On Monday, October 7^th, 2024, Representatives of the National Collegiate Athletic Association (NCAA) and plaintiffs from House v. NCAA received preliminary approval for a settlement agreement to resolve three major lawsuits: House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA.^[1]

This historic settlement changes the landscape of college sports in three major ways. First, players will be eligible to receive benefits from member schools that were previously prohibited by the NCAA.^[2] Second, former players will be compensated for the prior deprivation of their name, image, and likeness (NIL) rights.^[3] Third, the agreement establishes a groundbreaking revenue-sharing framework between member schools and athletes.^[4]

The benefits available to college athletes remained largely unchanged for decades; however, recent years have seen a trend towards expanding the academic and non-academic related awards available to players.^[5] Since 1956, players have been able to accept scholarships limited to a full “grants-in-aid.”^[6] “Grants-in-aid” scholarships allowed athletes to receive reimbursement for the following: tuition & fees, room & board, and required books.^[7] Originally, “grants-in-aid” scholarships included cash for “incidental expenses” (such as laundry), but “incidental expenses” were prohibited in 1976.^[8]

In 2014, the NCAA relaxed its rules and permitted member schools to offer “full grant-in-aid” scholarships, which allowed players to receive scholarships up to the full cost of attendance.^[9] Following the House settlement, players will be eligible to accept a plethora of benefits formerly unavailable, such as mental health resources, nutrition support, life skills development, and extended medical coverage after they stop competing.^[10]

The settlement requires the NCAA to retroactively pay nearly $3 billion to current and former players for its prior use of their NIL rights.^[11] The NCAA agreed to pay the damages in $280 million installments over the course of ten years.^[12] While that is a substantial sum, the NCAA had an incentive to settle the cases due to looming fears of bankruptcy.^[13] Had House gone to trial, the NCAA could have been liable for up to $20 billion in damages because U.S. antitrust laws grant plaintiffs “treble damages,” which triples the amount awarded to plaintiffs.^[14]

The NCAA does not plan on paying the full amount in cash.^[15] Instead, about 60% of the almost $3 billion in damages will be paid from reductions in the approximately $700 million that the NCAA distributes to member schools annually.^[16] Ancillary methods cover the remaining 40%, with the NCAA turning to reserves, various other revenue streams, and a reduction in operating expenses.^[17]

Perhaps the most significant element of the settlement is its proposed revenue-sharing framework, which allows schools to distribute up to 22% of the average power conference athletic media rights, ticket sales, and sponsorship revenue to athletes.^[18] Importantly, 22% represents the maximum that a member school may pay its players, meaning they can optionally share less than 22% if they choose.^[19] The model allows schools to pay players directly for their NIL rights, with each NIL payment applying towards the 22% cap.^[20]

Since athletes will still be permitted to contract with third parties for their NIL rights, the settlement establishes a robust NIL enforcement and oversight program with mandatory reporting for any NIL payments over $600.^[21] However, any NIL payments from third parties would not apply towards a school’s 22% cap.^[22] In support of the new oversight program, the NCAA argues that it will ensure fairness and transparency across the NIL landscape.^[23]

In addition, the settlement eliminates scholarship limits in all sports.^[24] Instead, rosters receive a limit and schools gain the discretion to offer partial or full scholarships – provided that the roster limit is not exceeded.^[25] While less significant than other components of the deal, the removal of all scholarship limits similarly benefits players by allowing more athletes to accept scholarship funds than before.^[26]

Critics of the settlement noted that the proposed 22% revenue-sharing plan pales in comparison to that of major American professional sports, which is around 50%.^[27] However, the proposed framework, in conjunction with the new benefits and roster limits, could see member schools dedicating nearly 50% of their athletics revenue to players.^[28] Therefore, the net benefit to college athletes is similarly in line with professional sports. In total, the value of new benefits provided to college athletes is estimated to be between $1.5 billion and $2 billion annually.^[29]

While much attention has been paid to what the settlement is; perhaps it is more important to understand what the settlement is not. Notably, the settlement fails to address several key issues that would prevent future lawsuits.

First, the settlement does not address the disparate treatment between male and female athletes with respect to compensation, which could lead to future lawsuits under Title IX, if female athletes are found to be a historically disadvantaged class.^[30]

Second, it does not preempt or resolve competing state legislation surrounding NIL.^[31] This is problematic because states are becoming increasingly more autonomous in the realm of NIL, sometimes bypassing the NCAA. For example, on September 17, 2024, Georgia Governor Brian Kempt joined the state of Virginia in passing legislation that allows in-school states to pay players directly for their NIL rights – without fear of NCAA retribution – regardless of whether the settlement is approved.^[32]

Additionally, Tennessee and Virginia were granted a preliminary injunction against the NCAA after the NCAA attempted to punish the University of Tennessee, Knoxville, for using NIL as a recruiting tool, which is against NCAA rules.^[33] Therefore, due to the settlement’s silence on the power dynamic between states and the NCAA, it is likely that states will continue to challenge the constitutionality of NCAA rules in court.

Third, the settlement does not address the recurring issue of whether college athletes are employees of the universities.^[34] The idea that member schools and athletes should be treated as an employer-employee relationship has gained traction in recent months.^[35] In March 2024, the members of the Dartmouth basketball team voted to unionize following a proclamation by the National Labor Relations Board (NLRB) that college athletes are employees and can unionize under the National Labor Rights Act (NLRA).^[36]

Contrarily, the NCAA argues that “[the] efforts by the NLRB…pose a direct threat to both the sustainability of sports programs…and to the baseline of support provided to all athletes.”^[37]

However, the need for employment law in college athletics appears to be growing due to universities still being unable to compensate athletes in exchange for their athletic performance (known as pay-to-play).^[38] Instead, compensation is only allowed in exchange for NIL rights.^[39] This is problematic because the absence of a stable employer-employee contractual relationship is harmful to both players and member schools.

For example, the Florida Gators signed QB Jaden Rashada in December 2023 after promising him $13 million in exchange for his NIL rights, only for Rashada to leave the school in January 2024 after the deal fell through.^[40] Similarly, QB Mathew Sluka left the UNLV football team just three games into the 2024 season after he did not receive approximately $100,000 in NIL funds that were promised to him during recruiting.^[41] In each of those instances, both the player and school would have benefited from a fixed employment contract detailing the exchange of university funds in consideration for athletic services.

In conclusion, the proposed settlement has the potential to permanently change the world of college sports because of the monumental overhaul to player compensation and benefit rules. However, the settlement will not be a panacea to all the NCAA’s problems, and it is unlikely that they will be free from anti-trust scrutiny anytime soon.

[1] Dan Murphy, Settlement Designed to Pay College Athletes Gets Preliminary Approval, ESPN (Oct. 7, 2024), https://www.espn.com/college-sports/story/_/id/41665307/settlement-designed-pay-college-athletes-gets-preliminary-approval.

[2] Michael Brutlag Hosick, Settlement Documents Filed in College Athletics Class-Action Lawsuits, NCAA (July 26, 2024), https://www.ncaa.org/news/2024/7/26/media-center-settlement-documents-filed-in-college-athletics-class-action-lawsuits.aspx.

[3] Id.

[4] Id.

[5] O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049, 1054-55 (9th Cir. 2015).

[6] Id. at 1054.

[7] In re Nat’l Collegiate Athletic Ass’n Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1063 (N.D. Cal. 2019), aff’d, 958 F.3d 1239 (9th Cir. 2020), aff’d sub nom. Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 69 (2021).

[8] Id.

[9] O’Bannon, 802 F.3d at 1054-55.

[10] Hosick, supra note 2.

[11] Associated Press, Attorneys Working to Address Judge’s Qualms with NCAA Settlement, ESPN (Sept. 17, 2024), https://www.espn.com/college-sports/story/_/id/40424224/mcws-2024-tennessee-legacy-2025-predictions.

[12] Hosick, supra note 2.

[13] Nicole Auerbach & Justin Williams, How the House v. NCAA Settlement Could Reshape College Sports: What You Need to Know, N.Y. Times: The Athletic (May 20, 2024), https://www.nytimes.com/athletic/5506457/2024/05/20/ncaa-settlement-house-lawsuit-college-sports/.

[14] Id.

[15] Hosick, supra note 2.

[16] Ross Dellenger, Docs: NCAA Could Face $20B in Damages, Bankruptcy if Proposed Settlement Offer Isn’t Agreed Upon, yahoo! sports (May 14, 2024), https://sports.yahoo.com/docs-ncaa-could-face-20b-in-damages-bankruptcy-if-proposed-settlement-offer-isnt-agreed-upon.

[17] Id.

[18] Hosick, supra note 2.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] Auerbach & Williams, supra note 13.

[28] Hosick, supra note 2.

[29] Id.

[30] Karen Weaver, House V NCAA Settlement Proposal Looms, Leaving Title IX, Athlete Employment Questions Unresolved, Forbes (Sept. 24, 2024), https://www.forbes.com/sites/karenweaver/2024/09/24/house-v-ncaa-settlement-proposal-looms-leaving-title-ix-athlete-employment-questions-unresolved/.

[31] Hosick, supra note 2.

[32] Eli Henderson, New Georgia Law Allows Direct NIL Payments to Athletes, Sports Illustrated: NIL Daily (Sept. 18, 2024), https://www.si.com/fannation/name-image-likeness/nil-news/new-georgia-law-allows-direct-nil-payments-to-athletes.

[33] Tennessee v. Nat’l Collegiate Athletic Ass’n, 2024 WL 755528, at *6 (E.D. Tenn. Feb. 23, 2024).

[34] Hosick, supra note 2.

[35] Sam Becker, Dartmouth’s Men’s Basketball Team Voted to Unionise. The Timing is Just Right, BBC (Mar. 13, 2024), https://www.bbc.com/worklife/article/20240313-dartmouths-mens-basketball-team-union.

[36] Id.

[37] Hosick, supra note 2.

[38] Id.

[39] Id.

[40] Associated Press, Florida is Under NCAA Investigation a Year After a Failed NIL Deal with QB Signee Jaden Rashada, U.S. News, https://www.usnews.com/news/sports/articles/2024-01-19/florida-is-under-ncaa-investigation-a-year-after-a-failed-nil-deal-with-qb-signee-jaden-rashada.

[41] Weston Blasi, UNLV Quarterback Leaves School, Saying $100,000 NIL Payment Wasn’t Made. Here’s How it Could Have Been Avoided., MarketWatch (Sept. 27, 2024), https://www.marketwatch.com/story/unlv-quarterback-leaves-school-saying-promised-100-000-nil-payment-wasnt-made-heres-how-it-could-have-been-avoided-14b3c6ab.