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As students depart their college campuses for summer break, the NCAA has no such reprieve on the horizon. Over the past few weeks, the NCAA has settled questions pertaining to backpay for Name, Image, and Likeness (NIL) use as well as transfer eligibility.  While these announcements signal victory for some, they also raise more questions for compliance and athlete employee status.

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First, The NCAA reached a historic settlement with athletes who had competed at the collegiate level before the Supreme Court’s ruling on athlete compensation in NCAA v. Alston. The members of the multiple consolidated classes comprised of former student athletes claimed that they were owed years of prohibited NIL revenue. The classes of athletes were certified in September 2023 and November 2023 with total damages estimated to be in the billions.

While terms of the settlement were not disclosed, the settlement is said to be upwards of $2 billion dollars. About half will come from the NCAA’s reserves, while the rest will be raised by withholding revenue distributions to conferences and schools over the next decade. The settlement also heralds in a new age of revenue-sharing for schools and their athletes. Beginning in 2025, schools will be permitted to distribute up to $20 million of their own revenue directly to athletes each year. The revenue-sharing model will require certain safeguards in order for schools to be in compliance with their Title IX obligations. Additionally, the revenue-sharing model, with its $20 million ceiling, will likely present challenges in recruiting and retention for smaller programs across the country.

The settlement also carries with it the potential of opening up the NCAA and its member schools and conferences to increased collective bargaining efforts, beginning with claims that student-athletes should be classified as employees, raising additional employment issues, as well as university obligations and requirements.

While the settlement deals with some issues, it does not include a proposed class action by former University of Colorado football player, Alex Fontenot and former college women’s basketball player Mya Hollingshed. The suit alleges that NCAA limitations on compensation restrains competition in the labor market. The case leaves open important antitrust considerations on purported restraint of trade in the college athlete labor market.

Second, last week, the NCAA announced that it will no longer enforce the Transfer Rule after settling a lawsuit brought by the U.S. Department of Justice, 10 states and the District of Columbia in the case State of Ohio et al v. NCAA. The NCAA’s Transfer Rule set forth certain limitations on an athlete’s ability to transfer schools and maintain eligibility.  The case brought by the states and DOJ initially secured a temporary restraining order (followed by a preliminary injunction agreement) that granted transfer athletes immediate eligibility through the 2024 academic year. The resolution of the multi-state case made moot certain antitrust claims brought by RaeQuan Battle, who brought an action against the NCAA alleging state law claims concerning trade and monopolization, Sherman Act violations and tortious interference.  Battle claimed that the NCAA’s Transfer Rule functioned as an unlawful restraint of trade in violation of the Sherman Act.  In a May 28 Order on the NCAA’s motion to dismiss, the court dismissed Battle’s antitrust claims as moot because of that the existence of the preliminary injunction agreement in the State of Ohio case. The court therefore concluded that Battle received the relief he had originally sought.

Open issues for stakeholders abound – the would-be $20M cap is based on 20% of the average revenues of some unspecified group of athletics programs, which itself has been estimated to be about $20 million.  That number — an average — will feel manageable for some institutions and unapproachable for others.  How schools will choose or be required to allocate compensation up to the cap remains an open question.  Setting Title IX aside, how do institutions decide to divvy up now permissible funding – e.g., between football, basketball, and other sports?  Should each sport eat what it kills as they say? How transparent will these decisions and allocations be and will they be disclosed during recruiting? What happens if the deal changes? If the last several years of changes surrounding the NCAA is any indication, the question is not really what comes next if the current landscape changes, but when.

No Offseason for the NCAA

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