*Initially published in Sports Litigation Alert, May 2, 2025.
Settlement Limits NIL Compensation, Leaves Open Major Issues
The House v NCAA settlement-purported to re- solve antitrust claims (i.e. issues stymying the competitive market)-will, if approved, fail to accomplish its primary purpose and continue to stymie the competitive market by limiting the amount of money National Collegiate Athletic Association (NCAA) athletes can earn for the use of their name, image, and likeness (NIL). While commentators have referred to the settlement as “transformational,” “historic,” and “landmark,” such evocative descriptions are not necessarily positive. This begs the question: does approval of the House settlement create more problems than solutions?
At the April 7, 2025 settlement approval hearing before U.S. District Judge Claudia Wilken, multiple objecting parties, including several student-athletes bravely speaking on their own behalf, criticized the overall structure of the House settlement. A central issue at the hearing revolved around the settlement’s inclusion and adequacy of student-athlete class representatives and whether the settlement unfairly limits compensation and damages payout calculations for student-athletes as a whole. The settlement involves paying nearly $2.8 billion in back-pay damages to be divvied up in generally nominal amounts amongst approximately 390,000 current and former Division I athletes who were unable to profit from their NIL rights due to then-applicable NCAA rules. Addition ally, Judge Wilken expressed hesitancy approving a 10-year settlement that would automatically bind future NCAA athletes (for instance, current middle and high school students) and effectively release any future legal claims that they might have with respect to NCAA rules on athlete compensation. Responding to her concerns, attorneys representing both parties clarified that future Division I athletes will not release any injunctive relief claims until they receive an opportunity to object.
Notably, the parties declined an initial chance to make changes to one of the other most contentious aspects of the proposed settlement — the shift from scholarship limits to roster caps. The sudden introduction of the roster cap was raised by Judge Wilken as a major area of concern, but the NCAA held firm in its stance that roster caps must be abruptly applied, rather than slowly implemented. Such a change is expected to pre dominantly impact non-revenue sports, walk-on student-athletes, and those who are on partial scholarships. The NCAA’s current rules place limits on the number of scholarships that each team can give to its players. The new rule would instead limit the total number of players, on scholarship or not, who could be on a roster. In effect, the settlement reallocates and concentrates money within NCAA programs rather than opening up financial opportunities for all student-athletes. Schools will likely reduce expenditures for non-revenue generating sports to offset the new costs associated with the settlement, thus increasing the potential for anti-competition and restricting overall scholarship opportunities through the elimination of thousands of roster spots on Division I teams across the country. Judge Wilken clearly remains very concerned about this issue and, through a written decision issued on April 23, 2025, gave the parties one more chance, or perhaps an admonition, to address it or risk denial of the settlement.
At this point, it seems approval is largely dependent upon the NCAA’s level of obstinance. But even if approved with acceptable changes to the future class and the roster limit issue, problems abound. While approval of the settlement will resolve narrow antitrust issues for the litigation parties and class participants, it will leave open, and even create, a universe of reverberating legal issues and countless potential plaintiffs to pursue such claims, including those who opted out of the settlement. The settlement also includes restrictive third-party terms requiring deals exceeding $600 to be disclosed and re viewed for fair market value. While transparency tends to be a good thing, the formula for determining fair market value is fuzzy and unpredictable. The uncertainty and potential anti-competitive impact of the fair market analysis may backfire, incentivizing a return to the secrecy and underground dealings that have long been the nemesis of the NCAA. In the absence of final approval, schools will continue to use collectives to pay athletes unrestricted amounts of money.
Additionally, the proposed salary cap and the restrictions on third-party NIL deals may violate antitrust law, which ironically, as noted, formed the basis of the lawsuit in the first place. The settlement also potentially violates various state laws, as numerous states have introduced pieces of legislation that directly challenge elements of the proposed settlement. Notably, this pro posed settlement only involves questions of federal law and, thus, cannot preempt claims that may arise under state law. Further, this deal invites questions pertaining to federal employment status and the broader implications of a revenue-sharing model, and may even violate Title IX gender discrimination laws, as there is no re lease of Title IX claims in the agreement. A resulting litigation bonanza is a near certainty.
Moreover, the settlement is not a replacement for collective bargaining and, in any event, prevents the possibility of the same. It is axiomatic that parties to a collective bargaining agreement are conclusively presumed to have equal bargaining power. Unlike professional athletes in the NFL and NBA who are represented by unions and have engaged in collective bargaining to secure minimum standards and protections on a broad range of issues, this proposed settlement agreement does not provide student-athletes with a comparable framework. Indeed, this settlement was not negotiated by representatives duly elected by student-athletes, and specifically asks the court to approve all existing NCAA rules regarding compensation and benefits that may or may not be provided by Division I conferences or schools to student-athletes, despite those rules being crafted without input from any athlete representatives. It is worth noting that the NCAA Board of Directors has voted to approve nine legislative proposals, which in turn would remove 153 current NCAA rules, contingent on the House settlement receiving final approval. All changes are part of the House settlement.
While an argument may be advanced that the “re action” from the settlement class has been generally positive, that observation may only apply to the reaction from class members who are to receive compensation from this settlement. The key question before Judge Wilken is whether the settlement is “fair, reasonable, and adequate” with respect to the 390,000 class members not whether the settlement resolves all issues raised in the case. Various continuing or newly filed lawsuits suggest there is an honest argument as to whether this settlement meets that standard. The potential to pit particular student-athletes against each other is a real possibility. It is important to remember that, even if Judge Wilken deems only a portion of the settlement unfair as to a specific subset of student-athletes, her only options are to approve it in full or deny it outright, hence her recent order giving the parties 14 days to modify the settlement to grandfather in roster limits.
The proposed settlement is heralded as the most significant shift in college sports since the introduction of NIL, but it is an open question whether this “trans formative” settlement represents real progress or merely unilateral NCAA control with a new paint job. It is frankly difficult to characterize the proposed settlement as a comprehensive solution to the myriad material is sues that student-athletes face. The potential for future litigation surrounding college athletics is certain, and the lack of structural protections in this settlement may not ensure that all interests are fairly represented. The law, as it stands, does not otherwise appear to provide those protections. In reality, the settlement seems to be acting as a band-aid, providing back pay for athletes who were wronged in the past, and setting a “salary floor” for schools with respect to their future student athletes. Regardless of the outcome at this stage, an appeal to the Ninth Circuit seems imminent.
Initially published in Sports Litigation Alert, May 2, 2025