CNN
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College athletes could soon be receiving dramatically different paychecks.
At issue is a case called House v. National Collegiate Athletic Association (NCAA), which requires college athletes to pay for sponsorship contracts known as name, image, and likeness (NIL) agreements and a portion of their broadcast revenue. This is a class action lawsuit seeking to change the way in which people are treated.
If the NCAA loses the lawsuit, it could be forced to pay up to $20 billion, while the settlement amounts to $2.7 billion in unpaid wages and requires a review of how student-athletes are paid. There is a possibility that it will become.
The NCAA and the conference are reportedly scheduled to meet soon to determine the terms of the settlement.
The House v. NCAA lawsuit was filed in 2020 by two college athletes, Grant House and Sedona Prince, against the NCAA and the Power Five conferences (Pac-12, Big Ten, Big 12, Southeastern and Atlantic Coast) in the U.S. District Court for the Northern District of California, Oakland Division.
The lawsuit focuses on an eight-year, $8.8 billion extension the NCAA signed for live broadcasts of the March Madness basketball tournament, as well as past damages for payments that the lawsuit says were wrongfully withheld. They are seeking compensation.
College sports are big business, with huge amounts of money coming and going.
Football and basketball at Division I schools, the top of the three tiers of college sports, generated $7.9 billion in revenue during the last fiscal year, according to data compiled by the Department of Education.
Overall revenue from Division I athletics in 2022 was nearly $17.5 billion, according to a report by the NCAA, college sports' governing body.
The NIL contracts stem from a 2021 NCAA policy change that allows student-athletes to benefit from sponsorship opportunities.
The move comes after California passed a law giving athletes the right to receive sponsorship payments in 2019, starting a national trend, followed by a landmark U.S. Supreme Court decision in 2021 that said student-athletes could receive education-related payments, forever changing the face of college sports.
But college athletes in the House lawsuit argue that current NIL rules and an “anti-competitive” college system hurt their chances of making money.
The lawsuit also argues that the current system “undermines schools' efforts to freely compete for the best recruits to colleges and universities. If schools violate these rules, they can be severely punished.
The class action lawsuit, filed by college athletes including Iowa basketball player Caitlin Clark and University of Southern California football player Caleb Williams, who appeared in commercials for major national brands such as State Farm and Wendy's, says the widespread harm caused by the current restrictions is “clear.”
“Many college athletes create significant value in their NILs and, absent the restrictions on challenge, would receive compensation for their use on the open market,” the complaint states.
Michael Reeves/Getty Images
Grant House will compete in the men's 200 butterfly C final at the TYR Pro Swim Series Westmont on March 8, 2024 at FMC Natatorium.
The lawsuit alleges that the NCAA limits how much student-athletes can earn outside of work.
For example, the lawsuit alleges that one of the NCAA rules that governs the jobs athletes can hold in college requires that student-athletes be compensated for the value or usefulness they receive to (outside) employers through promotions. It is specifically prohibited to receive such information for any purpose.” Reputation, fame, or personal favor gained through athletic ability. ”
“The damage is compounded by the fact that only a small percentage of college athletes play professionally, and while this fact is often highlighted by the NCAA as a justification for not paying compensation, it highlights that for most student-athletes, it is during their college years that their NIL is most valuable.”
In 2021, the Supreme Court unanimously ruled that NCAA rules prohibiting student-athlete compensation violate antitrust laws, paving the way for increased compensation for student-athletes.
But two years later, commissioners of the major college conferences said the Supreme Court decision would create a complex series of state laws that could undermine college sports and ultimately lead to the demise of sports programs across the country.
The proliferation of college transfer systems has given athletes the freedom to switch teams more regularly, eliminating the need to lose a year of eligibility after switching programs.
Commissioners said the increased use of transfer portals by athletes is a problem in college sports, especially for student-athletes pursuing degrees.
They say college boosters are using the current patchwork of laws to help recruit top athletes with promises of big salaries, and that other states are forced to play by different rules. He said it was a disservice to the university.
CNN has reached out to the NCAA and the five conferences named as defendants for comment.
The National Association of Collegiate Athletic Directors declined to comment when contacted by CNN.
Chris Jones/USA Today Sports (via Reuters)
Sedona Prince (right) drives to the basket during the TCU Horned Frogs vs. Baylor Lady Bears game.
A loss in court could result in defendants having to pay out as much as $20 billion and force the NCAA to file for bankruptcy, according to a document circulated among presidents and administrators of power conferences and obtained by Yahoo Sports. The report did not provide details about who wrote the document.
The plaintiffs argue that if they lose in court, the players will be released from the NIL system. “Essentially, if we win, there will be a complete free market in NIL, including broadcast payments,” Jeffrey Kessler, one of the attorneys representing the plaintiffs, told The Athletic.
When contacted by CNN, Kessler said “negotiations are ongoing” and declined to comment.
The settlement could reportedly be in the range of $2.7 billion in damages for unpaid NIL wages, plus would include a system that would allow universities in top conferences to distribute about $20 million per year directly to players.
According to ESPN, the NCAA will pay damages and the conference will implement a revenue-sharing structure going forward.
The ACC and Big 12 voted in favor of approving the settlement on Tuesday, according to ESPN.
The potential settlement comes amid a gradual shift in attitudes toward college athletes being compensated.
Earlier this year, members of the Dartmouth College men's basketball team became the first college athletes to vote to join a union, marking a significant milestone in the rapidly changing business of college sports.
