$2.8 Billion Settlement setting stage change across college sports

On Thursday evening, the NCAA and the country’s five largest conferences announced a nearly $2.8 billion settlement college sports to resolve multiple antitrust lawsuits. This landmark decision paves the way for an innovative revenue-sharing framework that could begin funnelling substantial funds directly to athletes as early as the fall semester of 2025.

NCAA President Charlie Baker and the commissioners of the Atlantic Coast Conference, Big Ten, Big 12, Pac-12, and Southeastern Conference issued a joint statement revealing they had reached a settlement agreement.

They described this development as “an important step in the ongoing reform of college sports,” highlighting that it will offer benefits to student-athletes and bring clarity to college athletics across all divisions for the foreseeable future.

Federal Judge

The agreement still requires approval from the federal judge overseeing the case and could face challenges. However, if upheld, it will signal the start of a new era in college sports. In this era, athletes will receive compensation more akin to professional athletes, and schools will be able to compete for talent through direct payments.

“It’s undoubtedly a significant advancement,” remarked Tom McMillen, a former Maryland basketball player and congressman who has been leading an association of collegiate athletic directors for the past eight years.

The specifics of the plan indicate the demise of the NCAA’s foundational amateurism model, which has been in place since 1906. This shift began three years ago when the NCAA relaxed its rules on endorsement deals funded by name, image, and likeness (NIL) money, reducing penalties for athletes benefiting from booster-provided cars and similar perks.

It is now conceivable to envision future seasons where a star quarterback or a top college basketball prospect not only secures lucrative NIL deals but also has a $100,000 payment from their school deposited in their bank account for playing.

NCAA

Many specifics remain unresolved, but the agreement stipulates that the NCAA and the conferences will disburse $2.77 billion over a decade to over 14,000 former and current college athletes. These athletes claim that outdated rules, which have been in effect since 2016, hindered their ability to profit from endorsement and sponsorship deals.

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“Despite it being driven by significant legal pressure, the NCAA, conferences, and schools are now acknowledging that college athletes deserve payment,” stated Ramogi Huma, a former UCLA football player and a longtime advocate for college athletes.

This represents a significant change, and there’s no reversing course now.

A portion of the funds will be sourced from NCAA reserve funds and insurance. Although the lawsuit primarily targeted five conferences encompassing 69 schools (including Notre Dame), numerous other NCAA member schools will receive smaller allocations from the NCAA to help cover the substantial settlement.

Schools in the Big Ten, Big 12, Atlantic Coast, and Southeastern conferences will shoulder the bulk of the settlement, each incurring approximately $300 million over ten years. Most of this amount will be directed towards payments to athletes moving forward.

The Pac-12 is also included in the settlement, with all 12 member schools sharing responsibility. However, by this fall, only Washington State and Oregon State will remain in the league as the other ten schools depart.

PAYING ATHLETES

Under the new compensation model, each school will have the option to allocate up to $21 million in revenue annually to share with athletes. However, this allocation cap may increase as revenues grow.

Athletes in all sports would qualify for payments, and schools would have the autonomy to determine how to distribute these funds among their sports programs. Roster restrictions would replace scholarship limits for each sport.

However, implementing this new compensation model has its challenges. It remains uncertain whether the model is subject to compliance with Title IX gender equity law, which is a crucial consideration. Equally being determined is whether schools can internalize NIL activities as they anticipate, potentially displacing booster-run collectives that emerged in recent years to remunerate athletes.

These complex and evolving matters could prompt further legal challenges, making the landscape of college sports even more intriguing.

THE CASE

The class-action federal lawsuit, House v. the NCAA, which led to the settlement, was scheduled for trial in January. Former Arizona State swimmer Grant House and Sedona Prince, a retired Oregon basketball player now at TCU, filed the complaint. They alleged that the NCAA, along with the five wealthiest conferences, unlawfully prevented athletes from earning endorsement income.

The lawsuit also argued that athletes deserved a share of the billions of dollars generated by the NCAA and those conferences through media rights deals with television networks.

Under political and public scrutiny and confronted with the potential for another significant legal defeat, which some in college sports feared could amount to $20 billion in damages, NCAA and conference officials relented on a fundamental aspect of their system: the notion that schools do not directly compensate athletes beyond scholarships for their play.

Over the past decade, that principle has been repeatedly challenged. Notably, in 2021, the Supreme Court unanimously ruled against the NCAA in a case regarding education-related benefits. While the specific scope of the Alston case did not dismantle the collegiate sports system, the decisive rejection of the NCAA’s amateurism model paved the way for further l

Former Yale athlete and Justice Brett Kavanaugh candidly remarked, “Ultimately, the NCAA and its member colleges are restricting the compensation of student-athletes who, collectively, generate billions of dollars in revenue for colleges annually.

THE OTHER CASES

The settlement is anticipated to resolve two additional antitrust cases confronting the NCAA and major conferences, which contest athlete compensation regulations. These cases, Hubbard vs. the NCAA and Carter vs. the NCAA, are presently before judges in the Northern District of California.

A fourth case, Fontenot vs. NCAA, introduces a potential complication as it remains under consideration in a Colorado court. A judge denied a request to consolidate it with Carter.

The uncertainty lies in whether Fontenot will be included in the settlement. This is significant because the NCAA and its conferences aim to avoid additional liabilities in case of an unfavourable court ruling.

“We intend to pursue our case in Colorado and await further details on a settlement proposal once they are formally presented to the court,” stated George Zelcs, a plaintiffs’ attorney in the Fontenot case.

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