The NCAA’s recent proposed settlement, totaling $2.78 billion, marks a monumental shift in the landscape of college athletics. This historic agreement is the result of years of litigation and represents a significant victory for college athletes seeking compensation for the use of their names, images, and likenesses (NIL).
The lawsuit, titled “In Re: College Athlete NIL Litigation” (Case No. 4:20-cv-03919), has been a complex and contentious battle involving multiple parties, including the NCAA and the Power Five Conferences (Pac-12, Big Ten, Big 12, Southeastern, and Atlantic Coast Conferences). The plaintiffs, a group of current and former college athletes, argued that NCAA rules restricting NIL compensation were anticompetitive and deprived them of fair compensation for their contributions to college sports.
The settlement provides a total of $2.78 billion in back damages to college athletes who were denied NIL compensation. This amount will be paid over ten years, equating to approximately $280 million annually. The distribution of back damages will be determined by the plaintiffs.
The settlement identifies four distinct classes of athletes:
Direct Payments and Third-Party Agreements
Institutions will be able to pay student-athletes directly for their NIL rights. Any institutional NIL payments would apply toward the 22% cap of the institution’s average athletic revenues. Third parties may continue to enter into NIL agreements with student-athletes. Such agreements will be subject to review to ensure they are legitimate, fair market value agreements and not used for pay-for-play. NIL payments by third parties would not apply toward the 22% cap but must be disclosed to the clearinghouse for review.
Starting in the 2025-2026 academic year, the settlement allows A5 conference member institutions to provide increased benefits to student-athletes, including for NIL. Schools can provide up to 22% of the average autonomy 5 athletic media, ticket, and sponsorship revenue to student-athletes.
One of the most transformative aspects of the settlement is the elimination of scholarship limits across all sports. This change ensures that more athletes will have access to educational opportunities without the constraints previously imposed by the NCAA’s scholarship caps.
While scholarship limits are being lifted, the settlement introduces roster limits to ensure fairness and competitive balance among teams. These roster limits are designed to maintain the integrity of college sports while providing more opportunities for athletes to receive scholarships.
To ensure effective enforcement and oversight of NIL activities, the settlement mandates the creation of a NIL clearinghouse. This body will be responsible for monitoring NIL deals, ensuring compliance with new regulations, and providing transparency in athlete compensation. The clearinghouse will play a crucial role in protecting athletes’ rights and maintaining fair play in college sports.
The proposed timeline for the settlement includes several key dates:
March 1, 2024: Court’s order granting Plaintiffs’ Motion to Approve the Manner and Form of Class Notice.
March 15, 2024: Publication Notice portion of the Notice Plan begins.
May 15, 2024: Conclusion of the Publication Notice portion.
July 12, 2024: Deadline for class members to request exclusion from the class (opt-out).
September 5, 2024: Final Fairness Hearing to determine the approval of the settlement.
