House v. NCAA settlement takes next step toward schools paying athletes

New documents were filed in the historic House v. NCAA case on Friday, the next step in formalizing the settlement agreement that will reshape college sports. They provide additional details on the previously announced $2.8 billion in back-pay damages to be paid out 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 the institution of roster limits and potential establishment of an oversight program for future NIL deals.

Judge Claudia Wilken still needs to approve the settlement.

The terms were agreed to in principle in May. Filed in the Northern District Court of California, the settlement is an effort to resolve multiple class-action antitrust 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 increased 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 still much work to be done in the settlement approval process, this is a significant step toward establishing clarity for the future of all of Division I athletics while maintaining a lasting education-based model for college sports.”

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

While Friday’s court filings mark an important and necessary piece of a continued settlement process that will have a major impact on the future of college sports, a number of issues remain unresolved, including the impact of Title IX regulations on revenue distribution and ongoing legal battles regarding employment status of college athletes.

Here are the most notable insights from the new documents, along with next steps in the settlement process and lingering unknowns.

Back-pay damages

If the settlement receives preliminary approval, attorneys can begin the process of informing class members — those former DI athletes dating back to 2016 — of the back-pay damages they stand to collect. Of the roughly $2.8 billion in retroactive damages to be paid out over 10 years, roughly $1.2 billion would come from NCAA reserves, and the rest would come from future withheld NCAA revenue distributions to Division I institutions. 

Based on the expert formula for back-pay distribution the plaintiffs put forth in Friday’s filings, somewhere between 80 to 90 percent of the total damages will get paid out to former power-conference football and men’s basketball athletes. The settlement estimates the average recovery for former power-conference football and men’s basketball athletes would be approximately $135,000, and for former power-conference women’s basketball players it would be approximately $35,000.

Judge Wilken recently denied a motion to intervene in the House case by Houston Christian University, which argued that the university’s financial interests were not adequately represented by the proposed terms of the settlement.

Future revenue sharing

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

The settlement does not address how or if Title IX regulations apply to revenue sharing, leaving uncertainty as to whether there would need to be a proportional distribution of funds between men’s and women’s sports’ athletes. Dan Cohen, an attorney with Barnes & Thornburg and former college sports administrator who specializes in sports law and Title IX cases, previously told The Athletic that Title IX broadly applies to any distribution of revenues or benefits once a school “takes those dollars on campus.”

However, there is a sentiment among athletics administrators that because the revenue sharing can be classified as internal NIL payments via broadcast rights and ticket sales, it is therefore driven by an athlete’s market value and schools won’t be beholden to an equitable distribution between men’s and women’s athletes.

The plaintiffs’ proposed formula for distributing back-pay damages could serve as a blueprint for future revenue sharing, or at least get cited as justification, but it’s still possible that any non-equitable formula could face future legal challenges on Title IX grounds.

Third-party NIL enforcement

Under an approved settlement, direct revenue sharing to athletes could be classified as “internal” NIL payments and count toward the voluntary 22 percent cap. College athletes could still enter into NIL deals with third-party entities — such as collectives or outside businesses and organizations — that would not count toward the 22 percent cap. But those outside deals would also be subject to review to determine if they are for legitimate market value and not pay-for-play compensation.

The settlement also allows for the formation of an enforcement arm (via the NCAA and/or power conferences) and even the use of an independent arbiter to resolve certain NIL disputes. This is one of the more intriguing and anticipated aspects of the settlement, and is meant to help level an NIL playing field that has become dominated by big-money pay-for-play deals and the most well-resourced programs. It’s also an area of the settlement that still needs to hammer out the details. It remains unclear how this enforcement arm will be instituted and operated, and what degree of power it would have. The passing of federal NIL legislation that supersedes the various state laws currently in place would also facilitate the settlement terms being uniformly applied to all DI schools.

Some college football and basketball coaches, particularly in the SEC and Big Ten, have indicated that they hope to continue utilizing NIL collectives and third-party entities as a compensation “sweetener” for athletes on top of the internal revenue sharing. This is the type of thing the settlement aims to curtail, notably in the form of those pay-to-play NIL deals.

Roster limits

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

• 105 in football (increased from 85)
• 15 each for men’s and women’s basketball
• 34 in baseball
• 25 in softball
• 28 each in men’s and women’s soccer
• 45 each in men’s and women’s track
• 30 each in men’s and women’s swimming

No sports would see a decrease in available scholarships, though scholarships in all sports would move to an equivalency model, meaning partial scholarships could be spread over multiple athletes. Sports like baseball already operated under that model, but this would be a change for head-count sports such as football and basketball that 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 permitted, despite previous concerns that the settlement would eliminate them. Certain details are still being resolved regarding walk-ons, but in all likelihood, teams would be required to remain within the roster limits in-season between scholarship and walk-on athletes. Meaning a football team could not carry 90 scholarship players and 20 walk-ons during the season, because that would eclipse the 105 roster limit.

Non-power-conference DI schools would have to adhere only to the settlement’s stipulated roster limits and other terms of the settlement if they elect to participate in the future revenue-sharing model.

Title IX would still apply to scholarship opportunities.

Unsettled issues

In addition to questions about Title IX and NIL oversight and enforcement, the settlement does not address the ongoing legal battles over unionizing efforts and employment status of college athletes, something the NCAA continues to seek relief from via Congress.

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

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

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

What’s next

The settlement must be approved by Judge Wilken and the court in order to move forward, which could take months. If approved, class members will begin receiving notice of the settlement, most likely in October. The former DI athletes available to receive back-pay would be able to opt out if they choose. Current and future DI athletes would be eligible to raise objections to the revenue-sharing model.

If ultimately approved, which would most likely occur in early 2025, the settlement is expected to go into effect for the 2025-26 season.

(Photo: Mitchell Layton / Getty Images)