NCAA, leagues reverse $2.8 billion settlement

The NCAA and the nation’s five largest conferences announced Thursday night that they have agreed to pay nearly $2.8 billion to settle a series of antitrust claims. This is a monumental decision that sets the stage for a groundbreaking revenue-sharing model that could begin directly directing millions of dollars to athletes as early as the fall 2025 semester.

NCAA President Charlie Baker, along with the commissioners of the Atlantic Coast Conference, Big Ten, Big 12, Pac-12 and Southeastern Conference, issued a joint statement saying they had agreed to the terms of the settlement. They called the move “an important step in the ongoing reform of college sports that will provide benefits to student-athletes and ensure transparency in college athletics across all sports for years to come.”

Terms were not disclosed, although some details have emerged over the past few weeks. They signal the end of the NCAA’s basic model of amateurism, which dates back to its founding in 1906. Indeed, the days of NCAA penalties for athletes driving cars equipped with legal highs began to fade away three years ago, when the organization removed restrictions on sponsorship deals backed by so-called name and surname, image and likeness money.

The deal must still be approved by the federal judge overseeing the case, and plaintiffs will have the option to opt out or challenge the terms of the deal. If that happens, it would usher in a new era in college sports in which athletes will be paid more like professionals and schools will be able to compete for talent through direct payments.

“There is no doubt about it. “This is a huge milestone,” said Tom McMillen, a former Maryland basketball player and congressman who has led the Association of Collegiate Athletic Directors for the past eight years.

It’s no longer a stretch to look ahead to seasons in which star point guards or top prospects on college basketball teams not only cash in on big NIL deals, but have six-figure school payments in the bank.

“This landmark settlement will bring college sports into the 21st century, and college athletes will finally be able to receive their fair share of the billions of dollars in revenue they generate for their schools,” said Steve Berman, one of the plaintiffs’ lead attorneys. “Our clients are the backbone of the NCAA’s multi-billion dollar business and can finally be fairly compensated for their extraordinary athletic talents.”

Many details remain to be finalized, but the agreement calls for the NCAA and conferences to pay $2.77 billion over 10 years to more than 14,000 former and current college athletes who say defunct rules prevented them from earning money from sponsorships and sponsorship agreements from 2016.

“Even though this happened solely because of overwhelming legal pressure, the NCAA, conferences and schools agree that college athletes should be paid,” said Ramogi Huma, a former UCLA football player and longtime advocate for college athletes. – And there is no turning back from there. This is truly groundbreaking.”

Some of the money will come from NCAA reserve funds and insurance, but even though the lawsuit specifically targeted five conferences involving 69 schools (including Notre Dame), dozens of other NCAA member schools will receive smaller amounts from the NCAA to cover the mammoth payout.

Schools in the Big Ten, Big 12, ACC and SEC will likely bear the brunt of the settlements, with the estimated cost of each being around $300 million over 10 years, most of which will be paid directly to athletes.

“The settlement, while undesirable in many respects and promising only temporary stability, is necessary to avoid bankruptcy of college athletics,” said the Rev. John I. Jenkins, president of Notre Dame.

Under the new compensation model, each school would be allowed, but not required, to set aside up to $21 million in revenue to share with athletes annually, although there could be a cap as revenue increases.

Athletes in all sports will be eligible for the payments, and schools will have the freedom to decide how to divide the money among sports programs. Scholarship limits by sport will be replaced by squad limits.

It’s unclear whether the new compensation model falls under Title IX gender equity provisions and whether schools will be able, as expected, to bring NIL activities into their facilities and displace the collectives run by boosters that have sprung up over the past few years to pay athletes. Both topics could lead to more lawsuits.

The federal class action lawsuit underlying the settlement, House v. NCAA, was scheduled to go to trial in January. The complaint, brought by former Arizona State swimmer Grant House and Sedona Prince, a former Oregon State and current TCU basketball player, alleged that the NCAA, along with the five wealthiest conferences, improperly prevented athletes from earning money from endorsements.

The lawsuit also argued that athletes are entitled to a share of the billions of dollars the NCAA and conferences earn from media rights deals with television networks.

Facing political and public pressure and facing the prospect of another legal loss that some college sports officials say could amount to $20 billion in damages, NCAA and conference officials have agreed to what has long been a core corporate principle: that schools not pay athletes directly for playing beyond the scholarship.

This principle has been challenged many times over the last decade. Notably, the Supreme Court unanimously ruled against the NCAA in 2021 in an education-related benefits case.

The narrow focus on the Alston case did not lead to the collapse of the college sports system, but a strong rebuke from the NCAA’s model of amateurism opened the door to more lawsuits. Judge Brett Kavanaugh, a former Yale athlete, put it bluntly: “The bottom line is that the NCAA and its member colleges are capping the pay of student-athletes who collectively generate billions of dollars in revenue for colleges each year.”

The settlement is expected to cover two other antitrust cases pending before the NCAA and major conferences that challenge athlete compensation policies. The Hubbard v. NCAA and Carter v. NCAA cases are also currently pending before judges in the Northern District of California.

The fourth case, Fontenot v. NCAA, poses potential complications because it remains in court in Colorado after a judge denied a request to join her to Carter. It’s unclear whether Fontenot will become part of the settlement, but it matters because the NCAA and its conferences don’t want to be burdened with additional damages if they lose in court.

“We will continue to litigate our case in Colorado and look forward to hearing about the terms of the settlement offer once it is actually released and presented to the court,” said George Zelcs, plaintiffs’ attorney at Fontenot.

RENOVATION OF THE SCHOOL ATHLETICS

The solution agreed in the settlement is groundbreaking, but not surprising. College sports have been moving in this direction for years, with athletes receiving more and more monetary benefits and rights they believe they have long been entitled to.

In December, Baker, a former Massachusetts governor who has been in office for 14 months, proposed the creation of a new Division I track and field program in which schools with the most resources would be required to pay at least half of their athletes $30,000 a year. This suggestion, along with many other possibilities, is still under discussion.

The settlement will not solve all the problems facing college sports. The question still remains whether athletes should be considered employees of their schools, something Baker and other college sports leaders are struggling to address.

Some type of federal legislation or antitrust exception will likely still be needed to codify the terms of the settlement, protect the NCAA from future litigation and preempt state laws that attempt to neutralize the organization’s power. As it stands, the NCAA continues to face lawsuits that challenge its ability to govern itself, including establishing rules limiting multiple transfers.

“This agreement also provides a roadmap for college athletic leaders and Congress to ensure that this unique American institution can continue to provide unparalleled opportunities to millions of students,” the joint statement said. “The entire 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 in college sports.”

Federal lawmakers have indicated they would like to do something, but while several bills have been introduced, none have come to fruition.

Despite the unanswered questions, one thing is clear: college athletics will soon become a professional sport more than ever.