House v. NCAA settlement filed, another step toward revenue sharing

The NCAA and its members would also owe $2.78 billion in damages, which would be paid to hundreds of thousands of eligible athletes over a 10-year period. The NCAA would be responsible for roughly 41 percent of the total damages. Schools would handle the other 59 percent, mostly through the NCAA withholding some of their annual payouts of March Madness revenue. The athletes sued over various compensation restrictions, challenging the amateurism model that has always been the foundation of college sports. But if there are even hints of amateurism left, this settlement would do them in for good.

From here, Wilken will review the long-form settlement and decide whether to grant preliminary approval. If she does, current and former athletes would have an opportunity to object to it and argue their case to her. Wilken would then consider those arguments before making a final call. If the process stays on schedule, lawyers expect it to finish sometime this winter.

In 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 so, the NIL payments would count toward the 22 percent revenue-sharing cap. And while athletes could still strike NIL deals with third parties — the way they have made money since an NIL policy was implemented in the summer of 2021 — the NCAA is hoping to use this settlement to neuter the donor-funded collectives that have had a massive influence in football and men’s basketball recruiting.

According to a statement from the NCAA, the settlement would establish a “robust and effective enforcement and oversight program to ensure the new NIL model achieves its objectives.” Or in other words: We are cool with an athlete earning $500 to post on social media about a pizza shop near campus. We are cool with a lucrative Nike or New Balance sponsorship. But we are much less cool with an athlete being promised $500,000 by a collective to transfer from one school to another — which NCAA officials often deride as “pay for play.”

The documents filed Friday included descriptions of many new rules, some of which could be implemented before the settlement is finalized and others that could come after. The settlement would establish a clearinghouse that reviews any third-party NIL payments above $600. This is part of the NCAA’s effort to eliminate, or at least curb, NIL payments tied to performance or an athlete’s school choice. Of course, those are the exact types of payments that are effectively running major-conference football and men’s basketball. But since the settlement was agreed to in May, NCAA officials have pushed phrases such as “true NIL” and “fair-market value,” feeling they may finally have a shot to regulate the NIL world.

Still, how much the NCAA can limit the power and spending of collectives – and whether it can really impose its definition of “true NIL” — remains a massive question. Free-market principles are one obstacle. Varying state laws, plus aggressive attorneys general, are others. The NCAA plans to use the clearinghouse data to inform decisions about whether a deal is for “fair-market value.” Then if an athlete wants to challenge a rule violation, a neutral arbitrator, who would be selected by the plaintiffs’ attorneys, would review the situation and make a ruling. That would be a significant shift in how enforcement and punishments are handled.

“This settlement is an important step forward for student-athletes and college sports, but it does not address every challenge,” 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 reached through the settlement could be significantly mitigated by state laws and continued litigation.”

The settlement does not resolve the question of whether any college athletes would become employees of their schools or conferences. It also doesn’t provide guidelines 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 equity. The settlement does, however, explain how the revenue-sharing cap would incrementally rise.

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

Another key piece of the settlement is updated roster rules. While the settlement includes new roster limits, scholarship limits would be eliminated, allowing schools to offer full or partial scholarships to every player on each team. This would certainly lead to a sharp increase in scholarships, because current rules allow 85 for football, 13 for basketball, 12 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 and 18 for volleyball, according to two people familiar with the settlement terms. In theory, that could lead to 20 more full scholarships in football, two more in basketball and so on, with Title IX law requiring equal scholarship opportunities for male and female athletes.

An additional change is that all sports would become “equivalency sports,” permitting schools to offer partial scholarships to any athlete. Football and basketball, as of now, are “head count” sports, meaning all scholarship athletes receive a full grant. The settlement, then, would shift the budgets and roster math for many Division I programs. Should a football team offer a full or partial scholarship to the maximum 105 players, it wouldn’t have any walk-ons, long a staple of the industry. Baseball and softball, already equivalency sports, could also see a dramatic increase in scholarship money, especially at the highest levels.

Not every school and conference is happy with the settlement. Not every plaintiffs’ attorney is, either. Back in May, in a letter to the NCAA, Big East Commissioner Val Ackerman argued that non-power-conference-football schools — everyone but the SEC, Big Ten, ACC, Big 12 and Pac-12 — would shoulder a disproportionate share of the $2.78 billion in damages to former and current athletes. That was before the NCAA and five power conferences, the six named defendants in the suit, agreed to settle with the plaintiffs. Then, after the agreement, Houston Christian, a small Division I school, attempted to intervene and block the settlement as constructed.

On Wednesday, Wilken denied Houston Christian’s motion. And with the broad language in her decision, she made it clear she has a high bar for challenges from schools (and conceivably individual athletes, too). Nevertheless, if Wilken approves the settlement, athletes would have that chance to object to it and/or opt out of the revenue-sharing system.

Meanwhile, Fontenot v. NCAA, another antitrust suit, is adding plaintiffs and plowing ahead despite a very possible settlement of House, Hubbard and Carter. The plaintiffs’ attorneys for House believe Fontenot will still eventually be consolidated with the other three cases. If that happened, the NCAA and its members would have clearer antitrust protection for the 10 years the settlement covers. But in an amended complaint, the plaintiffs’ attorneys for Fontenot are pushing hard against the proposed cap on how much money — again, about $20 million at first — schools can share with athletes.

The lawyers argue the cap “is artificially low” and “far below the revenue sharing that a competitive market would yield.” Echoing criticism from some labor advocates, they added that “it also simply substitutes one illegal price fix for another.”

That, right there, is the sound of more potential lawsuits in the future.