After five years of twists and turns, the settlement of the House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA consolidated class action suits has finally been approved, effectively ending the amateurism model that has underpinned the NCAA since its founding in the early 1900s. While the settlement promises significant changes to the college sports landscape — most notably a $2.8 billion payout to current and former student-athletes and the introduction of a revenue-sharing model — key challenges remain, particularly regarding name, image, and likeness (NIL) rules.
Understanding the New Structure
At its core, the settlement marks a historic break from the NCAA's traditional amateurism principles by permitting student-athletes to receive direct payments from schools. Schools will be allowed (but not required) to allocate up to 22% of the average annual revenues — derived from media rights, sponsorships and ticket sales — to student-athletes. The initial cap is set at roughly $20.5 million per school, with gradual increases anticipated over time, similar to the salary caps common in professional sports.
The structure also imposes a shift in roster management, replacing scholarship limits with roster caps. Many institutions are expected to prioritize their highest-revenue sports, such as football and men's basketball. As a result, smaller programs could face cuts and heightened competition for limited funding, and the livelihood of smaller Olympic and non-revenue sports are especially at risk. Already, several schools have cut programs and preemptively cut rosters in multiple non-revenue sports. In a last-minute response to objections to the settlement, the NCAA will allow (but importantly will not require) schools to voluntarily grandfather in current student-athletes and protect them from roster limit cuts.
In addition to direct revenue sharing, the settlement permits athletic departments to absorb NIL collectives and operate them as internal marketing agencies. Schools will not only distribute funds within the cap but also facilitate third-party NIL deals outside of it. The "Power 5" conferences have formed a new entity, the College Sports Commission (CSC), to oversee compliance and enforcement by both schools and student-athletes.
Legal and Regulatory Hurdles
Although the settlement attempts to create a sense of certainty in college sports, that certainty remains elusive. Almost immediately after approval of the settlement was announced, objectors to the settlement filed appeals on Title IX grounds. As a result of these appeals, the $2.8 billion in payments are currently on hold.
At the same time, Congress has engaged in its annual tradition of introducing federal legislation to address NIL and college sports regulation – this time, the Student Compensation and Opportunity through Rights and Endorsements (SCORE) Act. Like the dozens of Congressional bills before it, prospects for the SCORE Act are not good. Meanwhile, several states, including California, Michigan, and Ohio, enacted NIL laws that conflict with the settlement's terms, particularly around restrictions that could limit student-athletes' earnings. To date, at least 17 states have laws at odds with the settlement framework, setting the stage for further legal challenges.
The Role of the College Sports Commission
The CSC will act as the compliance arm of the new college sports structure. For the schools that opt in to this system (notably, the Ivy League will not participate), CSC will review roster caps to ensure school compliance and NIL contracts to ensure they reflect fair market value and are not used to circumvent the distribution cap. Student-athletes will be required to report NIL deals valued at $600 or more to NIL Go, the centralized platform developed by Deloitte for the CSC. Noncompliant agreements may be rejected and will be subject to penalties.
At this point, it is unclear how the CSC will manage the review of NIL deals for the thousands of student-athletes across the country or how long this review will take. Moreover, uncertainties remain regarding how violations will be penalized and how "fair market value" will be determined, particularly given disparities between athletes at powerhouse programs and those at smaller schools. The intent of this review is to root out pay-for-play deals disguised as NIL deals. However, the arguments by objectors to the House settlement hearings suggest that the NCAA's ability to assess the fair market value of the social following of a student-athlete, particularly in non-revenue sports, is suspect.
Preparing for What Lies Ahead
As the NCAA transitions into a revenue-sharing era with enhanced scrutiny over NIL agreements, brands, universities, and student-athletes must remain vigilant. Adapting quickly to these regulatory shifts, staying ahead of ongoing conflicts between the NCAA, athletes, and state regulators, and planning for changes in campaign timelines will be critical to success in this new collegiate sports economy.
The Bottom Line
- The House settlement promises a new era of compensation for student-athletes – if it survives ongoing challenges.
- The new structure offers opportunities for marketers to combine school sponsorships with student-athlete NIL deals in seamless transactions.
- The College Sports Commission is expected to target disguised boosterism in reviewing the fair market value of NIL deals, so most marketing deals should not be impacted.
- However, the addition of a new layer of centralized review of NIL deals will require more advanced planning and preparation for potential delays when planning campaigns.
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