What are the key details of the House Settlement?
A Beginners Guide to the House vs NCAA Case
On Friday 6th June, Judge Wilken delivered her final approval to the House settlement. The settlement is a landmark moment for college sports, addressing student athlete pay. This has been expected for a number of months and signals the start of a new era for College Sports. Given its importance, I wanted to create a short guide to the key details of the House Settlement.
The Background
It is important to understand how we got to this point.
The NCAA operates all college sports, from revenue-generating sports like football and basketball to Olympic sports like wrestling and swimming. Clearly this has become quite a chaotic landscape as football and basketball generate more and more money. In most universities, the revenue from these two sports supports the rest of the athletics department to some degree.
This has created pressure within football, especially as millions are generated from ticket sales, merchandising and TV revenue. The NCAA have historically stuck to the principle of “amateurism” stressing that the players were students first. Students should be focussed on their studies and not be paid as employees. Student athletes challenged this position, stating that they should benefit from their own Name, Image and Likeness (“NIL”).
Embed from Getty ImagesAs a reminder, NIL payments allow athletes to benefit from their marketability and differs from “pay to play” (essentially professionalism).
Several states started passing laws allowing NIL payments, conflicting with NCAA rules. Eventually the whole concept of amateurism was challenged in the courts with key cases being Alston v NCAA and O’Bannon v NCAA. Given this backdrop, in 2021 the NCAA agreed to an interim framework that allowed student athletes to receive NIL payments (from third parties, not the schools) under set conditions. The position was considered a bridge until either federal legislation or more permanent NCAA rules could be established.
A multitude of Lawsuits
Whilst the 2021 interim position provided some progress, the NCAA found itself defending several other legal cases. These included Hubbard v NCAA, Carter v NCAA and House v NCAA.
The NCAA and the then Power 5 conferences (SEC, B10, B12, ACC, Pac12), consolidated all 3 cases into House and defined settlement terms.
These were the terms presented and then deliberated by Judge Wilkens and eventually approved on 6th June.
What were the Terms of the House Settlement?
$2.8bn of Backpay to athletes
The main objective of the settlement was to address the issue of former players who claim they missed the opportunity to benefit from NIL payments. The settlement covers a period from 2016 onwards and covers athletes competing in Division 1 sports.
$2.8bn will be paid out to athletes over a 10 year period ($280m per year). The NCAA will make these payments from two sources. Either by using funds held in its own reserves, or withholding payments normally made to the conferences each year.
The pay out is a form of damages, reflecting lost revenue from the player’s “marketability”. A formula will be used to calculate payments based on sport, level of competition and market value of the sport at the time played. In reality the majority of funds will be paid to athletes in Power 5 football and men’s basketball, given the revenue generation of those sports historically.
There were objections to the backpay during the hearings on Title IX grounds (a US law prohibiting sexual discrimination in any school) which were considered by the Judge.
Following approval of the settlement, an appeal was filed by a group of female athletes on the grounds of breaching Title IX. Their argument is that if athletes had been paid fairly in the past, Title IX would have assured that the funds would have been split more equitably. Judge Wilken didn’t agree with this line of thought and the appeal courts will need to review. Until then, backpay payments will be kept on hold.
Revenue Share
The other key feature of the settlement is the ability for schools to share an element of the revenue generated from sports with athletes. This will be the sharing of athletic department’s revenue from TV rights, ticket sales and sponsorships. It is not payment for playing.
A formula will once again be used to calculate the maximum that can be shared. In year 1 it will 22% of P5 average revenue which gives a figure of $20.5m per school. It is expected that in most cases c75% of the payments will go to football players.
This is the maximum and schools do not need to spend this, indeed schools can also opt out altogether. These are risky strategies however as it may make recruiting challenging. The former Power 5 conferences are expected to opt in and make the payments to stay competitive.
Clearly schools need to find ways to fund these payments and this will largely come from existing athletic department funds. Some schools will use mechanisms such as ticket surcharges or cost cutting to create the headroom.
Governance and NIL Oversight
NIL payments will remain in the sport and will be seperate to the cap, given they are from third parties. All NIL deals greater than $600 will need to go through a clearinghouse called NIL-Go. This will be an online platform where deals will be reviewed using an algorithm to assess whether they are deemed at market value.
NIL has always been a touchy subject for the NCAA, who are concerned about booster and NIL collective interference. They worry that these parties will offer off-market terms to incentivise players to join their team (indirect pay for play).
Under the new system, the player will input the deal details and receive an approval, a decline with advice on how to amend to bring in line with market, or if continually declined a referral. A player in theory could still proceed and sign the deal even with a decline as it is not clear how enforcement will take place.
What will be deemed market value and whether that will take into consideration the local market is unclear. It is also not clear how athlete compliance will be assessed.
The new system, and all of the NIL oversight, will be monitored by a new enforcement commission; the College Sports Commission. This body will be headed up by ex Major League Baseball executive, Bryan Seeley. Not much else is known at this stage in terms of what this body will look like.
Scholarship and Rosters
Another element to the settlement was the removal of caps on sport-specific scholarships that a school can offer (scholarships in football were previously capped at 85).
This comes at a cost however, as new roster caps have been implemented, capping rosters at 105 in football. The school has the discretion to decide how many full or partial scholarships to offer as long as the cap is respected.
This part of the settlement received a lot of attention during the hearing from Judge Wilken who was concerned about the impact on players on the fringes of squads. For instance some teams may carry 120+ players for depth ahead of the season starting and this will no longer be allowed. Walk-ons (players who join with no scholarship or via a try-out) will be vulnerable to being cut.
There are implications for the broader sports programmes too. If additional scholarships are offered in football it may mean a reduction in non-revenue sports or programmes being cut completely in some sports. There were reports ahead of the settlement of some scholarships or even offer of places being withdrawn as colleges made preparations for what was coming.
The Judge did seek assurances that an element of grandfathering will be used so that squads are not cut immediately. Players already on rosters and those “assured of spots” in 2025 will be allowed to complete their eligibility. Therefore we should see a tapering of rosters in football and elsewhere.
Next Steps
Whilst the settlement and approval process was comprehensive there were a number of items not addressed.
The Title IX issue was not satisfactorily covered which led to the almost immediate appeal being filed on back-pay.
In addition, the settlement did not address key legal issues such as whether state law takes precedence over the ruling or whether student athletes should be deemed as employees at universities.
The NCAA is likely to seek the support of Congress to pass legislation to deal with these issues. We have already seen the first of such bills being discussed in House Committees.
A New Era Dawns
Whilst some uncertainly remains one thing is very clear, the days of amateurism are well and truly over. College Athletes will receive a fairer share of the revenues they help generate from schools, topped up by third party NIL. Does this make the semi professional or fully professional? I am not sure.
Many issues remain and the settlement lends itself to all sorts of legal challenge, Title IX being just one. These issues may take years to resolve.
Is the settlement perfect? No. But it is a step in the right direction for the right reasons.
And Finally….the man himself…Who is Grant House?
Grant House was the lead plaintiff in this case and was a former All-American swimmer at the Arizona state University. He had a distinguished college athletics career and represented Team USA.
Post college, House has been a prominent campaigner for student athlete rights. He still swims competitively too taking part in major swim meets with aspirations to make the 2028 Olympic Team.
