Former Division I student-athletes may soon hear the final whistle of the consolidated class action they brought against the National Collegiate Athletic Association (NCAA) and five of its conferences in 2020 to eliminate longstanding payment restrictions for student-athletes, In re: College Athlete Compensation Antitrust Litigation (the House Action).
On April 7, 2025, a two-part settlement including nearly $2.8 billion in backpay for former student-athletes and a prospective revenue-sharing model for current and future student-athletes will be subject to a fairness hearing before Senior U.S. District Judge Claudia Wilken of the Northern District of California.
Name, Image and Likeness Compensation for Student-Athletes
In July 2021, amid growing calls for the NCAA to permit student-athletes to profit from their name, image and likeness (NIL), the NCAA changed its rules to allow them to earn revenue in exchange for their NIL. Student-athletes signed deals—some earning millions—with major companies and brands as well as with independent organizations comprised of university boosters and fans, known as collectives. Since July 2021, the NIL landscape has continued to evolve through NCAA-issued guidance, congressional hearings, and NCAA rules related to NIL disclosure and transparency.
Prior to the NCAA’s approval of NIL compensation, numerous student-athletes sought the right to earn compensation for their NIL through various lawsuits against the NCAA and conferences. Some of those cases were consolidated in the House Action. At its core, the House Action stems from alleged antitrust violations, premised on allegations that the NCAA unlawfully restricted NIL compensation in violation of the antitrust laws.
The Proposed Settlement
The House Action is anticipated to resolve by way of a two-pronged settlement encompassing: (1) retroactive damages to be awarded in back pay to former student-athletes; and (2) NIL compensation based on school revenue for current and future student-athletes. First, under the proposed settlement, eligible former student-athletes unable to collect NIL compensation from 2016-2024 because of the NCAA’s prior restrictions will be awarded nearly $2.8 billion retroactively to be paid over 10 years based on a distribution plan considering factors such as the sport the student-athlete played. Second, in addition to school-provided benefits such as free tuition, room and board, NCAA member schools may use up to 22% of their annual athletic revenue, not to exceed $21 million, for student-athlete compensation, the limitations of which are projected to increase 4% annually and recalculated every three years.
Scrutiny of the Proposed Settlement
The settlement was preliminarily approved by Judge Wilken on Oct. 7, 2024, and has since faced its share of scrutiny. Approximately 3,500 of the 390,000 class members opted out of the settlement, some of whom have commenced new lawsuits against the NCAA challenging the proposed settlement and asserting antitrust claims. Numerous nonparties filed formal objections to the settlement, including the Antitrust Division of the United States Department of Justice.
Opponents of the settlement contend that the NCAA’s prior restrictions on student-athlete compensation is simply being replaced by another restriction—the proposed $21 million cap on student-athlete compensation. For example, the DOJ objected to the settlement on the basis that the proposed $21 million cap would operate as an improper restraint on competition among universities, in direct violation of applicable antitrust law. Other opponents contend that the $21 million cap is far too low in the face of multibillion-dollar media deals from which schools profit by use of their student-athletes’ NIL. Yet, many proponents of the settlement believe that the revenue-sharing model will create a pathway for student-athletes to make more income than ever before, while also adequately compensating former student-athletes through backpay.
Additional objections and expected challenges to the proposed settlement include:
- Potential Title IX Issues: Opponents of the retroactive damages component of the settlement have raised concerns arising under Title IX of the Education Amendments of 1972, which prohibits discrimination on the basis of sex. The near $2.8 billion retroactive damages fund is projected to be distributed at 75% to male football players, 20% to male and female basketball players, and 5% to student-athletes from other teams. Settlement opponents have objected to the proposed allocations because the majority of the near $2.8 billion damages figure will be paid to male former student-athletes.
- Roster Limitations: While the settlement will end restrictions on the NCAA’s present scholarship limits, it also calls for roster limits for all member schools that opt in to the settlement. Settlement opponents have expressed concern that roster caps will result in the elimination of numerous Division 1 roster positions for sports other than basketball and football, directly impacting walk-on athletes, those with partial scholarships and those who play sports other than basketball or football. This concern already has proven to be a reality for student-athletes whose roster spots have been eliminated as schools anticipate the new limits imposed by the settlement. Some opposed to the settlement proposed a carve-out for current athletes to protect their existing roster position, whereas others have expressed a wholesale opposition to roster caps of any kind.
- Non-defendants: The proposed House settlement binds each of the named defendants: the NCAA, Pac-12 Conference, Big Ten Conference, Big 12 Conference, Southeastern Conference and the Atlantic Coast Conference. Non-defendant conferences can only be bound by the settlement if one of the following occur: (1) the conference opts in to the settlement; or (2) the conference pays any single new student-athlete in the form of enhanced benefits such as direct compensation. Some institutions and conferences have opted out of the settlement. Recently, the state of South Dakota sought a preliminary injunction against the NCAA to halt the proposed settlement, alleging that the NCAA’s plan will impose costs on non-defendants, such as certain Division I schools that contend they did not cause the damages contemplated by the settlement.
- Enforcement and Regulation: The NCAA has formed a settlement implementation committee comprised of athletics directors from each of the conferences named in the lawsuit. The committee will work closely with specialized software and an advisory firm to evaluate all third-party NIL deals exceeding $600 received from third parties, which student-athletes are required to report to the NCAA. Such NIL deals will be reviewed by the advisory firm to ensure they are commensurate with fair market value for a valid business purpose, and to ensure the NIL deal does not constitute “pay for play,” which is still prohibited by the NCAA rules Opponents argue that the disclosure mandate contemplated by the settlement may run afoul of at least some state privacy laws—including a bill pending in Oregon that exempts student-athletes from disclosing NIL deals if the contract prohibits such disclosure.
- Implementation of Additional Revenue Streams: Recruiting and retaining top athletes has proven to be a costly endeavor. In anticipation of the settlement, member schools have implemented additional fees to increase overall revenue to support NIL compensation. New fees include “talent fees” on sports tickets, athletic surcharges to tuition bills and additional fees at concession stands. Other schools that resisted in-stadium advertising for years are now reversing course for increased cash flow to help recruit student-athletes.
- Student-Athlete Employment Status: The revenue-sharing model proposed by the settlement is expected to play into the question of whether student-athletes are employees of their universities, a legal issue that is currently under consideration in the courts.
Before approval of the settlement can be finalized, the Court is required to hold a fairness hearing at which class members may object to portions of the settlement, pre-filed objections will be considered, and additional arguments by class counsel may be raised. The ultimate inquiry for Judge Wilken at the April 7th hearing will be whether the settlement satisfies the requisite class action standard of being fair, reasonable and adequate for all class members.
The proposed settlement in the House Action represents yet another development in the NIL landscape. However, the many outstanding challenges associated with NIL compensation and the regulation of same indicate that we are not yet at the finish line.
McGuireWoods will continue to monitor the evolving NIL landscape. For questions, contact the authors of this article.