House of Representatives settlement with NCAA is another step toward schools paying athletes

New documents were filed Friday in the historic House v. NCAA case, another step in formalizing a settlement agreement that will change the face of college sports. They include additional details about the previously announced $2.8 billion in back pay to be paid over 10 years to former Division I athletes dating back to 2016, as well as a 10-year revenue-sharing model that could distribute money directly from athletic departments to college athletes starting in 2025. The documents also detail other aspects of the settlement agreement, including establishing roster limits and potentially establishing an oversight program for future NIL contracts.

Judge Claudia Wilken still has to approve the settlement.

The terms were agreed to in principle in May. Filed in the Northern District Court of California, the settlement attempts to resolve multiple class action lawsuits against the NCAA and Power 5 conferences: House v. NCAA, Hubbard v. NCAA and Carter v. NCAA.

“This is another important step in the ongoing effort to provide greater benefits to student-athletes while creating a stable and sustainable model for the future of college sports,” NCAA President Charlie Baker and the P5 commissioners said in a joint statement. “While there is much work to be done in the approval process, this is a significant step toward establishing clarity about the future of all Division I sports while maintaining a sustainable education-based model for college sports.”

“NCAA athletes have waited decades for this moment, and their right to receive the full value of their hard work has finally arrived,” plaintiffs’ attorney Steve Berman said in a statement. “We are incredibly proud to be on the final stages of this historic change.”

While Friday’s court filings are an important and necessary part of an ongoing settlement process that will have a fundamental impact on the future of college sports, a number of issues remain unresolved, including the impact of Title IX regulations on revenue sharing and ongoing legal battles over the employment status of college athletes.

Below we present the most important conclusions from the new documents, as well as the next steps in the settlement process and remaining unknowns.

Compensation for late payments

If the settlement receives preliminary approval, attorneys can begin the process of notifying class members — former D-I athletes since 2016 — about the back pay they are slated to receive. Of the roughly $2.8 billion in back pay to be paid over 10 years, about $1.2 billion would come from NCAA reserves, with the rest coming from future NCAA revenue withheld from Division I institutions.

Based on the expert formula for dividing back pay that they cited in Friday’s filings, somewhere between 80 and 90 percent of the total compensation will be paid to former Power football and basketball athletes. The settlement estimates that the average compensation for former Power football and basketball athletes will be about $135,000, and for former Power women’s basketball athletes about $35,000.

Judge Wilken recently rejected a motion to intervene in the Houston Christian University House of Representatives case, which argued that the proposed settlement terms did not adequately consider the university’s financial interests.

Future revenue sharing

The approved settlement would provide a court order that would allow DI athletic departments to share revenue directly with college athletes. Schools could voluntarily distribute up to 22 percent of average annual P5 revenue each season from media rights, ticket sales and sponsorships, which is expected to total $20 million to $23 million per school in 2025-26. (The total dollar amount won’t be officially known until all revenue from 2024-25 is accounted for, and that number is likely to increase each season as revenue increases.) The revenue sharing would be in addition to existing scholarship benefits.

The settlement does not address how or whether Title IX rules apply to revenue sharing, leaving uncertainty about whether funds will need to be proportionally distributed between male and female athletes. Dan Cohen, a lawyer with Barnes & Thornburg and a former college athletic administrator who specializes in sports law and Title IX cases, previously said Athletic that Title IX applies broadly to any distribution of revenue or benefits where a school “takes those dollars on campus.”

However, there is a perception among sports administrators that because the revenue split can be classified as internal NIL payments via broadcast rights and ticket sales, it is therefore determined based on the athlete’s market value and schools will not be required to split it equally between male and female athletes.

Plaintiffs’ proposed back wage allocation formula could serve as a model for future income allocation or at least be cited as justification, but there remains the possibility that any unfair formula could be subject to future legal challenges under Title IX.

NIL enforcement by third parties

Under the approved settlement, direct revenue sharing among athletes could be classified as “internal” NIL payments and count toward the voluntary 22 percent cap. College athletes could still enter into NIL agreements with outside entities — such as collectives or outside companies and organizations — that would not count toward the 22 percent cap. However, those outside agreements would also be subject to review to determine whether they are for legal market value rather than compensation for playing.

The settlement also allows for the creation of an enforcement arm (through the NCAA and/or the conference of powers) and even the use of an independent arbitrator to resolve certain NIL disputes. This is one of the more intriguing and anticipated aspects of the settlement and is intended to help level the playing field for NIL, which has been dominated by large pay-for-play deals and the most well-funded programs. This is also an area of ​​the settlement that still needs to be ironed out. It is still unclear how this enforcement arm would be established and operated, or what level of authority it would have. Passage of federal NIL legislation, replacing the various state laws currently in effect, would also facilitate uniform application of the terms of the settlement to all DI schools.

Some college football and basketball coaches, particularly in the SEC and Big Ten, have indicated they hope to continue using NIL collectives and third-party entities as a “sweetener” for athletes in addition to internal revenue sharing. That’s the kind of thing the settlement aims to curtail, especially in the form of pay-to-play NIL deals.

Composition limits

The approved settlement would eliminate current scholarship limits in favor of new roster limits. Schools would be allowed to offer as many scholarships per team as allowed by the new roster limits, which include:

• 105 in football (up from 85)
• 15 for men’s and women’s basketball
• 34 in baseball
• 25 in softball
• 28 in men’s and women’s football
• 45 in the men’s and women’s race
• 30 in men’s and women’s swimming

No sport would see a decrease in the number of scholarships available, although scholarships in all sports would move to an equivalency model, meaning partial scholarships could be spread across multiple athletes. Sports like baseball already operated under this model, but it would be a change for headcount sports like football and basketball, which currently can only award full scholarships to individual players. More than 750 new scholarship spots would be available across all NCAA DI-sanctioned sports.

Walk-ons would still be allowed, despite previous concerns that the settlement would eliminate them. Some details about walk-ons are still being worked out, but it’s likely that teams will have to stay within the in-season roster limit between scholarship and non-scholarship athletes. That means a football team couldn’t have 90 scholarship and 20 non-scholarship athletes in a season, because that would exceed the 105-player limit.

DI schools that are not members of the Power Conference will only be required to comply with the settlement’s staffing limits and other settlement terms if they choose to participate in the future revenue-sharing model.

Title IX will continue to apply to scholarship eligibility.

Unresolved issues

Aside from questions about oversight and enforcement of Title IX and NIL, the settlement does not address ongoing legal battles over unionization efforts and the employment status of college athletes, which the NCAA continues to seek resolution through Congress.

“This settlement is an important step forward for student-athletes and college sports, but it does not solve every problem,” Baker and the P5 commissioners said in a statement. “The need for federal legislation to provide solutions remains. If Congress does not act, the progress made through the settlement could be significantly limited by state laws and ongoing litigation.”

As for other antitrust lawsuits against the NCAA, some are still pending, such as the Fontenot case in Colorado, but all parties involved in the House case believe the terms of the settlement will resolve the current cases and discourage future complaints.

“We are pleased to take the next step toward finalizing this historic, industry-changing settlement that will provide a fair revenue-sharing system for college athletes who generate hundreds of millions of dollars for their schools,” plaintiffs’ attorney Jeffrey L. Kessler said in a statement. “For too long, these athletes have been disenfranchised from their economic rights in an unjust system that will now finally be fundamentally reformed. This new system will allow athletes to be fairly compensated for their contributions, and college sports will continue to thrive.”

What’s next

The settlement must be approved by Judge Wilken and the court to move forward, which could take months. If approved, class members would begin receiving settlement notices, likely in October. Former DI athletes who may receive back pay will be able to opt out if they wish. Current and future DI athletes will be able to file objections to the revenue-sharing model.

If ultimately approved, which is likely to happen in early 2025, the settlement should go into effect for the 2025-2026 season.

(Photo: Mitchell Layton/Getty Images)