing deal. I would be surprised if those people thought that music advances were high interest loans."
Perkins wondered whether Nilly's critics were ever in a situation where they had to worry about helping their parents pay bills or put groceries on the table. He said he was confident that the company was helping athletes rather than harming them.
A player who accepts money from Nilly is required to fulfill several "minimum commitments" throughout the life of their deal. In the contract obtained by ESPN, the player was responsible for making at least one social media post across his accounts per month, autographing up to 10 items per year and making himself available for at least one public appearance per year. The contract also states the athlete must commit to "best efforts" to keep his social media accounts active.
The company is not obligated to provide any help to the athlete in finding or fulfilling endorsement deals, according to the contract.
Courtney Altemus, co-founder of the Advance NIL consulting firm, which focuses on educating athletes and schools, said every deal is unique, but she typically recommends that athletes avoid contracts longer than a year or that give away exclusive rights to a player's name, image and likeness. Altemus said athletes who are giving up a share of their future earnings need to make sure they've done the math.
"They don't understand until they see the numbers," Altemus said. "They're going to have to make their own choices, but we'd really want to make sure they understand how much they're really paying to get access to that money earlier."
In the case of the contract obtained by ESPN, the player could end up giving Nilly the equivalent of a $75,000 fee in exchange for the guarantee of and immediate access to $50,000 up front.
If the player makes nothing in NIL deals over the seven years of the contract, Nilly loses its $50,000 investment. If the player earns $200,000 in deals during the contract, Nilly receives $50,000 and recoups its initial investment. If the player earns $500,000, Nilly receives $125,000 -- recouping its initial investment, plus $75,000 -- the maximum the company can make from the contract.
Perkins and Ricciardi said in an interview they use a proprietary formula to predict how much an athlete will earn through NIL deals before determining how much to offer as an advance. Ricciardi said it's "statistically unlikely" that a player will earn enough for Nilly to maximize its return during the span of a contract. Nilly, he said, aims to provide its investors with an average percentage return in the mid-teens -- meaning they would make somewhere between $5,000 and $10,000 from the athlete in this deal.
"It's critical to understand that anticipated NIL earnings are highly uncertain and volatile," Ricciardi said. "It may be tempting for one to assume that we're simply calculating money coming in and deciding how much we want to make on it, but that's not the case at all. Investors are taking risk because earnings are far from certain and are in no way guaranteed."
Ricciardi said that, in several cases, he has had conversations with college booster collectives about how much they plan to pay athletes before Nilly decides the size of its upfront payment. While many collective deals last only one year and payments for future seasons aren't guaranteed, the information gives Nilly a clearer picture of the returns they might expect from their initial investment in the athlete before they make their offer.
Perkins said Nilly is gaining momentum through word-of-mouth marketing. He regularly promotes the company and the players who sign with them on his personal Instagram account, which has more than 550,000 followers.
Perkins's fame gives Nilly an advantage in appealing to potential athletes, Altemus said, adding that college players are more likely to trust a company backed by a former player who has been in their shoes, and especially one who has had some success as an entrepreneur.
"People take that as its own layer of due diligence," she said.
'Maximize their NIL earnings'
Nilly's investors are a mix of institutional funds and high net worth individuals, Ricciardi said, but he declined to share specifics about how much they have raised. The company last month announced that investment firm Harlan Capital Partners would commit up to $200 million to Nilly contracts.
To pay the players their upfront money, Nilly raises funds by offering investors the opportunity to buy a share of a pool of contracts. The concept -- which alleviates the risk that a single athlete might not be successful -- is similar to mortgage-backed securities or collateralized debt obligations; Ricciardi was deemed the "grandfather of CDOs" by the Wall Street Journal for his role in popularizing the investment while working at Merrill Lynch in the 2000s.
Ricciardi said he believes the Nilly deals more closely resemble a different investment vehicle popularized by Prudential while he was employed there earlier in his career -- "Bowie Bonds," in which pop star David Bowie sold shares in future royalties from albums he recorded before 1990.
In the sports world, companies including Big League Advantage, RockFence Capital and X10 Capital also raise money from investors to offer payments to athletes in exchange for a share of their future earnings. Those groups mostly focus on offering money to up-and-coming baseball players in exchange for a piece of their future salary if they reach MLB.
Another company called Vestible, founded by a pair of former Oklahoma State football players, operates a slightly different model. The company wants to let athletes raise money through an "initial public offering," which will give fans and investors a chance to purchase shares of a portion of the player's future earnings. Their first client, Denver Broncos linebacker Baron Browning, is offering investors a share of 1 percent of his future earnings. The founders, Parker Graham and Yves Batoba, told ESPN they hope to launch IPOs for college athletes by the end of 2024. They said they will only sell a share of future professional earnings, rather than of money athletes earn while in college.
Big League Advantage, which lists four college athletes as current clients on its website, inked a deal with former Florida defensive lineman Gervon Dexter that paid him $436,485 in exchange for 15% of his future NFL earnings. The details of that contract became public when Dexter sued the company for allegedly breaking Florida's NIL laws. The lawsuit has since been dismissed and, according to BLA founder Michael Schwimer, will be resolved via arbitration. Schwimer said he wasn't certain how many college clients BLA had when reached by phone, but confirmed the company does not receive any percentage of their athletes' NIL earnings -- only their pro salaries.
Ricciardi and Perkins say Nilly does not tap into athletes' future professional salaries. The contract reviewed by ESPN does allow Nilly to keep a portion of any endorsements the athlete signs if he becomes a professional athlete during the seven-year term of the deal.
"You can't find another company that's going to take this type of risk like we're doing," Perkins said. "It's solely based on what you're going to accomplish in the NIL space."
Ricciardi said Nilly is different because the company plays an active role in helping athletes earn more money, one typically served by an agent. Professional players associations and some state laws prohibit agents from offering prospective clients money or other inducements as an incentive to sign with the agency, and so companies like Big League Advantage can't negotiate the professional contracts for their athletes.
Ricciardi said Nilly has also helped some athletes negotiate higher payments from their college collectives. While NIL dollars are supposed to be for endorsements, boosters from many schools have formed organizations known as collectives that use NIL contracts to pay athletes an incentive to play for their team. The payments have evolved to serve as a player's de facto salary. Industry experts say the vast majority of money that college football and basketball players earn -- as much as 80 to 90% -- comes from NIL contracts written by collectives.
While there's no standard rate for agents who negotiate collective payments for college athletes, professional agents typically take 4% or less of negotiated salaries. Marketing agents who help athletes land endorsement deals typically charge 20%. Ricciardi said Nilly takes a 25% cut because the company provides value to the athlete through the upfront money, and because Nilly assumes the risk that the player may not earn enough for Nilly to recoup its investment.
"We're all aligned to maximize their NIL earnings," Ricciardi said. "We're not an agent exactly, but we are a financial partner with them."
The contract reviewed by ESPN states that Nilly "is not acting as Athlete's advisor, agent, manager, or representative and [Nilly] is not authorized to enter into any agreements on behalf of Athlete."
He and Perkins said in the future they plan to help find other endorsement deals for athletes who sign up with the company. When they spoke to ESPN in July, they said they had not arranged any endorsements on behalf of their athletes.
Lending laws
Consumer finance experts who reviewed the contract obtained by ESPN said the one-sided relationship between the player and Nilly could lead a judge to determine that the arrangement more closely resembles a loan than a licensing agreement if challenged in court.
Mike Pierce, who formerly helped lead the student financial services team of the CFPB and now runs a student borrower advocacy nonprofit, said Nilly could be violating laws if the contracts are determined to be loans.
Federal Truth in Lending laws and other state laws require loan issuers to disclose certain terms and conditions to borrowers, among other mandates. A spokesperson for the CFPB said the agency declined to comment on any specific companies or its business practices. The agency's public database of complaints doesn't include any mentions of Nilly, and the company is not the subject of any federal lawsuits.
Pierce added that a court could deem Nilly's arrangements to be loans even though the repayment Nilly receives is contingent upon the player reaching a certain threshold in NIL earnings.
"That not's radical. It's not outside the bounds of the way the law thinks about lending," he said.
In its 70-page investor memorandum, which also was obtained by ESPN, Nilly cites recent rulings about income share agreements among its risk factors. Income share agreements are a financial arrangement in which a company lends tuition money to students in exchange for a share of the student's future wages, once they earn a certain amount. In several cases, federal and state authorities have deemed these arrangements to be loans and punished companies who provided them to students while not characterizing the offers as loans.
If Nilly's contracts are recharacterized as loans or extensions of credit, according to the investor memo, the result could be lawsuits that end in punitive or actual damages, along with "the inability to enforce the terms of the contracts."
Ricciardi operates a student loan company called Edly, which offers income share agreements to nonathlete students. He told ESPN that Edly considers those arrangements to be loans, but said they are substantially different than the licensing agreements that Nilly signs with athletes.
Judith Fox, a recently retired Notre Dame law professor and former CFPB adviser, said Nilly's contracts are operating in "uncharted territory" for regulators who would have to decide whether they're commercial contracts between two businesses or a consumer contract between a business and a borrower.
Fox, Pierce and Peterson -- the Utah law professor -- all said Nilly's contracts include concerning clauses that make it easy for the company to determine that an athlete had breached the agreement.
For example, if an athlete does anything that Nilly determines to be "injurious to the reputation of the company," Nilly can terminate its deal, according to the contract obtained by ESPN. Ricciardi said the language is a "boilerplate" morality clause that exists in all licensing contracts. But Pierce said if Nilly found an athlete had violated the terms of their deal, the contract gives the company options to keep the athlete's future earnings until the contract date ends or sue him or her to recoup the initial upfront payment.
"The promise here that if you don't make it big you don't have to pay anything back has a lot of fine print underneath it," Pierce said.