NCAA Student-Athlete Settlement Pushing Madness Past Tournament

The NCAA and student-athletes are expected to settle their long-running name, image, and likeness dispute next month. But the proposed settlement likely will leave several questions about the NIL landscape unanswered.

US Judge Claudia Wilken of the Northern District of California has scheduled a hearing for April 7 on the revised agreement, which addresses the court’s concerns about what rights student-athletes have to enter into future NIL agreements with third parties.

Even if the proposed settlement is approved, it will leave significant ambiguity over student-athletes’ NIL rights, leaving much to be determined through litigation.

NIL Ambiguities

The proposed settlement includes no legal framework or parameters around permissible practices, terms, or conditions for student-athletes to receive NIL payments from direct revenue-sharing with schools. Individual schools will decide how to structure revenue sharing agreements with student-athletes, which could open the door to heavy-handed practices.

Future litigation may determine how much schools can condition revenue-sharing on prohibiting student-athletes from exploring transfer opportunities, preventing them from seeking third-party NIL arrangements, or imposing playing standards or good-conduct mandates.

The proposed settlement fails to address the extent to which schools can work together—say, within their conferences—to devise template agreements or terms without violating anticompetitive rules, despite the clear legal concerns.

The NCAA and the Power 5 conferences can continue “their existing prohibitions” against NIL agreements involving “associated entities or individuals” under the proposed agreement, which many commentators have assumed to be synonymous with NIL collectives.

However, the five-part definition of associated entities or individuals is broader than the traditional understanding of a NIL collective. It includes individuals and entities who, along with their families (which is undefined), have contributed more than $50,000 “over their lifetime” to a member institution. It also includes those who have “assisted in the recruitment or retention of prospective or current student-athletes,” without indicating what constitutes assistance.

The first draft of the proposed settlement referred to “boosters” as defined by NCAA rules instead of associated entities or individuals. This section was revised after the first preliminary approval hearing.

Although Wilken has now given preliminary approval after the most recent modification, it is far from clear whether it addressed her concerns or that it outlines the parties’ rights and responsibilities with sufficient clarity.

There are two limitations regarding NIL agreements with associated entities or individuals in the proposed settlement. First, NIL agreements with associated entities or individuals must have “a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit.”

Second, any compensation to student-athletes from associated entities or individuals must be “at rates and terms commensurate with compensation paid to similarly situated individuals with comparable NIL value who aren’t current or prospective student-athletes at the member institution.”

The definition of what constitutes a “valid business purpose” and the methods for assessing “fair market value” are undefined, and it isn’t clear where benchmarking information would come from.

In the professional sports and entertainment world, marketing contracts generally aren’t disclosed publicly. The NCAA has promulgated third-party NIL contracts best practices but that document doesn’t address these questions.

Title IX

Significant Title IX questions remain unresolved by the proposed settlement. Following the court’s initial preliminary hearing, the parties revised the agreement to make clear that it didn’t release Title IX claims relating to schools’ revenue-sharing or third-party NIL governance.

Numerous objections to the proposed settlement are based on Title IX concerns, and the court specifically invited Olivia Dunne, one of the few female student-athletes to make significant NIL earnings, to the final hearing—though listed her last on the list of 14 objector invitees.

It is unlikely student-athletes could maintain Title IX claims against the NCAA in any event, partly because the proposed settlement agreement expressly releases those claims. But even for opt-outs, the US Supreme Court in NCAA v. Smith held that the organization wasn’t subject to Title IX because it received federal funding indirectly from schools who received such funding directly.

The same rationale would likely apply to athletic conferences. But how member institutions allocate revenue-sharing funds could be the subject of Title IX disputes.

During the last days of the Biden administration, the Department of Education’s Office for Civil Rights issued a fact sheet purporting to clarify that schools’ distribution of NIL funds must comply with Title IX. The Trump administration’s Department of Education rescinded the fact sheet Dec. 12 and removed it from the DOE website.

The February news release asserted that “Title IX says nothing about how revenue-generating athletics programs should allocate compensation among student athletes.” A government news release, however, is unlikely to have the force of law, leaving the Title IX implications of the settlement open to future conflicts.

Because the NIL landscape has been left in such an unsettled state, numerous vendors purporting to assist student-athletes and their families understand NIL opportunities have sprung up some presumably reputable and some likely not. What is certain, however, is that even after the April 7 hearing, much more litigation is likely to occur before the student-athlete NIL landscape is clear.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Sarah Rathke is a trial lawyer and co-head of the US sports and entertainment practice at Squire Patton Boggs.

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