Student Athlete Name, Image & Likeness Alert - The Death of Amateurism in College Sports: Under Historic $2.8B Settlement with NCAA, Student Athletes to Share in Revenues Print PDF
Amateurism in college sports is officially dead. On May 23, 2024, the NCAA and the Power Five Conferences approved a historic $2.8 billion revenue sharing settlement, paving the way for schools to pay student athletes directly for the first time in history. The settlement stems from the House v. NCAA antitrust lawsuit, which, among other things, challenged the NCAA’s NIL rules and argued that student athletes deserve back pay for their previous athletic contributions. While the settlement is far from becoming official (attorneys will spend months finalizing the details and the judge must approve the final settlement), this vote represents what is most likely the largest fundamental shift in college sports history.
Settlement Terms
Under the settlement, the NCAA will pay $2.8 billion in damages over a period of 10 years (on a prorated basis – 10% per year) to past (dating back to 2016) and current athletes. Further, the NCAA agreed to a revenue sharing plan allowing each school to share upwards of $20 million per year with its student athletes (with the actual amounts differing among schools). In exchange, student athletes cannot sue the NCAA for other potential antitrust violations and must dismiss their complaints in the House case as well as two other current cases (Hubbard v. NCAA and Carter v. NCAA). The settlement does not, however, resolve the pending movement by student athletes to be classified as employees. Nor does it settle the Fontenot v. NCAA case, which has much broader claims than House; essentially, the plaintiff in Fontenot has argued that all of the NCAA’s compensation restrictions are illegal (the final version of the House settlement, however, may ultimately also resolve Fontenot).
Individual student athletes will have the ability to opt out of the settlement, which would preclude their ability to participate in the revenue sharing or receive damages – but would also retain their individual right to sue the NCAA and its schools in the future for antitrust violations.
The settlement will not prevent future lawsuits against the NCAA and conferences from state attorneys general, and does not preempt state laws relating to NIL or revenue sharing. By settling, the NCAA and the Power 5 Conferences avoided the risks of being held liable for treble damages under antitrust laws as well as $20 billion in back damages, which could have led to bankruptcy.
A portion of the $2.8 billion will be split evenly among all members, and the remainder will be allocated based on the athlete’s market value, which will be determined by a sports economist. This process will certainly be complicated, and may take into consideration playing time and player ratings. The NCAA is responsible for 40% of the settlement, while the remaining 60% will be borne by the Division 1 conferences through a reduction of revenue distributions from the NCAA; the Power Five Conferences are likely to bear somewhere between 20%-30% of that burden.
In addition, the final settlement will likely eliminate limits on the number of student athlete scholarships, but will also likely limit roster sizes.
NIL Collectives
While there have been few specific details, the settlement is also expected to include a new NIL enforcement structure, focusing on pay-for-play rules relating to NIL collectives. This structure is expected to include court affirmation of NIL rules, as well as incentives for schools to bring collectives in-house. Schools are hopeful that this will enable them to regain control over the NIL landscape and tame what has become known as the NIL “wild west.”
The Future
Even after the settlement becomes effective, there will still be a tremendous amount of uncertainty about the future of college sports and significant challenges ahead – for all sides. Besides the unsettled issues outlined above (e.g., the employment question and NIL rule enforcement), many are concerned that this model will permit the rich to get richer (mainly because of the level of the pools of revenue available for distribution from the top power conference schools), further limiting the ability of smaller revenue schools to be competitive. In addition, there is a question of how (or even if) Title IX will apply, particularly because it is feared that lower revenue sports programs (of which many operate at a deficit) will be eliminated entirely by schools in order to account for the revenue sharing payments.
The NCAA will undoubtedly use the settlement as a springboard to ramp up its lobbying of Congress to pass federal legislation that will preempt applicable state laws, establish that student athletes are not employees, and grant an antitrust exemption. To date Congress has been slow to act on these issues, despite several bills on the subject being introduced. The one thing that is certain, however, is that the landscape of college sports is forever changed.