Ramifications of the House v. NCAA settlement

August 2025 | SPOTLIGHT | SECTOR ANALYSIS

Financier Worldwide Magazine

August 2025 Issue

The settlement of the House v. NCAA litigation imposes the most sweeping change to the multibillion-dollar industry that is collegiate sports in the US since the formation of the National Collegiate Athletic Association (NCAA). The House settlement now permits schools to make direct payments to student-athletes and therefore constitutes a leap to professionalising collegiate athletics.

Prior to the House settlement, elite-level collegiate sports acted as developmental programmes to professional leagues and student-athletes made relatively stark elections to develop as a student-athlete or to turn professional.

Now those lines are blurred, creating opportunities and risks for sports, athletes and investors. Student-athletes now have distinct avenues to receive compensation in connection with sport. First, compensation paid directly by a university or college (school) and school-affiliated entities, subject to a cap set on each school’s total allowable spend for that year, also known as the ‘pool cap’. Second, compensation paid by third parties to student-athletes for their name, image and likeness (NIL), as long as the third parties have no relation to, or affiliation with, the school (third-party marketing rights). And third, compensation from NIL collectives, as long as such compensation is at fair market value and cannot be used as compensation to attend a particular school.

Although the House settlement contains some specific guidance for schools, it leaves open several legal and operational issues involving marketing rights, contract structure, payment calculation and compliance, among others. Furthermore, the development of those operational issues may depend on state law in certain jurisdictions – at least 35 states have enacted legislation addressing student-athlete compensation since California initially enacted the Fair Pay to Play Act in 2019 and nearly 25 states have considered legislation just this year to amend these statutes, many of which are in direct response to the House settlement.

Furthermore, efforts to create a federal legislative scheme to govern NIL in college athletics have begun. On 9 June 2025, a bill was introduced by Bynum McClain, house representative, called the Student-athlete Protections and Opportunities through Rights, Transparency, and Safety Act (SPORTS Act). However, given other legislative priorities at this juncture, it is difficult to predict the contours of any overarching legislative scheme.

Summary of the House settlement

The House settlement resolved two separate antitrust claims that alleged that NCAA rules were anti-competitive. It has two components: a damage payment of $2.576bn for past harm to current and former student-athletes who participated in division one sports since 2016, and a framework for student-athletes to receive direct compensation, including for their NIL.

With respect to damage payments, the House settlement set aside $1.976bn for claims for NIL-related injuries, including videogame NIL, broadcast NIL and third-party NIL. It sets aside an additional $600m for claims related to pay for play (compensation for playing the sport or ‘athletic services’) claims. Ninety-five percent of that $600m will be allocated in a ratio of 75, 15 and 5 percent to student-athletes in football, men’s basketball and women’s basketball, respectively. The remaining 5 percent of that $600m will be distributed to additional plaintiffs who received a partial or full scholarship from the 2019-20 school year onward. The two funds together total the settlement fund of $2.576bn.

The most noteworthy changes are the rule changes that the House settlement created for paying student-athletes, which will remain in place for 10 years. Schools are now permitted to directly pay student-athletes subject to the ‘pool cap’ limitation – a per school total limit on the direct pay to student-athletes. The pool cap is initially set at $20.5m per school. An annual 4 percent escalator results in an estimate of approximately $32.9m per school in 2034-35. The schools are permitted, but not required, to pay student-athletes under this rule.

Of course, to acquire and retain talent, all competitive programmes will strive to distribute the maximum amount payable pursuant to the pool cap. Notably, these rules relate to compensation for NIL and not compensation for athletic services, which is not directly addressed by the House settlement. And because NCAA rules regarding pay to play remain in effect, the NCAA will likely continue to enforce those rules given the House settlement’s silence on this point. Consistent with the ability to directly compensate student-athletes for NIL in programmes covered by the House settlement, subject to the pool cap, the NCAA division one scholarship limits are eliminated and replaced with a roster limit adopted by the NCAA for division one sports.

Critically, the House settlement sets forth rules regulating NIL deals. Student-athletes can still receive payments in exchange for their NIL (third-party marketing rights). However, third-party marketing rights deals may not come from an entity that is owned or operated by the school (an ‘associated entity’). If so, those payments count toward the pool cap. Nonetheless, that rule also permits a school to enter into an agreement to act as the marketing agent for the student-athlete with respect to the NIL contract. In that instance, those payments do not count against the school’s pool cap. In addition, sub-licensed student-athlete marketing rights do not count toward the pool cap.

The House settlement also addresses compliance and enforcement with the new rules. First, it establishes enforcement guidelines in connection with third-party marketing rights. ‘NIL collectives’ affiliated with a school are subject to heightened scrutiny. The heightened scrutiny focuses on ensuring NIL payments by NIL collectives are for a valid business purpose related to the promotion or endorsement of goods or services offered to the general public for profit. Furthermore, those NIL payments must be at fair market value – consistent with the same terms paid to similarly situated student-athletes.

This last requirement is noteworthy, as NIL collectives have been criticised for making payments for NIL that exceed the fair market value of the student-athlete’s marketing rights and effectively result in a pay for play system. Of course, there can be great difficulty in establishing the ‘market’ for NIL rights, and in some sports a market may be difficult to determine with precision.

The NCAA also will transfer power to punish schools, athletic programmes and individuals for rules violations to a new entity called the College Sports Commission. The College Sports Commission will conduct its oversight through the NIL Go System. Student-athletes must self-report NIL deals into the NIL Go system whenever they enter into a deal over $600.

Ramifications of the House settlement

The rules regarding collegiate athletics are ripe for comprehensive, legislative overhaul. As the landscape for paying student-athletes evolves, there will likely be more pressure to create a legislature-made, rather than court-made, solution.

Not all sports will be treated equally. Football and basketball student-athletes stand to gain the most, as their sports generate the most revenue. Student-athletes in non-revenue sports may encounter reduced funding or have their sports cut entirely, as school budgets shift to paying the pool cap funds to revenue-generating sports and the administrative costs with the implementation of the new rules.

Some schools have announced that football programmes will receive 75 percent of revenue, men’s basketball will receive 15 percent and women’s basketball will receive 5 percent, with the rest going to non-revenue sports like tennis, track and field and rugby. Indeed, which sports benefit more will likely depend upon at which school that sport is played. For example, men’s basketball programmes at non-football schools – predominantly those outside of the ‘power four’ – will likely get a spending boost. However, men’s basketball programmes at football schools will likely suffer.

Schools with large athletics programme budgets will end up with a competitive edge, as they outspend smaller schools with budgets far below the pool cap. Attracting top tier talent may become embedded in the school landscape, resulting in well-funded football and basketball programmes in the ‘power five’ conferences ending up with an institutional advantage over other schools. Indeed, for many smaller schools, athletics programmes are a loss leader and the new financial landscape may lead smaller athletics programmes to shut down entirely.

Access to facilities, infrastructure and marketing abilities to maximise ticket sales, media rights and other revenue sources more akin to professional sport may further differentiate schools and dilute competitiveness in college athletics.

School-affiliated donor collectives will have their activities curtailed. Since 2021, when student-athletes were first allowed to receive income from NIL deals, school-affiliated donor collectives have paid as much as $1bn into third-party NIL agreements.

The roster caps imposed by the House settlement are lower than current rosters, which will result in some student-athletes being cut from the team and eliminating walk-on positions. Football teams will be capped at 105 roster spots, down from the previous number of 130. Women’s soccer will be capped at 28 spots, down from the 30-plus roster at many schools.

Given that student-athletes can now be paid directly for their NIL, student-athletes may have additional incentive and resources at their disposal to push for collective bargaining, and perhaps unionisation.

Many schools will have to make some hard budgetary decisions with respect to student-athlete support and administrative expense, now that schools will need to gather funding in each budget year to pay student-athletes up to the pool cap.

The success of the House settlement payment structure depends on fair and accurate enforcement of the rules, which means more disputes regarding rule enforcement.

On a global level, the interest in being able to monetise a college athletic career may serve as incentive for student-athletes in Europe and Asia to play in the US for their college careers.

The House settlement constitutes a landmark change in US collegiate athletics, dropping the business of professional sports squarely into the university and college environment. The impact of those changes remains to be seen, as the regulatory framework develops, and all relevant stakeholders work to try to apply the rules set forth in the House settlement to the business of school athletics.

Maurice Suh is a partner at Gibson, Dunn & Crutcher. He can be contacted on +1 (213) 229 7260 or by email: msuh@gibsondunn.com.

Maurice Suh

Gibson, Dunn & Crutcher