Settlement filed in House v. NCAA case, another step toward revenue sharing

The NCAA and its members would also owe $2.78 billion in damages, to be paid over 10 years to hundreds of thousands of eligible athletes, who would receive anywhere from $1 million to nearly $1.9 million, depending on their claims. The NCAA would be responsible for about 41 percent of the total damages. Schools would handle the remaining 59 percent, primarily through the NCAA retaining a portion of their annual March Madness payouts. The athletes sued over various compensation caps, challenging the amateurism model that has always been the foundation of college sports. But if there is even a shred of amateurism left, this settlement would kill them off for good.

From here, Wilken will review the lengthy settlement and decide whether to grant preliminary approval. If she does, current and former athletes will have a chance to file objections and present their cases to her. Wilken would then consider those arguments before making a final decision. If the trial goes as scheduled, attorneys expect it to wrap up this winter. The plaintiffs’ attorney said Friday that so far none of the athletes had opted out of the settlement terms.

Under the model created by the settlement, schools could also pay athletes directly for their name, image and likeness (NIL) rights, which is not allowed under current NCAA rules. If they did, the NIL payments would count toward the revenue-sharing cap. And while athletes would still be able to make NIL deals with third parties — the way they’ve made money since a NIL policy was implemented in the summer of 2021 — the NCAA hopes to use this settlement to neutralize the donor-funded collectives that have had a huge influence on the recruitment of football and men’s basketball players.

According to a statement from the NCAA, the settlement would establish “a robust and effective enforcement and oversight program to ensure that the new NIL model achieves its objectives.” Or, in other words: We think it’s cool when an athlete earns $500 to post on social media about a pizza place near campus. We think it’s cool when Nike or New Balance gets a lucrative sponsorship. But we think it’s much less cool when an athlete is promised $500,000 from a collective to go from one school to another — what NCAA officials often deride as “pay to play.”

The documents filed Friday outline a raft of new rules, some of which could be implemented before the settlement is finalized and others that could come afterward. The settlement would establish a clearinghouse that would review all third-party NIL payments over $600, part of the NCAA’s effort to eliminate or at least curb NIL payments tied to an athlete’s performance or school choice. Of course, these are the exact types of payments that effectively keep major conference football and men’s basketball afloat. But since the settlement was reached in May, NCAA officials have been pushing phrases like “true NIL” and “fair market value,” feeling they finally have a shot at regulating the NIL world.

Still, the extent to which the NCAA can limit the power and spending of collectives—and whether it can truly impose its definition of “true NIL”—remains a huge question. Free-market principles are one hurdle. Various state laws, plus aggressive attorneys general, are another. The NCAA plans to use the clearinghouse data to inform decisions about whether specific deals are for “fair market value.” If an athlete wants to challenge a violation of the rules, a neutral arbitrator, selected by the plaintiffs’ attorneys, would review the situation and issue a ruling.

The settlement would also allow the NCAA to create rules to prevent athletes, schools and boosters from “defeating” or “circumventing” the terms. If it were to create a rule to that effect, plaintiffs’ attorneys would have 30 days to file objections with a court-appointed “special master.”

Neutral arbitrators, a special master, third-party decision-making on violations that could affect athlete eligibility? It would all be a significant change from how the NCAA has handled enforcement and penalties.

“This settlement is an important step forward for student-athletes and collegiate sports, but it does not address all the challenges,” NCAA President Charlie Baker and the SEC, Big Ten, ACC, Big 12 and Pac-12 commissioners said in a joint statement Friday. “The need for federal legislation to provide solutions remains. If Congress does not act, the progress achieved by the settlement could be significantly limited by state laws and continued litigation.”

The settlement does not resolve the question of whether student-athletes would be employed by their schools or conferences. While the plaintiffs’ attorneys have said they would help the NCAA lobby Congress for legislation consistent with the settlement terms, the settlement explicitly states that the attorneys will not take a position on athlete employment. The settlement also offers no guidance on how Title IX would apply to revenue sharing between schools and athletes. NCAA officials say it would instead be up to each individual institution to ensure gender parity. The settlement does, however, lay out how the revenue-sharing cap would gradually increase.

After the first three years of the settlement, the revenue-sharing pool would increase by 4 percent. For example, if the initial pool were an even $20 million, the first annual increase would bring it to $20.8 million. But after the fourth year, the cap would be completely recalculated to account for large revenue spikes (such as a new conference TV deal). That would happen after the seventh year as well, though plaintiffs’ attorneys would also have two chances to request a recalculation outside of the scheduled updates.

Another key component of the settlement is the updated roster rules. While the settlement includes new roster limits, it would eliminate scholarship limits, allowing schools to offer full or partial scholarships to any player on any team. This would result in a sharp increase in scholarships, as the current rules allow for 85 for football, 13 for basketball, 12 each for softball and volleyball, and 11.7 for baseball. The proposed roster limits are 105 for football, 15 for basketball, 34 for baseball, 25 for softball, 18 for volleyball, 48 for men’s lacrosse, and 38 for women’s lacrosse. In total, there could be 790 new scholarships available for all sports covered by the settlement. So in theory, that could mean 20 more full scholarships for football, two more for basketball, and so on, with the Title IX law requiring equal scholarship opportunities for male and female athletes.

An additional change is that all sports would become “equivalency sports,” allowing schools to offer partial scholarships to any athlete. Football and basketball are now “head count” sports, meaning all scholarship athletes receive a full scholarship. The settlement would also change the budgets and roster math for many Division I programs. Because teams wouldn’t have to offer every scholarship they could, walk-ons wouldn’t be eliminated altogether. But If a football team offered full or partial scholarships to its 105-player limit, it would have no walk-ons, long a staple of the industry. Baseball and softball, already peer sports, could also see dramatic increases in scholarship money, especially at the highest levels.

In the meantime, Fontenot vs. NCAAanother antitrust case, adds plaintiffs and continues despite a very possible settlement of House, Hubbard And CarterThe plaintiffs’ attorneys for House to believe Fontenot will ultimately be consolidated with the other three cases. If that were to happen, the NCAA and its members would have clearer antitrust protections for the 10 years covered by the settlement. But in an amended complaint, the plaintiffs’ attorneys for Fontenot strongly oppose the proposed maximum amount (initially about $20 million) that schools can give to athletes.

The lawyers argue that the cap is “artificially low” and “far below the income distribution that a competitive market would produce.” Echoing criticism from some labor activists, they added that “it also simply replaces one illegal price-fixing agreement with another.”

This is a signal that more lawsuits may follow in the future.