Federal Judge Approves $2.6B Settlement — Colleges to Pay Athletes Directly

Federal Judge Approves $2.6B Settlement — Colleges to Pay Athletes Directly

A federal judge in California gave final approval to a $2.6 billion settlement for college athletes that transforms college sports by allowing colleges to directly pay athletes.

On Friday, U.S. District Judge Claudia Wilken's decision de facto created a professional era for college sports. She signed off on a plan for the NCAA and the five most prominent sports conferences to settle a class-action lawsuit with current and former college players. The case is House v. NCAA.

The deal will give backpay to some, as well as creating a system in which each Division I school will be able to distribute roughly $20 million a year to their athletes. Schools are poised to begin implementing the new model this fall. 

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But it is a transformative change.  In the past few years, NIL money has dominated the landscape, and players, especially in basketball, have jumped from program to program for higher pay packages. Some players attending four or even five different schools. It is reported that Duke star Cooper Flagg received more than $25 million in NIL payments alone this past season — his freshman year.

The settlement would “enable NCAA schools to share their athletic revenues with Division I college student-athletes for the first time in the history of the NCAA,” Wilken wrote in her 76-page opinion. She added that it was “expected to open the door for Division I student-athletes to receive, in the aggregate, approximately $1.6 billion in new compensation and benefits per year, with that amount increasing over the next ten years.”

NCAA President Charlie Baker wrote in a letter to his membership late Friday night after Wilken's decision was finalized, “Approving the agreement reached by the NCAA, the defendant conferences and student-athletes in the settlement opens a pathway to begin stabilizing college sports. This new framework that enables schools to provide direct financial benefits to student-athletes and establishes clear and specific rules to regulate third-party NIL agreements marks a huge step forward for college sports.”

Baker added, “That huge step comes with significant change. Going forward, the defendant conferences will be responsible for implementing several elements of the settlement, including the design and enforcement of the annual 22.5% cap (approximately $20.5 million in year one) for financial benefits a Division I school may direct to student-athletes. In addition, the court maintains jurisdiction over the implementation of the settlement, and the plaintiffs will continue to track progress. The defendant conferences are also responsible for launching and enforcing a series of rules regarding the third-party NIL contracts student-athletes may enter into. With these reforms, along with scholarships and other benefits, student-athletes at many schools will be able to receive nearly 50% of all athletics department revenue. That is a tremendously positive change and one that was long overdue."

But Baker warned, “Significant challenges remain, including attempts to force student-athletes to be classified as employees despite their leadership at all levels opposing this. In addition, attacks persist on college sports' ability to set national rules regarding years of eligibility — the policies that enable the next generation of young people to access educational and athletic opportunities. And states continue to undercut one another in a race to the bottom by challenging the ability of the NCAA and conferences to establish and enforce rules that maintain level playing fields. The NCAA and college sports leaders have made tremendous, positive change in recent years, but only Congress can address these issues."