NCAA Settlement: A New Era of Compensation for College Athletes

The landscape of college sports is undergoing a monumental shift as a result of a multibillion-dollar legal settlement between the NCAA, its top conferences, and athletes' legal teams. Approved by a federal judge, this settlement marks a turning point where student-athletes can finally receive compensation from their schools, a concept that was once considered unthinkable. The settlement addresses claims that NCAA rules restricting or prohibiting compensation for using athletes’ NIL, compensation for athletic services, and scholarship limits violated antitrust law.

Background of the Settlement

The journey to this landmark agreement began with a series of legal challenges to the NCAA's long-standing amateurism rules. Until recently, college athletes were prohibited from profiting from their name, image, and likeness (NIL). This restriction started to erode in 2021 when athletes were granted the ability to earn from NIL deals. Boosters and wealthy donors began using NIL deals to pay athletes, particularly in high-profile sports like football and basketball.

The House v. NCAA, Carter v. NCAA, and Hubbard v. NCAA cases culminated in settlements totaling $2.8 billion, addressing the NCAA’s policies that prevented college athletes from monetizing their NIL and earning compensation beyond scholarships. The cases arose from the NCAA’s policies that prevented college athletes from monetizing their name, image, and likeness (NIL) and earning other compensation beyond scholarships. For the House Settlement, the Defendants (NCAA and Power Five Conferences) have agreed to pay $2,576,000,000 into a settlement fund ("damages settlement"). For the Hubbard Settlement, the Defendants (NCAA and Power Five Conferences) have agreed to pay $200,000,000 into a settlement fund.

The Court recently granted Class Counsel's request to reopen the claims period in In re College Athlete NIL Litigation ("House"). If you have not submitted your claim already, you must submit it by October 1, 2025.

Key Provisions of the House Settlement

On June 6, 2025, Judge Claudia Wilken approved the proposed settlement in House v. NCAA, Oliver v. NCAA and Hubbard v. NCAA. The House settlement requires the NCAA and its Power Five conference members to pay approximately $2.8 billion in damages to compensate student-athletes for the denial of NIL opportunities under prior NCAA eligibility rules. The settlement class includes all Division I student-athletes who competed from 2016 to the present, reflecting the applicable statute of limitations.

Direct Payments to Athletes

Now, instead of relying on third parties, schools will have the option to pay athletes directly. This direct payment model allows for Division I schools to pay a portion of their revenue directly to student-athletes, with $20 million as the cap for the first year (2025-26). The pool cap increases annually over the 10-year term of the agreement, reaching a projected $32.9 million in 2034-35. The justification for these direct payments from schools is that money earned by schools via media deals stems from student-athlete NIL. The direct payment model allows for Division I schools to pay a portion of their revenue directly to student-athletes, with $20 million as the cap for the first year (2025-26).

NIL Oversight and Regulations

Athletes can still earn from NIL deals, but a new group called the College Sports Commission will oversee these activities to ensure NIL isn’t secretly used as extra salary. All NIL transactions with a total value of $600 or more must be reported by student-athletes and member institutions to the Commission. Reporting will be done via an online platform called NIL Go, which will be overseen by LBi Software and Deloitte. The Commission will be responsible for determining whether reported NIL payments from Associated Entities and Individuals are at fair market value. Associated Entities and Individuals must attempt to determine valuation based on other deals entered into by similarly skilled and similarly famous athletes.

Organizations that are not categorized as “Associated Entities or Individuals” - e.g., athletic apparel, sports drinks, and other consumer brands - may enter NIL deals with student athletes, without the need to comply with the fair market value rule.

Scholarship and Roster Limits

Pursuant to the House settlement, there are no longer limits to the amount of scholarship athletes a school that opts in can have on a team. NCAA rules previously limited Division I football programs to 85 full scholarships but put no limit on roster numbers. The House settlement requires eliminating NCAA scholarship limits, potentially resulting in more than 115,000 additional scholarships annually. However, the NCAA will be permitted to adopt roster limits for Division I sports.

Distribution of Settlement Funds

The settlement fund will be split into two funds, a $1.976 billion fund referred to as the “NIL Claims Settlement Amount,” and a $600 million fund referred to as the “Additional Compensation Claims Settlement Amount.” These two funds will be further divided and distributed based on the sort of injury class members suffered. The agreement calls for a $1.976 billion settlement fund for NIL-related injuries, including NIL in broadcasts for certain college football and men’s and women’s basketball players.

Read also: Crafting Your NCAA Profile

Class members include all student athletes who were eligible and on a Division I team roster, regardless of the team or conference, between June 15, 2016 and September 15, 2024.

Implications and Challenges

While this settlement marks a significant step forward, it also presents several challenges and raises important questions about the future of college sports.

Financial Implications for Schools

Division I schools that opt in must comply with the House settlement’s financial terms for directly compensating student athletes. The direct payment model allows for Division I schools to pay a portion of their revenue directly to student-athletes, with $20 million as the cap for the first year (2025-26). The pool cap increases annually over the 10-year term of the agreement, reaching a projected $32.9 million in 2034-35. The justification for these direct payments from schools is that money earned by schools via media deals stems from student-athlete NIL.

Schools have been exploring creative ways to brace themselves financially for direct payments to athletes beginning on July 1, 2025, including possibly spinning out different entities for their athletics programs, private equity financing, and other alternatives. For other schools, opting in may result in drastic measures such as eliminating certain varsity sports, or even reclassifying to a lower division, both of which have already occurred. University of North Carolina Asheville announced its decision that it will not opt in to the settlement for the 2025-2026 school year, stating, “the revenue generated by our athletic department is essential for enhancing and sustaining various aspects of our program, including scholarships, sports medicine services, mental health resources, and more.

Outside the Big Ten and SEC-whose media contracts generate substantial revenue-most Division I schools lack the revenue base to allocate $20.5 million (or more in future years) to athlete compensation. Data indicates that approximately 75 percent of athletic revenue at many institutions comes from football, with an additional 17 percent from men’s and women’s basketball. As such, institutions must conduct a thorough financial and legal assessment to determine whether opting into the revenue-sharing model is feasible. Those that opt in must also ensure that their distribution plans are compliant with the settlement’s terms and applicable legal requirements. In many cases, a significant portion of compensation is expected to flow to revenue-generating sports, potentially pressuring athletic departments to reevaluate their support for nonrevenue sports.

Impact on International Student-Athletes

While this will open interesting new opportunities and is clearly a first step applying to domestic students, it also raises concerns about how international student-athletes will be affected. Today’s visa rules and legal issues, especially for those on F-1 student visas, may make it hard for many international athletes on those visas to get paid. This creates challenges for schools trying to support all their athletes fairly.

International athletes on F-1 student visas face strict rules that don’t allow them to be paid for playing sports or earning money through NIL deals. If schools try to pay them, they could violate federal immigration laws and face serious consequences. Other visa options, like O-1 or P-1, could let international student-athletes get paid. This gives schools a chance to support these athletes in new ways while staying within the rules.

Antitrust Concerns and Future Legislation

Although House was an antitrust suit, issues remain as to the NCAA’s status under antitrust law. The NCAA is seeking an antitrust exemption from Congress. Professional sports leagues have such exemptions, allowing the leagues to regulate players more easily. Although the NCAA has been lobbying Congress since 2021 on this issue with little progress, new draft legislation could give the NCAA the antitrust protection it has been seeking. Specifically, the draft legislation would prevent legal challenges to direct payments to athletes.

The settlement may prompt federal lawmakers to consider new legislation that addresses the employment status of NCAA college athletes and provides the NCAA with clearer guidelines on NIL compensation. Congress to pass legislation that would prevent college athletes from being deemed to be employees of schools and to provide the NCAA with an antitrust exemption or immunity to allow it to enforce rules related to transfers and other potential compensation guardrails.

Title IX and Gender Equity Concerns

Judge Wilken acknowledged that the settlement may raise significant gender equity concerns. Although Title IX compliance was not addressed within the scope of the settlement, the order notes that affected athletes may need to pursue separate legal remedies if violations occur. As Judge Wilken emphasized, potential challenges related to Title IX, state NIL statutes and federal or state employment and labor laws fall outside the court’s jurisdiction.

Payments are on hold as the settlement is facing two appeals that the back payment distributions violate Title IX of the Education Amendments, which prohibits sex-based discrimination in education programs. There are already challenges on the basis of Title IX following the House settlement.

Enforcement and Oversight

The power conferences are launching a new enforcement organization to monitor payments that come from schools and boosters, a duty that was previously one of the main functions of the NCAA's national office. College sports officials hope the new organization will have a more streamlined and effective approach to investigating potential violations and punishing those who break the rules. The new enforcement organization, called the College Sports Commission, announced the hiring of MLB executive Bryan Seeley as its CEO. Seeley's job is described as having to "build out the organization's investigative and enforcement teams and oversee all of its ongoing operations and stakeholder relationships."

Although athletic conference commissioners are reportedly confident in the Commission and its ability to successfully oversee enforcement, some critics are skeptical as to the effectiveness of the new enforcement arm.

Potential for Competitive Disparities

While the model introduces a regulated mechanism for athlete compensation, it also has the potential to create competitive disparities. Moreover, few institutions may be in a financial position to fully utilize the cap.

Institutions adopting the revenue-sharing model should take care to develop clear and compliant agreements and implementation plans. A key component of the House settlement is the elimination of NCAA-imposed scholarship limits, allowing institutions to offer a greater number of full or partial scholarships to student-athletes.

Transfer Portal and Fair Market Value

The House settlement agreement does not establish specific guidelines regarding the transfer portal or how the “fair market value” analysis will apply to transferring athletes. The process for assessing a player’s fair market value in the fast-moving transfer portal environment remains undefined and is likely to create challenges and potential disputes.

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