More Questions Than Answers As NCAA’s House Settlement Deadline Looms

Back in December, via an update to a “question and answer” document, the NCAA informed member institutions that they have a deadline of March 1 to indicate whether they are opting into the historic House settlement and its proposed revenue-sharing model that will allow schools to pay “NIL compensation” to their athletes directly. Those who opt-in will be allowed to provide additional benefits to their athletes up to a cap of over $20 million but will be subject to roster limits for each sport that have not previously been in place. Those who opt out will remain in the status quo.

With that deadline just over a week away, there are many more questions than answers for schools. Beyond the settlement being a tectonic shift in how the NCAA operates, other external factors are contributing to the chaos. The transition of power from President Biden to President Trump would have added some uncertainty on its own, but two agencies (the Department of Education and the Department of Justice) issued public statements that could greatly impact schools’ decisions to opt-in or opt-out; only to have them rescinded once new leadership was installed in those agencies. If this wasn’t confusing enough for schools, lawyers representing a group of anonymous athletes who have filed one of many objections to the settlement asked the judge presiding over the House case (Judge Claudia Wilken) to issue an immediate injunction to stop the NCAA from imposing its March 1 deadline.

The likelihood of Judge Wilken issuing such an injunction is miniscule. Typically, when a party wants an injunction, they have to make a court filing requesting one, not write a letter directly to the judge. It’s not entirely clear whether Judge Wilken even has the discretion to issue an injunction in reaction to this letter. Further, this deadline was issued over two months ago. If Judge Wilken were so inclined to prevent the NCAA from imposing this deadline even without an official request or filing, she would have likely done it already.

The Timing of the Deadline

The letter does raise the fair issue of the relative arbitrariness of the March 1 deadline. The hearing for final approval of the House settlement is scheduled for April 7th (coincidentally the same day as the men’s NCAA basketball tournament championship game). The timeline for Judge Wilken to issue a decision on her approval of the settlement is unclear. Asking schools to make a major decision regarding athletic department operations before anyone knows whether the settlement will even be approved is an odd policy choice. The timing could be an attempt to use the number of schools opting in as additional leverage to get Judge Wilken to approve the settlement. That strategy is unlikely to work (which has never stopped the NCAA before). Judge Wilken isn’t stupid, and she’s dealt with the NCAA before as the presiding judge in the infamous O’Bannon and Alston cases. She ruled against them in both.

It is widely assumed that all of the schools in the Power 4 conferences will opt-in to the settlement. Even some schools in the so-called Group of 5 conferences, like Boise State, have already declared they are opting into the revenue-sharing model. This is not a switch an athletic department can just flip on. It requires meticulous planning, including making NIL deals with their athletes. If the settlement is ultimately not approved, and those schools are not allowed to hold up the deals they made with the athletes, more chaos and lawsuits will assuredly follow. Notably absent on the NCAA’s document of 35 questions and answers is “what happens if the settlement is not approved?” That would be a nice piece of information for schools to have when making their decision.

Can Schools Change Their Mind After the Deadline?

According to the NCAA’s question and answer document, schools can decide whether they are in or out of the revenue-sharing model on a year-to-year basis (with a March 1 deadline each year). That fact alone may sway some of the more risk-averse schools who are on the fence into opting out. It would be unsurprising if the NCAA also allowed schools to change their mind after the upcoming deadline passes, making the upcoming deadline all the more tenuous.

Will the Settlement be Approved?

The NCAA is putting an awful lot of eggs in the “settlement will be approved” basket. So much so that they are unwilling to even entertain questions to the contrary. Most settlements are approved by judges. The courts typically do not want to interfere with good-faith dealmaking that helps avoid lengthy and expensive litigation. However, this settlement is far from typical in numerous ways and Judge Wilken initially declined to give the settlement preliminary approval back in September. The two sides made some minor changes to the settlement terms, which was enough to change the judge’s mind at the preliminary stage. Since then, there have been a litany of objections to the settlement filed by current athletes (including LSU gymnast/NIL superstar Livvy Dunne), former athletes, parents of athletes, and the former NBA Players’ Association Executive Director Michelle Roberts, among others. The objections raise major issues such as the imposition of roster limits, Title IX and gender equity concerns, and individual damages calculations among others.

What Happens if the Settlement Is Not Approved?

It’s difficult to speculate on how the NCAA and schools will pivot if the settlement is ultimately not approved. If Judge Wilken makes recommendations to change the settlement so she is willing to bless it, the NCAA would be wise to concede to new terms, even if they don’t like them. The proverbial Pandora’s box of revenue sharing has already been cracked open. Reverting to a system without the option for revenue sharing would only invite more lawsuits. Beyond the revenue-sharing aspect, going to a full trial regarding the damages owed to former athletes is potentially perilous. The NCAA could, in theory, win a case on the merits and not have to pay the currently agreed upon $2.8 billion, but that seems improbable. In the more likely scenario that the court finds that the NCAA violated antitrust laws by fixing athlete compensation at $0, the dollar figure it could be on the hook for is nearly incalculable. The gap between the theoretical NIL value of tens of thousands of athletes who contributed to a multi-billion dollar industry and $0 is difficult to quantify, but that’s precisely what the court would try to do. Then they would triple that number, as required under antitrust law. The NCAA has a lot of money, but they couldn’t survive that loss.

What Will College Sports Look Like If the Settlement is Approved?

If the best-case scenario plays out for the NCAA and the settlement is approved, it will help stabilize the chaos a bit, but it will not be the end of the NCAA’s legal woes. The way they plan on operating after the settlement is still in violation of antitrust laws, they will still have deal with athletes who have opted out of the settlement, Title IX/gender equity litigation is likely on the horizon, and the question of athlete employment remains unresolved. It will also be interesting to see the co-existence of schools that opt in and those that opt out. The NCAA, to put it charitably, struggles to enforce one set of rules. Watching them try to enforce two very different sets of rules should prove entertaining.