NCAA, college leaders file landmark agreement in antitrust cases; here’s what was settled and what’s next – MASHAHER

For decades, the NCAA and college sports leaders went to great lengths to both avoid court and congressional intervention.

Now, in the wake of a landmark settlement agreement, the courts hold significant oversight over the industry’s new model and only Congress can prevent what some college leaders see as an inevitable end — athlete employment.

The NCAA and power conferences on Friday filed their 100-plus page long-form agreement in the settlement of three antitrust lawsuits (House, Hubbard and Carter), ushering in a future of athlete revenue sharing, expanding scholarships to full rosters and creating a historic enforcement system of arbitration overseen by the courts. The new concepts take effect at the start of the 2025-26 academic year next summer or fall.

The plaintiff attorneys, representing thousands of athletes who brought the class-action suits over athlete compensation or lack thereof, separately filed documents Friday detailing how they plan to distribute nearly $2.8 billion in back damages to former players over a 10-year period.

According to documents sent to Yahoo Sports, 83% of the back pay — $2.3 billion — is expected to go to an estimated 19,000 football and men’s basketball players, many of them from power conferences. That is an average of about $120,000 per player over the 10-year period, or $12,000 a year.

The back-damages formula could guide how schools distribute revenue going forward. The first back payments are due this coming spring after, presumably, the settlement is approved by presiding Judge Claudia Wilken of the U.S. District Court of Northern California.

Friday’s filings were the latest step in a settlement approval process that could stretch, attorneys contend, into the early portion of next year.

The long-form filing from the defendants — the NCAA and five power leagues — includes dozens of pages of legal jargon offset with the all-important injunctive relief agreement: a 31-page document detailing the revenue-sharing pool and cap, new roster limits for sports and an enforcement mechanism unlike anything college sports has seen.

While the settlement grants plenty of authority to the NCAA and conferences, as well as protecting their existing and future rules, the court and the plaintiff attorneys — most notably Jeffrey Kessler and Steve Berman — are tasked with overseeing and managing various aspects of the future model, including the operation and enforcement of college sports’ new quasi-salary cap.

A court-appointed “special master” will settle disputes over compliance and interpretation matters about the revenue-sharing model, a role currently occupied by the NCAA office. A “neutral arbiter” is charged with hearing and ruling on appeals from athletes or schools found to have violated rules connected to the new model, a role currently held by the NCAA infractions entity.

Plaintiff attorneys as well as their class of athletes — new freshman classes are automatically added to the settlement each year — hold a role in the development of the enforcement process of the new salary cap and are partly responsible for monitoring such over the decade of the agreement.

While much of the filing has previously been reported, the document did provide some new information and more specifics around various concepts, most notably an enforcement and arbitration system to police third-party NIL entities, such as collectives; and the escalating pool of revenue that schools are permitted to share with athletes.

For more on the new scholarship and roster structure, please see this story.

Third-party NIL and arbitration

One of the biggest looming uncertainties as part of the settlement agreement is its impact on third-party, booster-backed collectives. Collectives provide millions to athletes in, what many believe to be, cash incentives disguised as endorsement deals for the use of their name, image and likeness (NIL).

Language in the settlement seeks to eliminate or greatly reduce what many college leaders describe as “phony” NIL payments from booster organizations to athletes. The settlement does this through an assortment of rules and an enforcement mechanism that is protected through the court. For instance…

• Boosters — or any third-party entity or business, for that matter — are expressly prohibited from striking NIL deals with athletes unless they can prove the agreements are genuine with rates that align with “similarly situated individuals with comparable NIL value” who are not players at that school, the settlement reads.

• All third-party NIL deals of a $600 value or more must be approved by a newly created clearinghouse that is expected to vet the agreements for authenticity by using fair market value standards. For those deals not approved, the NCAA, conferences and/or a new third-party enforcement entity has authority to deem athletes ineligible and/or to fine schools for violations, as they do now.

• However, unlike now, those punishments can be appealed to an agreed-upon neutral arbitrator. The arbitration process, according to the settlement, is designed to be a more accelerated and neutral procedure than the NCAA’s current infractions situation, where committees of school representatives determine matters. The arbitrator must rule within 45 days of the beginning of the arbitration process, but an extension is possible. The arbitrator’s ruling is “final and binding,” according to the settlement.

• During arbitration, enforcement penalties — for instance, a player ruled ineligible — will be stayed until a ruling. Arbitrators have the power to request the production of documents and witness testimony. It’s unclear if that entails subpoena power.

Circumventing the cap

The settlement also seeks to eliminate ways for schools to use third-party NIL agreements to circumvent the annual revenue-sharing cap. For instance…

• The settlement gives the NCAA and leagues power to “adopt rules that prohibit any transactions designed to defeat or circumvent the cap,” it says.

• The settlement makes clear that school funds used by an outside entity to distribute to athletes will count against the revenue-sharing cap. This is a significant piece of information that seeks to eliminate the possibility of schools circumventing the cap by funneling institutional monies through multimedia rights holders, foundations, collectives and other agencies for athlete distribution — as some are currently doing. While that practice is permitted, the monies distributed are subject to the revenue-sharing cap, and NIL deals with athletes must be approved by the clearinghouse.

There is, however, one way to circumvent the cap.

As part of the revenue-sharing model, schools can serve as an athlete’s “marketing agent” for third-party NIL deals by entering into exclusive or non-exclusive endorsement agreements to purchase a player’s NIL.

This is the transaction that permits schools to share revenue with athletes, but it also does something else: Schools are permitted to procure outside, third-party NIL deals for their athletes that do not count against the revenue-share cap, as long as those deals are proven to be authentic. Such a policy incentivizes schools to find organic endorsement deals for their athletes with brands and businesses. Schools can use a marketing agency to as well do this.

For instance, as part of its endorsement agreement with an athlete, a school can distribute revenue to that athlete while also using that athlete’s likeness in separate agreements with brands and businesses to generate more money. Player A, for example, receives $100,000 in revenue share from his school but also receives $50,000 from a third-party for an endorsement deal that is approved as authentic. The $50,000 is exempt from the revenue-sharing cap.

The revenue-share pool

As has been reported for months now, the formula to determine the revenue-sharing cap is 22% of an average of certain power school revenues, as noted in the long-form settlement agreement. Those figures include, most notably, ticket sales, television contracts and sponsorships.

The financial figures that schools most recently reported to the NCAA are used to reach the average, which means that the exact cap figure for Year 1 in 2025-26 will remain uncertain until the completion of 2024-25, attorneys told Yahoo Sports.

However, administrators are working off an estimate of about $21.5 million as the annual cap starting point. While the 22% will remain the same through the 10-year agreement, the cap money figure will rise based on built-in escalators as well as scheduled recalculations that are spelled out in the long-form agreement — a visual chart that is available below.

As shown in that chart, in Years 2 and 3 of the deal, the money figure will automatically increase by 4% each year. In Year 4, a recalculation of revenues will generate a new cap. The three-year cycle repeats through the 10-year length of the settlement.

Revenues are expected to increase as additional cash flows into departments. In fact, plaintiffs and their attorneys have two options over the 10-year period to trigger a non-scheduled recalculation of the average — decisions likely made when conferences enter into new, more lucrative television deals or/and begin receiving new College Football Playoff monies.

Ohio State athletic director Ross Bjork told Yahoo Sports this week that he expects the cap to rise to $24 million as soon as Year 2 and to break $25 million by the time the Year 4 recalculation happens.

Over the course of the 10-year deal, the plaintiff attorneys expect college athletes at major conference schools to receive more than $20 billion in revenue from their schools. That’s about $28 million annually per power conference school over the duration of the decade.

There are exceptions, though, that can artificially lower the cap, including as much as $2.5 million in Alston-related money already going to athletes and $2.5 million in additional scholarships offered that were not previously permitted under NCAA rules.

More key notes from the long-form settlement

• Those that are not defendants — schools and conferences in the Group of Five, FCS and non-football playing Division I programs — are bound by the roster limits, reporting system and enforcement mechanism only if they choose to share revenue with athletes. They can opt out of the new model if they decline to share revenue.

• There will likely be two portions of attorneys fees: one for their role in the future revenue-sharing model; and another for their cut of the back damages. Attorneys fees for the back damages are likely to be filed at a later date, but their fees as part of the revenue-sharing model were included in Friday’s filing. Attorneys are requesting a $20 million up-front fee plus a cut of the total amount of revenue shared with athletes each year. The cut starts at 0.75% and has built-in escalators to 1.5%. The 70 power schools are expected to at least share a combined $1.5 billion with athletes per year. Including the up-front $20 million, attorneys will receive $150 million — at the very least — from this portion of the settlement.

• The plaintiffs and attorneys will assist in NCAA and power conference lobbying efforts for congressional legislation to codify the settlement agreement and, most importantly, not advocate against the NCAA on Capitol Hill, which they, very much, have done over the last several months. They will take a “neutral” stance on the employment issues, according to settlement language.

• As expected, the settlement features an option to actually terminate the agreement if employment/collective bargaining arrives in college sports.

• The settlement protects NCAA rules around (1) four-year athlete eligibility maximum over five years, and (2) an athlete’s requirement to pursue a degree to participate in the revenue sharing.

• The first back-damage payment is due May 15, 2025, or within 45 days of the settlement’s finalization, which attorneys expect to happen in the early part of 2025 (January-February). Subsequent yearly payments will be made each July 15.