On June 6th, the United States District Court for the Northern District of California approved a settlement that would finally allow college athletes to rake in the big bucks (as they deserve to). This comes four years after the U.S. Supreme Court case National Collegiate Athletic Association v. Alston, 594 U.S. 69 (2021), ruled that limiting compensation to student athletes violates the Sherman Act. This paved the way for student athletes to receive compensation directly from schools for playing college sports. As Dan Murphy, writing for ESPN, puts it: "college athletics should be treated less like an education-based endeavor and more like a lucrative entertainment industry."
The long wait comes from the slew of legal challenges to the NCAA's rules as a result of the decision. The settlement, nicknamed the House settlement after its case name, opened the floodgates to the NCAA must not only pay back $2.8 billion in damages for all the uncompensated years for its athletes, but also permit colleges to pay their athletes based on an increasing salary cap.
Such a historic decision can influence some unique historic problems. Since colleges have to adapt to this rule quickly, it may influence the collegiate sports landscape for years to come. Let's take a look at what this would look like.
College football is one of the biggest benefactors of the recent decision. Source: Gene Gallin
Case Overview
The case,
House v. NCAA, was initially filed by former Arizona State swimmer Grant House and Oregon women's basketball player Sedona Prince in June 2020. It specifically centered around NCAA policy preventing players from receiving compensation from the use of their name, image, likeness (NIL) rights and streaming deals.
A settlement was initially reached in May 2024, pending further approval. This approval was delayed due to a controversy regarding roster limits - more on this later. With the settlement finally approved, a new revenue sharing model was implemented to enable colleges to pay their athletes.
Here's how it works. Each school is given $20.5 million (increasing every year) to work with, paying its roster across all of its sports. How its distributed is up to the school, but many Power Conference schools - that is, the schools that compete in the four biggest collegiate conferences - are going to dedicate it to their most popular sports.
It's estimated that the top 20 Power Conference schools will invest 75% of their revenue into football and 16% into basketball. leaving very little for other sports. Source: https://nil-ncaa.com/football/And the Winner Is...
Football. It's always football.
The NCAA reported $1.4 billion in revenue from the 2024 fiscal year alone, an increase of $91 million from 2023, with football making up a large portion of that number. People swear by their favorite collegiate teams (go Hurricanes), and almost every college has a football team that competes at some level. Many colleges also have their own football stadiums for these games. If your college competes at a Division I level, your stadiums are packed nearly every game.
Players getting paid for being part of such a lucrative industry is only fair. What's more interesting is how this will affect other collegiate sports.
Men's collegiate basketball is the second biggest breadwinner, bringing in, on average, over $8 million in revenue per school per year. Largely benefitting from the popularity of March Madness among other sources, this recent decision should be nothing but a benefit to the sport.
The answer isn't so clear for other sports.
Many collegiate sports are considered non-revenue sports. These sports don't generate as much revenue for colleges and are usually propped up by other revenue sources. That's because the bulk of revenue doesn't come from ticket sales - it comes from the platforms that stream these games.
This could potentially be disastrous for walk-ons. These are athletes that don't receive scholarships to play, whether they were recruited or not. That's because there's a limited number of scholarships available for athletes, especially for non-revenue sports.
The House settlement includes much more than just paying athletes. Roster limits used to be unlimited, but now they are limited to guarantee more players receive a scholarship as well as ensure competitive integrity. Upon the settlement's initial proposal, athletes such as Jake Rimmel from Virginia Tech's cross-country team were cut from their team in anticipation of the decision. As a result, the judge responsible for the House case had to step in and prevent schools from doing so. Eventually, the settlement included a provision to identify walk-ons as "designated student-athletes" and thus immune to roster limits. However, it still puts into question the ability for teams to develop these players who, like Rimmel, went back home after the Fall semester, hoping their team or someone else will give them a chance.
Even if walk-ons keep playing, their teams may not survive for long. Non-revenue teams may struggle to keep up when football and basketball take up most of the resources, which may force some schools to close down shop for non-revenue teams. Impacts on NIL Rights
This decision could potentially conflict with state legislature's existing bills on NIL rights.
According to the National Coalition of State Legislatures, more than 35 states have
passed legislation related to compensation of student athletes since 2019. Within these states are protections for athletes' right to be compensated. However, the House settlement includes a provision requiring the NCAA to take part in reviewing NIL deals.
Such a provision culminated in the establishment of
NIL Go, which is a clearinghouse that requires student athletes to report NIL deals worth more than $600 to the NCAA for fair market value assessment. In other words, they decide your value based on the deals of other athletes in your field. One key criterion is determining whether the deal is a "valid business purpose" in the perspective of the school. This point alone would have
denied 70% of booster collectives in past deals. Deals with public companies rarely break into five or six figures for the average student athlete; thus, these investor-funded initiatives dedicated to student athletes are one of the only ways students can make bank outside of school payouts.
It begs the question - are athletes really getting paid, or only the most popular (who already have extremely high value NIL deals like
Cam Ward did)?
This is a developing situation that requires a lot of attention in the coming years. The controversy around student athletes and their place in the entertainment industry has reached a whole new playing field, and this settlement is the kickoff.
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