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College athletics is officially entering a new world.
A California judge on Friday night a little bit past 9 p.m. ET granted approval to the NCAA’s landmark settlement of three antitrust cases, often referred to as the “House settlement,” ushering in an era where schools are permitted to share revenue with athletes within a new enforcement structure led by the SEC, Big Ten, Big 12 and ACC.
Claudia Wilken, the 75-year-old presiding judge in California’s Northern District, granted approval of an agreement between the named defendants (the NCAA and power conferences) and the plaintiffs (dozens of suing athletes) to settle three consolidated cases, all of them seeking more compensation for athletes.
"Despite some compromises, the settlement agreement nevertheless will result in extraordinary relief for members of the settlement classes. If approved, it would permit levels and types of student-athlete compensation that have never been permitted in the history of college sports, while also very generously compensating Division I student-athletes who suffered past harms," Wilken said as part of the 76-page opinion.
Unsuccessful in so many legal battles recently — most notably a 9-0 loss in a 2021 Supreme Court decision — the NCAA and its richest, most influential conferences decided last spring to strike a revolutionary agreement by settling these cases instead of risking a court defeat that might cost them as much as $10 billion.
The House settlement will pay thousands of former athletes — playing from 2016-2024 — a whopping $2.8 billion in backpay from lost name, image and likeness (NIL) compensation. Even more groundbreaking, the settlement paves the way for schools, for the first time ever, to directly compensate athletes in a system that features an annual cap and a new enforcement entity that is expected to more heavily scrutinize booster-backed payments.
While paychecks can begin to be distributed from schools to athletes on July 1 — the official start date of settlement implementation — the new enforcement entity, the College Sports Commission, an LLC operated mostly by the power leagues, immediately takes effect with Wilken’s approval of the agreement.
"This is new terrain for everyone. … Opportunities to drive transformative change don't come often to organizations like ours. It's important we make the most of this one," NCAA president Charlie Baker said in a statement released Friday night. "We have accomplished a lot over the last several months, from new health and wellness and academic requirements to a stronger financial footing. Together, we can use this new beginning to launch college sports into the future, too."
It means that any new contract struck between an athlete and a third-party entity, such a business, brand, booster or collective, is now subject to the new Deloitte-run NIL clearinghouse. The clearinghouse, dubbed "NIL Go," is charged with evaluating NIL deals between athletes and third parties to determine their legitimacy.
It puts an end, perhaps, to schools hurriedly signing current players and transfers to new contracts before the approval of the settlement in deals that frontload a majority of the compensation. Contracts signed before the settlement approval and paid out before July 1 were not subject to the clearinghouse or cap, leading to a “mad dash” in the basketball and football portal.
Power conference leaders are targeting a Major League Baseball executive to manage the College Sports Commission as CEO, multiple sources tell Yahoo Sports. Bryan Seeley, a former assistant U.S. attorney who has served for more than a decade as MLB’s vice president of investigations and deputy general counsel, is believed to be the preferred candidate for the CEO role of college sports’ new enforcement entity.
Despite plenty of hurdles in the settlement’s years-long approval process, those who negotiated the deal have long expected it to be approved because of the sheer numbers involved. More than 85,000 athletes have filed claims for the backpay and just 600 have opted out or objected to the agreement — a paltry number that did not faze the judge.
Wiken’s decision, coming two months after the final hearing in Oakland, California, puts an end to what was thought to be one of the last looming hurdles of a deal: roster limits. In a concept authored by the power conferences, the settlement imposes new limits on sports rosters, many of which had not previously existed.
In a recent filing, the NCAA and power leagues agreed to revise settlement language to permit schools to grandfather-in athletes on existing teams or those who have been cut this year, as well as recruits who enrolled on the promise of a roster spot.
With its approval, the settlement ushers into college sports a more professionalized framework but one, many believe, that is ripe for more legal scrutiny. Already, attorneys are gearing up for future legal challenges over, at the very least, the new NIL clearinghouse, Title IX and the capped compensation system — much of which can be resolved, legal experts contend, with a collective bargaining and/or employment model that college executives have so far avoided.
The settlement’s approval is only the first in what many college leaders describe as a two-step process to usher in stability in the college sports landscape.
Step 2 may be even more difficult: lawmakers producing a congressional bill to codify the settlement terms and protect the NCAA and power conferences from legal challenges over enforcement of their rules. Five U.S. senators have been meeting regularly in serious negotiations over legislation, but no agreement has been reached.
Here’s an explainer of college sports’ new world delivered by the settlement’s approval:
Each school is permitted — not required — to share up to a certain amount of revenue annually with their athletes (the cap). Per the settlement agreement, the cap is calculated by taking 22% of the average of certain power school revenues, most notably ticket sales, television dollars and sponsorships.
In Year 1 — July 2025 through June 2026 — the cap amount is projected to be $20.5 million.
While each school is charged with determining how to distribute those funds, most power conference programs are planning to distribute 90% to football and men’s basketball, as those are, for the most part, the only revenue-generating sports for an athletic department.
In Year 1, that’s about $13-16 million for a football roster and $2-4 million for men’s basketball, with the remaining amount shared with women’s basketball, baseball, volleyball and other Olympic sports.
While the 22% cap will remain the same through the 10-year settlement agreement, the cap money figure will rise based on built-in escalators (4% increase in Year 2 and Year 3), scheduled recalculations (after each third year) and additional cash flows into athletic departments, such as when conferences enter into new, more lucrative television deals or/and begin receiving new College Football Playoff monies.
Ohio State athletic director Ross Bjork told Yahoo Sports this summer that he expects the cap to break $25 million by the time the Year 4 recalculation happens. There are exceptions, though, that can artificially lower the annual cap, most notably up to $2.5 million in additional scholarships that a school offers.
A new non-NCAA enforcement entity — an LLC predominantly managed by the power conferences — will oversee and enforce rules related to the revenue-share concept.
The company, College Sports Commission, is expected to be headed by a CEO as well as a head investigator for enforcement matters. The entity is charged with assuring that schools remain under the cap and that third-party NIL deals with athletes are not the phony booster-backed deals so prevalent over the last four years.
An enforcement staff is expected to be hired to investigate and enforce rules related to cap circumvention, tampering, etc., and are charged with levying stiff penalties. Violators may be subject to multi-game coach suspensions, reductions in a school’s rev-share pool as well as reductions in allowed transfers, and significant schools fines.
However, the biggest looming uncertainty of the settlement agreement involves a Deloitte-run NIL clearinghouse that must approve all third-party NIL deals of at least $600 in value. The "NIL Go" clearinghouse is using a fair market value algorithm to create “compensation ranges” for third-party deals.
Deloitte is expected to approve or disapprove deals in as little as one day, and athletes can resubmit rejected deals at least once with alterations suggested by the clearinghouse. For example, Deloitte may deem a submitted $100,000 deal between an athlete and third party to actually be valued at $50,000. The player can alter the deal to align with the clearinghouse’s suggested figure or the school can cover the difference by accepting a reduction against their revenue-pool cap.
Deals rejected for a second time are referred to the CEO and enforcement staff and are then processed through an appeals system via court-overseen arbitration. Arbitration rulings are expected within 45 days, according to the settlement.
Athletes who lose arbitration cases and still accept compensation in the rejected deal are deemed ineligible.
Starting with the fall basketball and football signing periods, schools began readying for this new era.
Some even signed players to revenue-sharing agreements that begin to make payments on July 1 or later, contingent on the settlement’s approval. Other players signed contracts with school booster collectives that featured a clause assigning the contract to the school on July 1.
For the most part, the contracts grant schools permission to use a player’s NIL rights — a reason for the compensation — but these agreements feature language often found in employment contracts, including buyouts, athlete requirements and prohibitions as well as the freedom for schools to reduce the players’ compensation based on their academic standing and performance.
Already, the agreements are a subject of legal scrutiny.
In January, Wisconsin defensive back Xavier Lucas left the university to enroll at Miami despite signing a revenue-share contract with UW. In public statements, Wisconsin has suggested it will pursue legal action against Lucas and/or Miami, which, it suggested, tampered with an athlete under contract. Lucas’ representatives believe the contract is not enforceable as it was contingent on settlement approval when signed.
The situation is a potential landmark case on settlement-contingent revenue-sharing agreements.
