NCAA pact to pay current, former athletes to transform college sports

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Basketball great Caitlin Clark, now a professional, still could reap a great deal of money from the University of Iowa as a result of the settlement to which the National Collegiate Athletic Association agreed on Friday. File Photo by Corey Sipkin/UPI | License Photo
The business of college sports was upended after a federal judge approved a settlement between the National Collegiate Athletic Conference and former college athletes Friday.
After a lengthy litigation process, the NCAA has agreed to provide $2.8 billion in back pay to former and current college athletes, while allowing schools to directly pay athletes for the first time.
Joshua Lens, whose scholarship centers on the intersection of sports, business and the law, tells the story of this settlement and explains its significance within the rapidly changing world of college sports.
What will change for players and schools with this settlement?
The terms of the settlement included the following changes:
The NCAA and conferences will distribute approximately $2.8 billion in media rights revenue back pay to thousands of athletes who competed since 2016.
Universities will have the ability to enter name, image and likeness, or NIL, agreements with student-athletes. So, schools can now, for example, pay them to appear in ads for the school or for public appearances.
Each university that opts into the settlement can disburse up to $20.5 million to student-athletes in the 2025-26 academic year, a number that will likely rise in future academic years.
Athletes' NIL agreements with certain individuals and entities will be subject to an evaluation that will determine whether the NIL compensation exceeds an acceptable range based on a perceived fair market value, which could result in the athlete having to restructure or forgo the deal.
The NCAA's maximum sport program scholarship limits will be replaced with maximum team roster size limits for universities that choose to be part of the settlement.
Why did the NCAA agree to settle with, rather than fight, the plaintiffs?
In 2020, roughly 14,000 current and former college athletes filed a class action lawsuit, House vs. NCAA, seeking damages for past restrictions on their ability to earn money.
For decades, college athletics' primary governing body, the NCAA, permitted universities whose athletics programs compete in Division I to provide their athletes with scholarships that would help cover their educational expenses, such as tuition, room and board, fees and books.
By focusing only on educational expenses, the NCAA was able to reinforce the notion that collegiate athletes are amateurs who may not receive pay for participating in athletics, despite making money for their schools.
A year later, in 2021, the U.S. Supreme Court unanimously ruled in a separate case, Alston vs. NCAA, that the NCAA violated antitrust laws by limiting the amount of education-related benefits, such as laptops, books and musical instruments, that universities could provide to their athletes. The ruling challenged the NCAA's amateurism model, while opening the door for future lawsuits tied to athlete compensation.
It also burnished the plaintiffs' case in House vs. NCAA, compelling college athletics' governing body to take part in settlement talks.
What were some of the key changes that took place in college sports after the Supreme Court's decision in Alston vs. NCAA?
Following Alston, the NCAA permitted universities to dole out several thousand dollars in what's called "education benefits pay" to student-athletes. This could include cash bonuses for maintaining a certain grade-point average or simply satisfying NCAA academic eligibility requirements.
But contrary to popular belief, the Supreme Court's Alston decision didn't let college athletes be paid via NIL deals. The NCAA continued to maintain that this would violate its principles of amateurism.
However, many states, beginning with California, introduced or passed laws that required universities within their borders to allow their athletes to accept NIL compensation.
With over a dozen states looking to pass similar laws, the NCAA folded on June 30, 2021, changing its policy so athletes could accept NIL compensation for the first time.
Will colleges and universities be able to weather all of these financial commitments?
The settlement will result in a windfall for certain current and former collegiate athletes, with some expected to receive several hundred thousands of dollars.
Universities and their athletics departments, on the other hand, will have to reallocate resources or cut spending. Some will cut back on travel expenses for some sports, others have paused facility renovations, while other athletic departments may resort to cutting sports whose revenue does not exceed their expenses.
As Texas A&M University athletic director Trev Alberts has explained, however, that college sports does not have a revenue problem -- it has a spending problem. Even in the well-resourced Southeastern Conference, for example, many universities' athletics expenses exceed its revenue.
Do you see any future conflicts on the horizon?
Many observers hope the settlement brings stability to the industry. But there's always a chance that the settlement will be appealed.
More potential challenges could involve Title IX, the federal gender equity statute that prohibits discrimination based on sex in schools.
What if, for example, a university subject to the statute distributes the vast majority of revenue to male athletes? Such a scenario could violate Title IX.
On the other hand, a university that more equitably distributes revenue among male and female athletes could face legal backlash from football athletes who argue that they should be entitled to more revenue, since their games earn the big bucks.
And as I pointed out in a recent law review article, an athlete or university may challenge the new enforcement process that will attempt to limit athletes' NIL compensation within an acceptable range that is based on a fair market valuation.
The NCAA and the conferences named in the lawsuit have hired the accountancy firm Deloitte to determine whether athletes' compensation from NIL deals fall within an acceptable range based on a fair market valuation, looking to other collegiate and professional athletes to set a benchmark range.
If athletes and universities have struck deals that are too generous, both could be penalized, according to the terms of the settlement.
Finally, the settlement does not address -- let alone solve -- issues facing international student-athletes who want to earn money via NIL. Most international student-athletes' visas, and the laws regulating them, heavily limit their ability to accept compensation for work, including NIL pay.
Some lawmakers have tried to address this issue in the past, but it hasn't been a priority for the NCAA, as it has lobbied Congress for a federal NIL law.
Joshua Lens is an associate professor of Instruction of sport & recreation management at the University of Iowa. This article is republished from The Conversation under a Creative Commons license. Read the original article. The views and opinions in this commentary are solely those of the author.