On October 7, 2024, in the federal case of House et al. v. NCAA et al. out of the Northern District of California between the National Collegiate Athletic Association (“NCAA”) and a proposed class of current and former Division One (“D1”) college athletes, the court granted preliminary approval of a groundbreaking NCAA NIL Settlement which will fundamentally restructure the college sports landscape.
This settlement provides for payments to certain eligible college athletes for lost name, image, and likeness (“NIL”) earning opportunities. It would also expressly permit universities, for the first time ever, to directly pay college athletes for NIL activities. Final settlement approval is expected in April 2025. This means the new rules would be in place for the 2025-2026 college school year.
Overview: The House Case and the Proposed Settlement
The House case is a consolidation of three cases—Carter v. NCAA, House v. NCAA, and Hubbard v. NCAA—filed by current and former college athletes who claimed that the NCAA’s rules prohibiting universities from directly compensating college athletes for NIL violate federal antitrust law.
The proposed settlement in the House case contains two components: (1) a backward-looking component that provides for monetary payments to certain student-athletes in the form of back pay totaling over $2.5 billion; and (2) a forward-looking component that creates a ten-year system in which D1 universities can implement revenue sharing systems to pay student-athletes directly for NIL activities.
Backward-Looking Component: Monetary Payments
Who is Eligible for These NIL Payments?
Any college athlete who competed on a D1 athletic team and was declared initially eligible for D1 competition between June 15, 2016, and September 15, 2024, is eligible. Men’s football, men’s basketball, and women’s basketball athletes are eligible for the majority of the funds.
How Will Payments Be Calculated?
These funds primarily serve as compensation for broadcast revenue, videogame revenue, and other NIL opportunities that college athletes would have been eligible for but-for the NCAA’s prohibition on NIL earnings. The settlement calculates the payments using a methodology that factors in the sport played, the conference in which the athlete placed, and the years in which the athlete played.
Forward-looking Component: The Direct Payment “Pool”
The settlement will create a system in which D1 schools can provide direct NIL benefits to athletes, up to 22% of the Power Five[1] schools’ average athletic revenues each year (referred to as the “Pool”). In doing so, it estimates an allotment of about $20 million per university beginning in the 2025-2026 school year that will grow to about $33 million per university over the next decade. Under the new system, college athletes could receive between $1.5 billion to $2 billion annually in new benefits.
What Happens to The Existing Benefits That College Athletes Receive?
The proposed settlement provides that the Pool payments will be in addition to, not in place of, existing scholarships and other benefits. It covers third-party NIL payments and provides for the elimination of all scholarship limits. The settlement estimates that the existing benefits combined with the Pool payments will mean college athletes could receive roughly 50 percent of a D1 university’s athletics revenue, similar to the revenue distribution between professional athletes and sports teams.
Will College Athletes Still Be Able to Agree to Their Own NIL Deals?
Yes. The settlement agreement prohibits restrictions on NIL deals between college athletes and third parties, as long as those third parties are not “associated entities or individuals” of the universities. These third-party deals are separate from the universities’ Pool payments and thus do not count against the Pool limit.
Does The Pool Apply to All D1 Schools or Just Power Five Schools?
The calculations under the proposed settlement were based on the revenues of Power Five universities, but the terms of the proposed settlement apply to all 363 D1 universities. Thus, all D1 universities will be permitted to provide these benefits up to the Pool amount.
How Will Disputes Be Resolved?
The settlement will do away with the NCAA’s existing infractions system. Instead, it proposes a neutral arbitration system for resolving disputes about NCAA eligibility matters between athletes, universities, conferences, and the NCAA.
Next Steps: Notice Period & Final Approval
Eligible college athletes are receiving notice of the settlement and its terms. On October 18, 2024, the notice campaign and claims periods began via email and mail notices sent to eligible athletes.
The website collegeathletecompensation.com is available for college athletes to get complete information about the settlement. It has resources to help determine their eligibility, calculate the payment amount they may be eligible for, and submit claims. The payment estimate for each eligible athlete should be available by December 17, 2024. The claims period will begin on this same day and run through January 31, 2025. A hearing for final approval of the settlement agreement is scheduled for April 7, 2025.
What About College Athletes Who Played Before June 15, 2016?
Due to the statute of limitations, the House settlement does not cover college athletes who played before June 15, 2016. However, two recently filed cases—Chalmers v. NCAA and The “Cardiac Pack” v. NCAA—have challenged the NCAA’s continuing commercial use of the name, image, and likeness of college athletes who played before 2016. These cases do not seek damages for the NCAA’s failure to compensate college athletes for NIL earnings from decades ago. Instead, they seek to prohibit the NCAA from currently and continually using those players’ NIL for commercial purposes.
These cases are still in active litigation and the NCAA recently moved to dismiss both cases, so their ultimate resolution is far from clear. However, they have the potential to broaden the scope of former college athletes eligible for compensation from the NCAA.
Conclusion & Takeaways
With preliminary approval granted, it is more likely than not that the settlement agreement will receive final approval in April 2025. This means that the new NIL payment rules could be in effect for the 2025-2026 school year, and universities and conferences are preparing as if they will be. Some universities are already making arrangements to implement new revenue-sharing systems in anticipation of the post-settlement landscape, and the Big Ten Conference (Big Ten) and Southeastern Conference (SEC) recently met to discuss plans for implementing the pending House settlement.
Current and former college athletes who may be eligible for these payments should visit collegeathletecompensation.com to review their eligibility for the NCAA NIL settlement and learn more about the proposal.
Berenzweig Leonard LLP will continue to monitor and provide updates on the legal developments across college sports.
Charles Bonani is an Associate at Berenzweig Leonard. He works on a range of legal matters, including employment law and government contracting. You can reach him at cbonani@berenzweiglaw.com or (571) 615-0430.
[1] The Power Five consists of the five major athletic conferences: Atlantic Coast Conference (ACC), Big Ten Conference (Big Ten), Big 12 Conference (Big 12), the Southeastern Conference (SEC), and the Pacific 12 Conference (Pac-12). There are currently only two teams remaining in the Pac-12, with most schools recently joining other Power Five conferences.