AARON GLAS—College athletics have long been a massive source of revenue for universities and conferences, but the stars that you watch in March Madness or the Cotton Bowl have long been prohibited from sharing in that wealth by the NCAA’s rules regulating amateurism. Now, the settlement in House v. NCAA, a landmark pending class-action settlement between current and former collegiate athletes and the NCAA, could change that. If approved, the settlement will compensate current and former athletes for lost financial opportunities and pave the way for a revenue-sharing system that will allow athletes to finally share in the profits they help generate. But while this agreement marks progress, it is far from a perfect solution, and several obstacles remain on the horizon.
The settlement has two key components: a backward-looking one and a forward-looking one. The NCAA will first pay $2.8 billion in backpay damages over ten years. This is designed to compensate athletes for lost opportunities related to their name, image, and likeness (NIL), video game appearances, and broadcasting rights—avenues that were previously closed to athletes. Second, the settlement includes forward-looking provisions that allow athletes to share in the revenue generated by athletic programs. These changes will open the door to revenue-sharing agreements, where athletes will receive a portion of the media rights, ticket sales, and sponsorship revenues they help generate through their athletic contributions. It’s a move toward a more equitable future for college athletes, who have long seen their labor benefit everyone but themselves.
Judge Claudia Wilken, a United States District Judge in the Northern District of California, preliminarily approved the settlement on October 7, 2024. This was not just a mere rubber stamping of the agreement. She declined to rule on preliminary approval at an earlier hearing, voicing concerns about the mechanics of the settlement and telling the parties’ attorneys to “go back to the drawing board.” Three weeks later, the parties submitted a revised settlement that Wilken preliminarily deemed to be “fair, reasonable, and adequate,” meeting the required standard for judicial approval of proposed class action settlements. But this doesn’t mean the settlement is a done deal. The court permitted all interested parties to file objections to the proposed settlement by January 31, 2025. Over twenty objections were filed to the settlement, with over sixty other interested parties filing informal letters with their opinion.
A notable objector included the Department of Justice. The proposed settlement contains a defined formula to determine the percentage that athletes will receive under the proposed revenue share agreement, which amounts to about $20.5 million that schools can use to pay their athletes at their discretion. The DOJ called this an artificial cap that doesn’t reflect the free market value, especially in high-revenue sports like football and basketball. Although it is an improvement over the athletes getting nothing prior to the settlement, football and basketball powerhouse schools could likely pay their athletes more. Athletes at those programs also likely provide more than $20.5 million in value and could be paid more on the free market. The DOJ was concerned that the NCAA would use a court-approved settlement as an antitrust shield against future legal action by players looking to secure greater compensation. It has thus requested that the court either decline to grant the settlement final approval or make clear that any approval does not signify that the proposed cap complies with antitrust laws.
Other objectors focused on the settlement’s provision swapping scholarship caps for roster limits. This would benefit some class members, but likely harm others whose roster spots are eliminated. The biggest losers under the swap will likely be athletes who walk on to college teams or do not receive athletic scholarships, as there will be less spots for them under the settlement. These athletes play sports in college for the love of the sport and are often huge value-adds to teams. Scholarship athletes enjoy their morale-boosting presence and they often develop into important playing team members, which is a marketing tool for schools. This is particularly impactful for non-revenue generating sports, where walk-ons have played a crucial role.
Another wrinkle in the settlement is its potential conflict with state laws and ongoing legislation concerning NIL and revenue-sharing arrangements. More states are passing laws allowing college athletes to profit from their NIL, and the settlement’s revenue-sharing structure might be at odds with state laws designed to give athletes more control over their financial opportunities. This could lead to a patchwork of regulations that complicate the implementation of the settlement and its long-term impact.
It is important to note that the House settlement is not a cure-all for the NCAA’s current onslaught of litigation. Sixty-seven players who opted out of the settlement filed a new lawsuit against the NCAA, and there are other pending legal efforts to recognize college athletes as employees. Schools and conferences have also opted out of the settlement; the Ivy League notably opted out in its entirety.
Despite the ongoing challenges and objections, it seems likely that Judge Wilken will ultimately approve the settlement. The settlement represents a major step forward for athlete compensation, even if it doesn’t solve all the problems facing college sports. However, the fragmented nature of the settlement, along with the ongoing legal challenges, leaves the future of college athletics in a state of uncertainty. The real question is: when will we see comprehensive reform or legislation to bring order to the chaos currently engulfing college sports? The House settlement may offer a partial solution, but it’s unlikely to be the final word on how athletes may be compensated. Until a comprehensive regulatory framework is established, the “Wild West” that is college sports is likely to continue.
