Last week, the House settlement finally went final, opening a new era in college sports. As groundbreaking as it is, it also is probably just a waypoint on the road to the actual steady state that college athletics has been heading to lately. Since a lot of folks seem confused by this settlement, I wanted to give GC subscribers the real info on what this deal actually is.
In the 21st Century, the largest story in college athletics has not been conference realignment or even the skyrocketing TV rights deals. It’s been the breathtakingly fast fall of the amateurism rules that the NCAA had put in place from its inception in the early 20th Century.
The first domino to fall was the result of the Ed O’Bannon lawsuit. He saw a lookalike of himself in an EA college basketball game that had classic teams and was angry that his image and likeness, if not his name, were being used without his permission or compensation. He filed a class-action lawsuit in 2009, and it came to a conclusion in 2014.
The O’Bannon case is the one that killed the EA college football game for a decade. That series had famously included players that matched the current players — heights, weights, skin tones, numbers, etc. — without paying the players for it. By a few years before the end of the original game, you could even import a file to the game that contained roster names and the announcers would use the players’ names because they had been pre-recorded.
Besides killing off the video game, O’Bannon’s victory made it possible for schools to pay full cost-of-attendance stipends beginning in the 2015-16 school year. They were only $2,000 to $5,000, but they were meant to cover costs like food and off-campus housing (and definitely not subsidizing partying, as all athletes are very devoted to their craft and classes and not subject to distraction).
The next big one came six years later with the conclusion of the Alston case in 2020. That one brought an end to limits on schools’ ability to give education-related benefits to athletes. No longer could the NCAA cap the ability of universities to offer books, school supplies, computers, tutoring, and internships to their players. This is the suit that had the NCAA going down 9-0 in the Supreme Court with Justice Brett Kavanaugh writing a blistering concurring opinion that all but said he and his fellow justices believed amateurism rules were illegal across the board.
From there, the NCAA has been under a constant legal blitzkrieg. States began passing laws that made the NCAA’s prohibition on NIL payments illegal in 2021. Restrictions the NCAA tried to put on NIL also fell quickly, sometimes not even taking to the end of the legal process before the Association gave up on an impossible goal. Transfer restrictions likewise came down, and most recently, JUCO players get extra eligibility on account of the NCAA not actually running JUCO sports. That one is technically temporary pending the conclusion of a lawsuit on these lines brought by current Vandy quarterback Diego Pavia, but it’s hard to see the NCAA winning anything in court these days.
Which brings us to the House case. As it became clear that restrictions of NIL were illegal in the early 2020s, some former college athletes realized it meant that restrictions of NIL were illegal when they were in school too. Former Arizona State swimmer Grant House, for whom the shorthand of the case is named, and former women’s basketball player Sedona Prince of TCU and Oregon filed suit on these grounds.
All the way back in May of last year, the NCAA and the conferences also named in the suit announced that they had come to a settlement with the plaintiffs. The settlement still had to be approved by the federal judge overseeing the case though, and that only just happened last Friday after several rounds of changes she required to make the settlement pass enough legal muster to sign off on. I phrased it that way on purpose, and I’ll come back to that.
There are two pieces to the settlement. One is that the NCAA agreed to pay $2.75 billion (yes, with a B) to college athletes who played in the ten years from 2016 to the present as damages for illegal restriction of compensation. It has a decade to pay all that out.
The other part is that schools will be allowed to share revenue with players, allowing schools to pay athletes directly for the first time. The most anyone can do this year is $20.5 million, but that will rise for the next decade. Yes, there are a lot of ten-year windows with this thing.
It’s up to the schools to decide whether they will max out their House payments and how to divvy them up between teams. Schools like Florida will do the whole $20.5 million, whereas schools like West Florida won’t.
People are already colloquially referring to this settlement-mandated limit as a salary cap, but it’s not. Mainly that’s because the revenue share payments aren’t salaries. Athletes still aren’t employees of their schools under this settlement.
For another thing, different programs will have different caps because of the variability I mentioned above. Think about how schools sponsor differing numbers of sports. Florida has 17 varsity sports. Stanford has 36. No matter how many teams and athletes a school has, they all have the same cap of $20.5 million.
A football powerhouse might also put the majority of it into the gridiron alone. They might then put most of the rest towards men’s and women’s basketball, baseball, and maybe one other sport they idiosyncratically care about (wrestling at Iowa, say, or track at Oregon or volleyball at Nebraska) with all other sports getting something from the petty cash drawer.
I said the judge wanted the settlement to “pass enough legal muster to sign off on”, so here’s what I meant. The settlement includes a mechanism where schools can opt-out to preserve the right to handle their own way on this one separate from the NCAA. Not many will, but it’s there. The settlement also provides for a new organization to analyze NIL deals to make sure that they are for “a valid business purpose”, i.e., that the value on them matches what would be reasonable for any similarly notable person to get for such a deal and isn’t just a recruiting inducement.
The latter is meant to rein in the excesses of the current NIL market, but it also sounds to some (including me) that it’s likely yet another illegal restraint on compensation. Without a collective bargaining agreement or an antitrust exemption for the NCAA, I don’t know how that withstands a legal challenge.
The fact that schools are free to divide the money as they see fit also sounds to many like it’s begging for Title IX enforcement actions. The catch with that is that Title IX is a complete mess right now. The Biden Administration attempted to enlarge Title IX protections, and there has been a ton of litigation over that. The many court cases are keeping the Title IX lawyers at the Department of Education busy. On top of that, the current Trump Administration announced plans to cut the DOE down to the smallest possible size permitted by law, which figures to further reduce Title IX enforcement capacity.
One upshot of the settlement is that, according to many sports journalists with sources, this offseason’s NIL market was particularly wild. Because the settlement outlines were announced in late spring of 2024, some players made extra large NIL asks knowing that revenue sharing was likely coming on July 1 of 2025. I don’t know all the details of that, but I suspect it would involve either promises of specific amounts after July 1 or possibly even collectives doing jumbo-sized payments for the first half of this year until the revenue share kicks in. It wouldn’t shock me if this is the main reason that Florida went heavy on high school recruiting instead of the portal in this cycle.
I fully expect the NIL Police aspect of this settlement to get challenged and struck down in court. If a car dealer wants to pay a college athlete $400,000 as a recruiting inducement, why should anyone be able to stop it from happening? Pro athletes can’t do stuff like that in order to get around salary caps, but that’s because all the players agree to a collective bargaining agreement that stops it. As ever, college athletes have no CBA. There may be a Title IX action or two, and I’m sure there are plenty of lawyers looking for other ways to challenge the settlement.
I really think there is no way around it: either all restrictions on college athlete compensation go away, or we get one or both of an NCAA antitrust exemption and collective bargaining agreement.
I don’t have the legal expertise to judge it, but I wouldn’t be surprised if even eligibility rules are on thin ice. Pavia’s suit isn’t trying to extend eligibility, only stop the NCAA from shortening it for JUCO players. However, I could believe that capping the number of years of eligibility is illegal, or that playing a pro version of a sport making someone irrevocably ineligible is illegal too.
So that’s the deal with the House settlement. It’s a continuation of the trend of barriers to athlete compensation falling. The NCAA has to pay out the better part of $3 billion in damages, and schools can directly pay athletes up to $20.5 million per year with an annual raise to that. NIL deals are supposed to be capped at market value, but that aspect as well as others likely will see their own legal challenges.
It’s the new steady state of the college sports world, until it isn’t a few years from now when another court ruling changes things. So it goes for college athletics these days.