‘New beginning’: $2.8B settlement OK’d, allowing colleges to pay athletes

A judge in California has formally approved a landmark $2.8 billion settlement that will change the complexion of college athletics.

Claudia Wilken, a senior judge with the U.S. District Court for the Northern District of California, accepted the agreement in the so-called House vs. NCAA case, which actually combined three separate antitrust cases against college sports’ governing body.

The ruling means schools that choose to opt in to the settlement will be able to pay their athletes directly for the first time though the new revenue-sharing model.

Those schools, which include UNLV, will also be required to pay a portion of the $2.8 billion owed to former athletes as part of the agreement.

The parties argued their case for approval in front of Wilken in April, but the judge expressed concern over the proposed roster limits that could cause harm to current student-athletes by pushing them out of programs.

A revised proposal was presented last month, and Wilken approved it in writing Friday evening.

Wilken had said she would not be held to the timeline created by the NCAA’s plan to implement the new rules on July 1, but this ruling does give the parties time to implement the rules before the start of the new academic year.

A salary cap will be set at 22 percent of the average athletic revenue of Power Five schools and Notre Dame, which amounts to about $20.5 million for the upcoming academic year. It is expected to increase by about $1 million each year.

NCAA President Charlie Baker trumpeted the settlement’s approval as a “new beginning” for his organization and its student-athletes.

End of chaos?

While the NCAA will be shelling out a significant amount of money as part of the settlement, Baker said the new guidelines that will be implemented as a result are invaluable.

College athletes had already won the right to profit off their name, image and likeness as a result of previous suits that broke the long-held facade of amateurism, but schools still could not pay their players directly. That helped foster an environment of uncertainty and chaos as institutions, boosters and third-party collectives tried to navigate the system.

“For several years, Division I members crafted well-intentioned rules and systems to govern financial benefits from schools and name, image and likeness opportunities, but the NCAA could not easily enforce these for several reasons,” Baker said in a statement. “The result was a sense of chaos: instability for schools, confusion for student-athletes and too often litigation. Sometimes member schools even supported that litigation — some of which spurred hastily imposed court orders upending the rules.”

The approval of the settlement should go a long way toward calming those rough waters.

“Approving the agreement reached by the NCAA, the defendant conferences and student-athletes in the settlement opens a pathway to begin stabilizing college sports,” Baker said. “This new framework that enables schools to provide direct financial benefits to student-athletes and establishes clear and specific rules to regulate third-party NIL agreements marks a huge step forward for college sports.”

NIL remains

In addition to the revenue-sharing model, students will still be able to cash in on NIL deals. The settlement provides some semblance of oversight, as accounting firm Deloitte will be tasked with developing a clearinghouse that ensures all NIL contracts of more than $600 are legitimate and represent fair market value as opposed to just being an additional payment to entice the player to attend a school or stay there.

The settlement also calls for limits on roster spots as opposed to the old model that capped scholarships but allowed for programs to bolster their numbers with walk-ons. Wilken’s delay in approval was largely based on her concern that current student-athletes had already been cut in anticipation of the new rule.

She had requested the parties find a solution that didn’t include current players being affected While the amended agreement calls for teams to be allowed to have players grandfathered in without counting against the roster limits, there is no requirement.

That proved to be enough to get the settlement over the finish line.

Opt-outs

The five power conferences were originally named in the suit and will enact the new guidelines, but all Division I programs have the ability to opt in by June 15. Many programs and conferences have already announced their intention to do so.

Those programs electing to opt out will not have to share in the settlement payments, but also won’t be able to pay athletes.

A list of 353 student-athletes, including several prominent names, who were eligible to collect on the settlement chose not to be included. Those athletes will retain their legal rights.

That may not be the only future litigation involving this case. Several legal challenges are expected to follow in the near future, including Title IX challenges.

State legislators and Congress may also eventually weigh in on the new rules.

Contact Adam Hill at [email protected]. Follow @AdamHillLVRJ on X.