NCAA and Power Five conferences vote for $2.8 billion settlement in House, Hubbard and Carter cases

In the spring of 2021, NCAA lawyers argued vehemently before the U.S. Supreme Court against paying each college athlete additional money each year.

The amount: $5,980.

Three years later, the organization signed a groundbreaking agreement that would fundamentally change college sports: It abandoned its archaic rules, shrugged off the long-standing amateurism argument and catapulted the industry into an era of direct compensation for athletes.

The amount: Over the term of the ten-year agreement, athletes are expected to receive more than 15 billion US dollars in new money.

The NCAA and major conferences voted this week to settle three antitrust cases (House, Hubbard and Carter), approving terms that include nearly $2.8 billion in damages; a future athlete revenue-sharing model that will cost the major conferences a total of more than $1 billion annually; and other potential changes to the association's governance, enforcement and scholarship structure.

Although the vote has been expected for weeks, it is a historic moment, a groundbreaking and radical change for an organization that has fought for decades against paying athletes directly even as its major football and basketball teams earned billions. The result of nine months of negotiations with plaintiffs' attorneys, NCAA President Charlie Baker and conference commissioners ushers in a new era for the industry that they hope will bring stability to the currently tumultuous recruiting landscape.

Caught in the purgatory between amateurism and professionalism, college sports are experiencing a resurgence – but not of their own accord. The industry was reluctantly forced into this semi-professional world by state laws and the court system, and still clings to a shred of amateurism as the new model is expected to continue to prohibit pay-for-play and incentive payments.

However, the university administration is convinced that the agreement will avert future legal disputes, bind the major leagues to the NCAA for at least another decade and ensure more regulation in the recruiting area.

“This would be the biggest change in the history of college sports. Period,” said Gabe Feldman, a sports law professor at Tulane University and a leading voice in NCAA litigation. “There have been significant and incremental changes. The NIL era opened many doors, but requiring athletes to share revenue with schools would not only be monumental, but it would run counter to what the NCAA has stood for for a century.”

What the new model means for athletes and what it costs for schools

All five presidential panels of the major conferences — the Big Ten, SEC, Pac-12, Big 12 and ACC — voted in favor of the settlement this week. The Pac-12 voted in its original form despite its near dissolution. The league held the final vote Thursday night on a historic day.

However, it will likely be many months before a final settlement is reached. The agreement must be approved by a judge and can be challenged by individual plaintiffs. Experts say this will take at least five months.

But the industry's new model is to be implemented within 14 months, at the beginning of the fall semester of 2025. It will allow universities – but not oblige them – to share revenue with athletes up to a certain quasi-salary cap.

The revenue-sharing agreements with athletes are classified as NIL agreements, in which schools provide funds for the use and broadcast of a player's name, image and likeness – a concept at the heart of the House case. Other forms of payment that are not NIL agreements are an option.

Although this new system still leaves many questions unanswered, institutions will be allowed to distribute up to $22 million per year to athletes. That figure, which is still very much in flux, was derived from 22% of the power conference's average revenue. The cap includes exceptions, as a total of $5 million in Alston-related money and additional scholarships can count toward the total.

A new model would remove scholarship restrictions while introducing caps on the number of faculty members. This is intended to avoid further litigation, but given the high intensity of recruitment, the move could cost universities millions in additional financial aid.

The end result is a hefty price tag — $200 million to $300 million per school over the 10-year settlement, or about $15 billion for all top schools. That figure assumes a school meets the revenue-sharing cap annually and increases scholarships by at least $3 million to $5 million.

Many school administrators are shocked when they find themselves seeking extra money in unusual ways, such as leveraging private equity and capital. A $30 million annual award, along with $20 million in scholarships, represents about 40-45% of the average budget of public school athletic departments in the ACC, Big Ten, SEC and Big 12.

Without an agreement, however, the university's leaders risk another loss in court, a $20 billion damages claim and bankruptcy, according to documents obtained by Yahoo Sports.

In addition to the new financial data, there are other changes coming.

Rule enforcement will not disappear

The comparator-based model is expected to include a new enforcement arm and administrative structure, at least for the power conference schools, that will allow them to create and enforce their own rules. Those details may take months to finalize.

For the administration, the enforcement situation is a key consideration. The settlement does not eliminate the booster-led collectives, but rather provides incentives for schools to incorporate them into the university's athletic department, primarily through a stronger enforcement body — one that may operate outside the NCAA and gain teeth from the settlement itself.

As part of the settlement, the judge is expected to “affirm” existing NCAA compensation rules, particularly those that prohibit incentive payments for deals that are not “true NIL,” according to a legal document summarizing the settlement. However, few details about the enforcement body were disclosed.

The settlement would also provide a 10-year “release” from antitrust damages claims by current, former and future athletes as part of a “substitution system” for new plaintiffs, according to the documents. An article on Yahoo Sports last week cited such a concept by plaintiff's attorney Steve Berman, who said the settlement includes a built-in element that would allow any new class of athlete to opt into the revenue-sharing structure.

The settlement is not perfect. It does not protect the NCAA and the conference from future lawsuits by state attorneys general, does not override state NIL or revenue-sharing laws, and does not provide any real regulation for the application of Title IX in such a compensation model.

Title IX “remains applicable at the campus level,” the document says – a situation that could lead to schools circumventing federal law by continuing to hire outside third parties to compensate athletes.

Jeffrey Kessler, another plaintiff's attorney in the case, believes the Title IX issue will ultimately be resolved in the courtroom.

“The courts will decide,” he told Yahoo Sports. “It doesn't affect us. If we reach an agreement, we will negotiate a system in which the athletes are compensated. The extent to which Title IX applies will be determined [by the courts].”

Opposition for this historic agreement

The board's vote followed a contentious approval process within the NCAA's 32-conference Division I. The 22 non-FBS conferences were upset with the funding model used to pay the nearly $2.8 billion in damages and banded together to block the move. Despite the opposition, the NCAA's board of directors approved the funding model on Tuesday, with five of the 21 voting members not supporting the plan. After approval, the item was sent to the board of directors, which met for over an hour on Wednesday before taking a vote.

Under the approved framework, the NCAA will pay 41% of the damages ($1.1 billion) while the schools will pay 59% ($1.65 billion) over the 10-year repayment period. It's all about the schools' share. The power conferences will pay about $664 million in damages. The other 27 non-power conferences will pay $990 million – a breakdown that has angered members of the non-power leagues.

Conference leaders and NCAA executives, who have been engaged in intense negotiations since August, only presented the financing plan and terms of the agreement to low-revenue leagues two weeks ago, they claim, with one commissioner calling the process “not healthy.”

There is further resistance to the agreement.

Representatives of players' associations and college athletic advocacy groups have publicly criticized the agreement as a short-term solution. They are calling on college administrations to find a framework for collective bargaining that gives athletes themselves a voice and offers a more long-term solution.

In the meantime, NCAA and conference officials are expected to continue lobbying Congress to both codify the terms of the agreement and circumvent state laws to protect themselves from implementing an employment model.

However, there is another catch.

A hearing is scheduled for Thursday in a separate Colorado antitrust case, Fontenot v. NCAA. The case involves billions of dollars in compensation for college athletes due to television broadcasts. While the House settlement is expected to consolidate two other antitrust cases – Hubbard and Carter – the Fontenot case is a special case. House, Hubbard and Carter have the same legal team. The law firms Korein Tillery and Olson Grimsley Kawanabe Hinchcliff & Murray are leading the Fontenot case.

The hearing is expected to focus on the possible consolidation of the cases. While House lawyers expect a consolidation with the Carter case, Fontenot's lawyers filed a brief on Tuesday with a clear message: They don't want a consolidation. Consolidating all four cases would be ideal for the NCAA to avoid future legal disputes.