10 Questions Answered About the NCAA’s House Settlement

Last Updated on May 30, 2024

The NCAA and Power Five conferences (ACC, Big 12, Big Ten, Pac-12 and SEC) have agreed to a settlement in the House v. NCAA case, which threatened to cost the organizations a potential $4 billion in treble damages had the case gone to trial.

Instead, the parties have agreed to $2.8 billion in damages to former college athletes and 22% of the average Power 5 school’s revenues. That amount is estimated at more than $20 million annually per school for future revenue sharing, which will increase as college athletic revenues increase. Additionally, scholarship caps will be removed, allowing athletic departments to spend more there as well.

“This landmark settlement will bring college sports into the 21st century, with college athletes finally able to receive a fair share of the billions of dollars of revenue that they generate for their schools,” said Steve Berman, Hagens Berman managing partner and co-founder, who represented the plaintiffs in this matter. “Our clients are the bedrock of the NCAA’s multibillion-dollar business and finally can be compensated in an equitable and just manner for their extraordinary athletic talents.”

Here are 10 things you need to know about the settlement based on the details available.

How Much Money Are Former Athletes Getting?

The former athletes covered by this settlement (should they opt in) include an estimated 14,500 Division I athletes who played from June 15, 2016 until the class was established in the case November 3, 2023 and could have received money for commercial use of their NIL, video games and broadcasts if the NCAA had permitted it. The $2.8 billion part of the settlement is for them, although 25-35% of it will go to the plaintiffs’ attorneys, as determined by the judge.

Berman told ESPN the money will be divided between athletes pursuant to a formula created by a sports economist. Some money will be split equally between all athletes who opt into the class, while some money will be allocated based on each athlete’s market value. That market value might be determined by such factors as career snap count or a player’s star rating.

Who is Paying the Money?

Reports have the NCAA paying $1.1 billion of the $2.8 billion for past damages, with approximately $1.65 billion being paid by the Power Five and the remaining 27 Division I conferences paying $990 million.

Reports have this being funded through both the NCAA withholding payments to universities (which is largely revenue from March Madness) and direct payments.

Tom Wistrcill, the commissioner of the Big Sky Conference said on Hans and Scotty G. on KSL Sports Zone in Utah that he only learned about the details of the settlement two weeks ago on a call with NCAA President Charlie Baker. Only the Power Five conferences were named parties in the case, so only they were part of the negotiations, but the rest of the Division I conferences are on the hook for the payment.

“We didn’t get a say in this, and now we’re paying this tax—essentially getting our wages garnished—and we had nothing to say about it, nothing to do with it, and certainly our former student athletes aren’t benefitting from this,” said Wistrcill.

The commissioner says he’s frustrated because FCS schools will end up funding part of the payments to athletes from FBS schools under this arrangement, when only the Power Five from the FBS were sued in this case.

How Much Money Are Current and Future Athletes Getting?

Going forward, it’s estimated athletic departments will be able to pay athletes up to $21-22 million annually per school for future revenue sharing. That number will also increase over the 10-year period of the settlement based on 22% of the average Power 5 school’s revenues. The revenue categories being included are TV contracts, ticket sales and sponsorships, but not donations.

Details coming to light include a 4% per year automatic escalator of the revenue figure for the first three years of the deal, with a reevaluation in Year 4. Additionally, some monies already going to athletes will be credited toward the cap, including Alston-related payments.

Each school will have to determine how much to offer and how they will determine the amount each athlete receives, presumably based on their individual market value. Paying every athlete the same amount would only open the institution to antitrust violations for allegations like price fixing.

“As tax-exempt entities, universities must be cautious with flat payments to athletes, as this can attract IRS scrutiny,” said Katie Davis, a CPA and partner at James Moore & Co. “Payments should reflect fair market value to avoid issues with private benefit rules and maintain tax-exempt status. Ensuring compliance through individualized valuations and proper documentation is important to meeting IRS requirements and avoiding potential penalties.”

Paying fair market value, however, isn’t as easy as issuing flat payments.

“A key complexity is the fair value measurement of an athlete’s NIL, which must be initially determined and regularly assessed,” said Jim Booz, a former UVA staffer who now now serves as the director of college athletics advisory services at James Moore. “This requires defined process and personnel to manage the ongoing evaluation.”

This may necessitate athletic departments adding new responsibilities for existing staff or hiring new staff members to manage the changes.

“Athletic departments need to plan for identifying staff to manage these changes,” said Jim Booz, a former UVA staffer who now now serves as the director of college athletics advisory services at James Moore & Co. “These staff members will engage with players associations, unions, and agents, and handle payment distribution. Given the complexities, head coaches likely won’t want to be involved in these discussions.”

Where Will The Money Come From?

This is a question every athletic department in the country is asking right now. Do they put facility upgrades on hold? Layoff staff? Cut sports? Lean on donors because it’s one of the sources of revenue that won’t increase the revenue sharing bill?

“Athletic departments will need to tighten belts and make tough choices, such as scaling back on travel, delaying facility upgrades, and reevaluating support for non-revenue sports,” said Davis. “Building reserves for future litigation and addressing donor fatigue are also essential for long-term financial stability.”

“The reality for most schools will be in the detail of the rollout of payments over the length of the term of the settlement and what that means for their annual budgeting,” said College Sports Solutions founder Jeff Schemmel (disclosure: I’ve previously worked as an independent contractor with this organization). “The substantial decrease in yearly NCAA revenues will of course have to be accounted for. In all cases, it will begin with an examination of current and future revenue sources—including those provided by the institution—and expenses that can either be absorbed elsewhere or substantially reduced.”

Private equity has emerged as potential solution as news of the House settlement heated up. Weatherford Capital and RedBird Capital Partners announced this week Collegiate Athletics Solutions, a “purpose-driven, dedicated capital and business-building platform for public and private university athletic departments across the United States.”

Davis says it might not be a natural marriage between college athletics and private equity.

“The clash between private equity’s fast-paced, profit-driven approach and the traditionally slower, mission-focused climate of college athletics is inevitable.”

She notes it has the potential to change a number of dynamics.

“Navigating the pecking order of college athletics stakeholders is already tricky. You’ve got university governance at the top, followed by boosters with their own expectations, coaches pushing for resources, and athletes who just want to play, succeed, and get their cut. Now you add in PE investors who want their returns, and balancing all these interests becomes a real juggling act. Imagine a fundraiser asking a booster for money to upgrade the weight room, while the booster is wondering if their donation is just going to cover the PE firm’s demands.”

Will NIL Collectives Go Away Now?

There’s no reason to believe NIL collectives will go away because of this settlement. In fact, they could offer a way for schools to spend even beyond the cap agreed upon here for a competitive advantage.

The Collective Association, which represents over 30 collectives, expects collectives to continue to be part of strategies going forward.

“The Collective Association is pleased that this settlement resolves these past cases and ensures that college athletes can finally receive a share of the revenue generated by their efforts. We now urge the entire college sports community to unite in creating a forward-looking, sustainable solution that benefits all of college athletics.”

He believes collectives may be an important part of the puzzle going forward.

“The logistical realities of implementing an efficient revenue sharing program will require multiple groups working together for the benefit of all college athletes. The athletic departments and conferences that view collectives as valued partners and work closely with them will see the benefits quickly and clearly. I think the role of collectives becomes even more important for universities as they compete to attract and retain talent.”

What Else is in the Settlement?

According to a report on the settlement from Ross Dellenger, the settlement document also includes a reporting requirement for third-party NIL deals that might be tied to the athlete’s revenue-share payment and a definition of “True NIL,” which will be based on a to-be-developed calculation of fair market value.

One other interesting aspect of the settlement is that it eliminates NCAA scholarship caps and contemplates new roster limits, meaning in sports like baseball, where scholarships are often split into small amounts across the team, full scholarships can now be offered to everyone on the roster if they have the funding.

“The potential changes to the scholarship model and roster caps raise severe and immediate Title IX risks, if not done equitably,” said Dan Cohen, a Title IX specialist who has represented college athletics departments across 33 states in Title IX matters in the last five years, including many of the major college football schools.

With the additional funds needed for revenue sharing, however, it’s hard to predict whether departments will take on this added expense, especially with the Title IX implications.

Berman also confirmed to me that the settlement includes a provision for the parties to reconvene before the end of the 10-year term to decide if they want the settlement to continue beyond the 10-year scope. Additionally, if there is a collective bargaining entity in the future to represent college athletes, and it bargains for terms better than the settlement, then the settlement will be dissolved.

Does Title IX Apply?

Speaking of Title IX, there’s already a debate going on across the legal industry about whether or not Title IX will apply to the revenue sharing contemplated under this settlement.

Attorney Mit Winter of Kennyhertz Perry argued on X that he believes Title IX wouldn’t apply.

“If payments are for use of athlete NILs in TV broadcasts, we know certain sports drive the vast majority of that TV revenue: football and men’s basketball. So I can’t see schools taking money that’s being paid by networks to broadcast football and basketball games and giving half to female athletes. With the agreements being for the use of athlete NILs, the schools will need to figure out a way to value those athlete NILs. And I can’t see them artificially depressing payments to football and basketball players and artificially increasing payments to athletes in other sports. That could create new legal headaches for schools. And I also don’t think Title IX requires them to divide payments up like that. The NIL payments aren’t ‘scholarship aid’ as covered by Title IX.”

NCAA President Charlie Baker has previously said in a Yahoo Sports interview that he doesn’t think Title IX applies, that it only applies to opportunities and not compensation.

Berman told me their conversations with the court also didn’t contemplate Title IX applying.

“We told the court well, we don’t think Title IX applies because in our world, this is money that goes to the conferences. And then the conferences are allowing schools to pay it, so it’s not directly from schools. Not sure that argument is now going to fly given the structure.”

Attorney Cohen considered whether conferences could distribute broadcast monies directly to the athletes so it wouldn’t pass through the universities and trigger Title IX, but he’s not sure that makes sense.

“There may be a viable theory where conferences distribute payments directly to student-athletes under a fair market valuation approach, which might avoid some Title IX implications if the shared revenue does not actually pass through the schools. However, conferences may be wary to do so. The NLRB is already advancing a ‘joint employer’ theory against Southern Cal and the Pac-12, and conferences may be cautious about their own potential liabilities.”

There’s also the fact that we’re talking about more than just broadcast revenue here.

“We’ll have to see the final settlement structure, but gate receipts and sponsorship dollars likely could not be addressed in this manner. Title IX undoubtedly will come in to play in numerous ways as schools implement the final revenue sharing structure as well as the new scholarship/roster cap structure.”

Attorney Lexi Trumble of Parker Poe says, “I can’t conceive of a world in which the landmark House settlement doesn’t implicate Title IX.

She believes several Title IX program areas are implicated, including the provision of publicity resources and the disbursement of athletic financial assistance.

“Depending on how these payments for years of back-damages and prospective revenue-sharing agreements are categorized and administered, athletics administrators will have to balance market-driven financial forces with federal gender equity mandates. Whether payments to players are required to be proportionally allocated, as in the case of athletic scholarships, or proportionally available, which is the metric used for other forms of financial assistance like summer school aid, Title IX’s broad jurisdictional very likely governs the on-campus transactions contemplated by the settlement.”

In terms of the debate over whether revenue sharing would fall under “financial assistance,” she says thinks it does.

“The U.S. Department of Education’s Office for Civil Rights has explained in guidance documents that, ‘Athletic financial assistance includes any financial assistance expenditures through the institution’s athletics program and any other aid that is connected to a student’s athletic participation.’ If these House payments are routed through a school’s athletics department—if they bring the compensation on-campus—the school’s involvement in those transactions, in my opinion, likely triggers Title IX.”

Cohen says there are ways for schools to make revenue sharing work within Title IX. However, he cautions, “Title IX lawsuits will be the next wave of litigation if schools aren’t careful in implementing this correctly.”

Until it’s tested, or the OCR provides guidance, there is no definitive answer, so expect many schools to proceed with caution.

Can International Athletes Receive Revenue Sharing?

Currently, international athletes are limited to few NIL activities, as only passive income opportunities are allowed for those on student visas. Asked about how international athletes will be impacted by the House settlement, Ksenia Maiorova, an immigration attorney who works with college athletes, says the situation may be different for former athletes versus current athletes.

“It’s clearly passive,” she said of the case for former athletes receiving part of the $2.8 billion settlement. “They’re not doing anything for it. They weren’t rendering those services with the expectation of compensation.”

For current athletes, however, she says it’s less clear. She says there’s a conservative position and a more liberal position. On the conservative side, there’s quid pro quo because they’re receiving a revenue share because they’re playing, which makes it “work” that require employment authorization and would be a no-go under student visa rules.

However, the more liberal position is that they’re not doing anything they weren’t doing before this decision, they’re just making money for it now.

“The folly of that argument is the difference between the student athlete who gets that money and the regular student who does not.”

Maiorova says aligns more with the conservative approach. Without federal guidance, it’s anyone’s guess which position is correct.

When Will Revenue Sharing Begin for Current Athletes?

We’re not going to see revenue sharing this fall. It could still take months for Judge Wilken to approve the settlement. The settlement could also be appealed by athletes or schools to the U.S. Court of Appeals for the Ninth Circuit and eventually the U.S. Supreme Court.

It seems the earliest we’d see implementation would be Fall 2025, but it could also be later.

Although it might seem on the surface like this settlement sets up some protection and stability for the NCAA going forward, this agreement only settles three cases: House v. NCAA, Hubbard v. NCAA and Carter v. NCAA. Just yesterday, the judge in the Fontenot v. NCAA case declined to consolidate it with House, and there are multiple other cases across the college athletics landscape that pose future issues.

Athletes will also have the option to opt out of the settlement agreement in House, meaning they will preserve their legal right to appeal the settlement or bring a future case.

There’s also the potential for there to be athletes who aren’t covered under this settlement because they didn’t play between June 15, 2016 and November 3, 2023 and potentially won’t be playing once future revenue sharing goes into effect. For example, if you have a freshman in Fall 2024 who only plays one year, and revenue sharing doesn’t go into effect until Fall 2025, they’re in a gap that isn’t covered.

This settlement may also create grounds for new antitrust cases in the future because the solution here creates a cap, which represents a restraint on pay. Restrictions like that are potential antitrust violations if not collectively bargained, which can’t happen unless athletes are deemed employees.

In its statement announcing the settlement, the NCAA and the Power Five commissioners made it clear they’re still looking to Congress to provide future stability in the industry.

“The five autonomy conferences and the NCAA agreeing to settlement terms is an important step in the continuing reform of college sports that will provide benefits to student-athletes and provide clarity in college athletics across all divisions for years to come. This settlement is also a road map for college sports leaders and Congress to ensure this uniquely American institution can continue to provide unmatched opportunity for millions of students. All of Division I made today’s progress possible, and we all have work to do to implement the terms of the agreement as the legal process continues. We look forward to working with our various student-athlete leadership groups to write the next chapter of college sports.”

This piece originally appeared on Forbes

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