A federal judge has now granted preliminary approval for the long-awaited $2.78 billion settlement after the National Collegiate Athletic Association (the “NCAA” or the “Association”) and its Power Five conferences voted last May to approve settling (the “Settlement Agreement”) the latest antitrust challenge to collegiate sports. This brings the NCAA and conferences closer to obtaining the Court’s final approval to compensate current and former athletes over a span of 10 years. It also paves the way for a major overhaul in Division I sports, allowing Division I schools to start paying athletes directly for use of their name, image and likeness (“NIL”), subject to a per-school cap that would gradually increase over time.
The Court expressed apprehension regarding an earlier settlement proposal, which limited NIL payments, especially those derived from booster-led collectives. Ultimately, the Settlement Agreement clarified the term “booster” and the guidelines around the pay-for-play incentives. The main change involved excising the word “boosters” and replacing it with a better-defined description of whose potential NIL deals would be subject to oversight by a neutral arbitrator once an NIL deal is executed. Last week, the Court concluded “that it will likely be able to approve the Settlement as fair, reasonable, and adequate” absent further elaboration.
Background
The case was filed by three current and former NCAA student-athletes seeking backpay for lost NIL-related revenue, including lost revenues from broadcasting, video games, and third-party NIL agreements that began after the NCAA modified its NIL rule, which went into effect on July 1, 2021. This landmark settlement fundamentally transforms the “amateurism” traditionally associated with college sports, which we recently discussed in our analysis the extensive antitrust challenges facing the NCAA—challenges that would profoundly shift the legal environment for the NCAA and the Power Five. Meanwhile, states have been considering and even signing legislation into law that prohibit state colleges and universities from refusing to provide student-athletes with NIL compensation.
Through the settlement, the NCAA has agreed to allow its member schools to share revenue with athletes directly, in addition to paying nearly $2.8 billion in damages to current and former collegiate athletes over the next decade –where member schools will pay 59% of the settlement’s damages, and the NCAA will shoulder 41% using its reserve fund. This settlement also resolves two additional lawsuits, Hubbard v. NCAA and Carter v. NCAA in which plaintiffs alleged that the NCAA violated antitrust rules by restricting compensation and benefits for student-athletes.
Opposition to the Settlement
There was significant opposition to the Settlement Agreement. For example, six female rowers argued that the vast majority of the benefits would go to men’s football and basketball players, with a lesser sum being shared with women’s basketball players, further perpetuating gender disparity in collegiate-level sports. The rowers specifically opposed the Settlement Agreement’s expected “release” of antitrust compensation claims from current, former and future athletes for 10 years, a shield that the NCAA is eager to secure in light of a myriad of athlete class action lawsuits seeking compensation. Another group of students based in Colorado also opposed the Settlement Agreement arguing that it violates due process by releasing the claims of individuals who cannot participate in the approval process.
Leaders of player associations and college athlete advocacy groups have already criticized the settlement as a short-term fix to a systemic issue. They urge colleges to consider collective-bargaining frameworks as a long-term solution, especially against the backdrop of the Dartmouth men’s basketball team’s recent vote to become the first unionized college sports team in the United States.
Furthermore, at least one pending antitrust lawsuit is not covered by the Settlement Agreement: Alex Fontenot, a former Colorado football player is suing the NCAA for restricting how it shares TV rights revenue with players. While the NCAA argued that Fontenot’s claims should be consolidated with the other lawsuits in the settlement, a judge recently denied that argument.
A New Revenue-Sharing Model
As a direct consequence of the settlement, schools will be permitted—but not required—to begin sharing up to $21.5 million with athletes annually, establishing a de facto salary cap for athletes, in additional to all NIL deals.
The settlement is also expected to establish an enforcement infrastructure for the revenue-sharing model, the NCAA’s rules regulating student-athlete compensation, and scholarship structure. For the NCAA, the enforcement infrastructure will be key to monitoring the NIL market if and when the Settlement Agreement obtains final approval.
What’s Next?
Final approval for the hearing is scheduled for April 7, 2025. If granted, direct revenue sharing between schools is set to begin in July 2025. But there is still a considerable road ahead for the NCAA and the conferences. For example, the mechanics of athlete pay while complying with Title IX could become the next legal challenge, and indeed some opposition to the Settlement Agreement was based on objections to damages and compensation estimates premised on historical earnings, due to allegations that the NCAA has systematically underfunded women’s sports, disproportionately favoring allocation formulas benefiting men’s sports. It is a safe bet that the competition in the courtroom will continue alongside the competition on the sports field.