The N.C.A.A.’s Landmark Athlete-Pay Settlement, Explained

When the N.C.A.A. and the major athletic conferences agreed on Thursday night to a $2.8 billion settlement of a class-action antitrust lawsuit by college athletes, it was a pivotal moment in the long history of college sports.

For the first time, the N.C.A.A. agreed to allow colleges and universities to pay athletes directly for playing sports, through revenue sharing plans.

The agreement also would pay compensation to close to 25,000 athletes who attended 363 Division I colleges and were denied the ability to make money by marketing their names and images during their playing days. Restrictions on those kinds of deals were lifted by the N.C.A.A. in 2021.

Here’s what we know about the settlement and its possible impact.

How is this settlement different from other lawsuits and decisions over pay for student athletes?

This settlement would create a system through which Division I athletes can be paid directly by their schools for playing sports — a first in the nearly 120-year history of the N.C.A.A. An earlier decision three years ago permitted college athletes to make money on their own by marketing their names and images individually.

Is the settlement final?

Not yet. The federal judge in California, Claudia Wilken, who is presiding over the case, known as House v. N.C.A.A., will decide in the next few months whether to approve or reject the settlement.

Judge Wilken has decided two other influential antitrust cases against the N.C.A.A. involving payment to student players. In each of the cases, known as O’Bannon and Alston, she ruled for the plaintiffs, but awarded only minimal relief.

What would the settlement do?

There are two major parts of the settlement — one to compensate players for income they have already foregone, and the other to allow schools to pay their players from now on, through revenue sharing.

The compensation part calls for $2.8 billion in damages to be divided among athletes in three categories. One group is made up almost exclusively of athletes who played major-conference football and men’s basketball, the college sports that yield the most revenue. Another category covers women’s basketball players in the major conferences. And the third includes any other Division I athlete who competed between 2016 and 2020 and joined the lawsuit. (One of those athletes is Grant House, a former swimmer at Arizona State who is the first named plaintiff in the case.)

The N.C.A.A. has not released details on how these back payments would be distributed, or on what basis the amounts would be decided.

Where would that $2.8 billion come from?

The money would be paid over 10 years by the N.C.A.A. and by athletic conferences made up of Division I colleges and universities, who account for about 30 percent of the N.C.A.A.’s more than 1,100 members.

Here is how it breaks down: The N.C.A.A. would cover 41 percent ($1.2 billion) of the bill through spending reductions and new revenue and by dipping into its reserves.

The conferences that were co-defendants in the lawsuit — Big Ten, Southeastern, Big 12, Atlantic Coast and Pac-12 — would pay about 24 percent, and the remaining five conferences that compete for the College Football Playoff would contribute about 10 percent.

The Football Championship Subdivision, which includes conferences like the Big Sky and the Ivy League and historically Black colleges and universities, would pay about 13 percent. And Division I conferences that do not play football, like the Big East, would foot 12 percent of the bill.

The conferences’ share would come from money withheld from future N.C.A.A. distributions, mostly from the men’s basketball tournament. The N.C.A.A. is using each conference’s representation in the tournament to determine its individual share, so a conference like the Ivy League, whose teams have won tournament games the last two years, would be on the hook for more than, say, the Southland Conference.

How will the revenue sharing part work?

Many details are unclear, and may not be made public until the judge makes her decision.

Here are the broad outlines: Beginning with the 2025 football season, Division I schools would be allowed — but not required — to set aside up to about $20 million of sports revenue a year to pay athletes. Each school would decide for itself how to distribute the money and which athletes would receive it.

Overall, the settlement would call for schools to share about 22 percent of their sports revenue with players. That is a much smaller share than in the professional sports world, where leagues have agreed to share about 50 percent of revenue with players.

Might a volleyball player, say, receive money, or will it just be for football and basketball players?

That would be left up to each school. Some might choose to pay all varsity athletes, others might pay only those in high-profile programs that bring money in, or any other combination.

It is unclear how this plan would be affected by Title IX, the federal law dictating that schools must provide equal opportunities for men and women in athletics.

Why did the N.C.A.A. opt for this settlement?

The organization wanted to avoid what could have been a far larger award to the plaintiffs if the case had gone to trial and the plaintiffs won — a potential price tag of more than $4 billion.

By settling the case and creating a plan for revenue sharing, the N.C.A.A. is hoping to ward off more antitrust lawsuits claiming that athletes are being unfairly denied compensation. Litigation on those lines has hampered the N.C.A.A.’s ability to make even basic rules about how it governs itself.

How would the settlement affect college players’ efforts to unionize?

At this point, not at all. There are three cases working their way through various forums that seek to classify athletes as employees, and those efforts would not be directly affected by the settlement.

Dartmouth men’s basketball players have been allowed to form a union by the National Labor Relations Board, though the college is appealing the decision. An N.L.R.B. administrative judge is awaiting final written arguments on whether U.S.C. football and men’s and women’s basketball players should be classified as employees. And an antitrust lawsuit over the issue, Johnson v. N.C.A.A., has been marooned in a federal appeals court for 15 months awaiting a ruling on the N.C.A.A.’s motion to dismiss it.

One thing to consider: The settlement would last for 10 years. If revenue sharing is extended beyond that, it might have to be done through collective bargaining.

What about the N.C.A.A.’s efforts to get help from Congress?

The N.C.A.A. has spent millions of dollars lobbying Congress in recent years, asking for an antitrust exemption that would shield it from lawsuits that limit its ability to make its own rules. For example, the N.C.A.A. had to abandon any restrictions on student transfers after a lawsuit by state attorneys general challenged the restrictions as a restraint of trade.

The organization will continue to ask Congress for help, but action is highly unlikely in this election year. Many lawmakers have expressed reluctance to intervene in how the N.C.A.A. governs itself.

The N.C.A.A. may use this settlement as a way to demonstrate to Congress that an antitrust exemption is necessary assistance, not a bailout.

Are all member schools in favor of this plan?

No. While many college leaders have acknowledged a need for some kind of compensation system., there is heated debate about how to go about it. Administrators from smaller conferences are upset that they were not included in discussions about the settlement, and are worried that their conferences will have to pay a disproportionate share of the cost.

What might block the settlement from being approved?

On Thursday, a judge in Colorado denied the N.C.A.A.’s request to move another antitrust case, Fontenot v. N.C.A.A., to the same court in California that will decide on the settlement. That decision leaves open the possibility that athletes who are part of the settlement class in the House case — any Division I athlete going back to 2016 — could opt out of the settlement if they believe that the Fontenot case might deliver more money to them. And if many athletes do opt out of the House case, that might affect Judge Wilken’s decision on whether to approve the settlement.