ESPN host and former NBA star Kendrick Perkins is facing backlash over a new startup company that is being compared to a ‘predatory’ lender.
Perkins, the 39-year-old basketball analyst, is partnering with Wall Street investor Chris Ricciardi in Nilly, which offers college athletes up-front money in exchange for future name, image and likeness (NIL) earnings.
The problem, according to expert who spoke to ESPN about the company, is that Nilly could lead a vulnerable group of young people into predatory loans. Thus far, Nilly has deals with only 20 men’s football and basketball players, all of whom are at either the college or high school level.
‘These are trashy products designed to take advantage of young kids,’ Utah law professor and former Consumer Financial Protection Bureau advisor Chris Peterson told ESPN.
ESPN’s Dan Murphy obtained one copy of a Nilly contract that offers a $50,000 payment to a high school senior in exchange for exclusive NIL rights over a seven-year period. Furthermore, Nilly will get a quarter of that athlete’s NIL for the duration of the deal or until Nilly gets $125,000 – 2.5 times its original investment.
ESPN host and former NBA star Kendrick Perkins is facing backlash over a new startup
And according to Ricciardi, Nilly can earn as much as 50 percent of an athlete’s NIL money, although a company spokesman told ESPN that the share can be as low as 10 percent.
NIL agreements have been permitted by the NCAA since 2021 and allow amateurs to earn endorsement money from third parties without risking their eligibility. But it wasn’t until recently that such agreements could be bundled into other deals, such as the ones being promoted by Nilly.
AJ Dybantsa, the top basketball recruit in the country, stands to make millions in NIL deals
Ricciardi stresses that the contracts are not loans, but licensing deals, which protects athletes from defaulting. Instead, he explained, the deals are more like the advance payments musicians and authors receive for a portion of future royalties.
‘There’s no interest rate,’ Ricciardi said. ‘There’s no requirement to pay back. It’s purely a licensing deal. I would be surprised if those people thought that music advances were high interest loans.’
But not everyone agrees with Ricciardi.
Michael Haddix Jr., whose gives financial education seminars to college athletic departments, described the arrangements as ‘predatory.’
‘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,’ Haddix Jr. told ESPN. ‘It feels predatory, and it’s capitalizing on young people who need money and haven’t thought through the long-term implications.’
Advance NIL co-founder Courtney Altemus, who consults with athletes and schools, recommends students stick to shorter deals to avoid any unforeseen issues. Furthermore, she says, athletes need to do the math themselves so they understand the impact of this decision.
‘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.’
Gervon Dexter will pay 15 percent of his future NFL earnings to Big League Advantage
Naturally, Perkins has defended the company.
A former Texas high school star who jumped straight to the NBA in 2003, Perkins sees Nilly as a way to reduce costs for low-income families.
‘You have so many athletes and their parents who are struggling day-to-day,’ Perkins, the ESPN analyst, told ESPN. ‘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.’
And while most NIL deals are four- and five-figure deals for relatively unknown athletes, the figures get considerably higher when top recruits are in play.
AJ Dybantsa, one of the nation’s top basketball recruits, could see somewhere between $7 million and $9 million in NIL money, according to long-time college basketball reporter Jeff Goodman. And while it’s not known if Dybantsa has any deal with Nilly, such a player could end up paying millions and millions to the startup under the aforementioned contract.
Similar companies already exist in baseball, where prospects are often paid for a portion of their future earnings.
One such company, Big League Advantage, has recently moved into the NIL market, where a similar firm, Vestible, was already operating. Both companies have paid college football players hundreds of thousands of dollars in exchange for future NFL earnings.
In one deal, former Florida defensive lineman Gervon Dexter will pay 15 percent of his future NFL earnings to Big League Advantage after the Chicago Bears rookie received $436,485 during his college days.
This article was originally published by a www.dailymail.co.uk . Read the Original article here. .