NCAA’s Codified Pay-for-Play Structure Creates Downhill Problems

The $2.576 billion class settlement in House v. NCAA that Judge Claudia Wilken granted in June represents the most significant judicial intervention in the structure of intercollegiate athletics since NCAA v. Alston.

While commentators are focusing on the historic financial payout and the advent of school-funded compensation that cracks the bedrock of “amateurism” in college sports, the long-term significance of House lies in its codification of a legal framework for pay-for-play and its displacement of institutional enforcement authority.

The settlement agreement doesn’t simply resolve past antitrust violations related to name, image, and likeness restrictions—it transforms the NCAA’s governance model, particularly through its mandated arbitration framework, poses compliance burdens related to Title IX, and offers vague directives regarding the new revenue-sharing “Pool.”

The Legal Significance

The settlement agreement extends beyond the NIL concept. House departs from the deregulatory spirit of the 2021 reform by judicially endorsing direct compensation flowing from NCAA athletic departments to their student-athletes in exchange for their athletic services (colloquially referred to as “pay-for-play”).

The NIL reform in 2021 cracked the door open to commercialization insofar as student-athletes secured third-party endorsements for the use of their NIL. House kicks the door off its hinges by explicitly acknowledging that the NCAA’s restriction on pay-for-play violated antitrust law.

The settlement agreement approved by Wilken contains a profound change in dispute resolution centered on NIL partnerships. House requires arbitration for disputes between student-athletes and the NCAA or its member schools. On the surface, this may streamline conflict resolution and protect athletes from school-imposed penalties during a dispute. But the devil is in the details.

First, arbitrators—not university compliance departments or NCAA enforcement arms—will be the last word in many disputes.

Second, neither the NCAA nor member schools may impose penalties while arbitration is pending (absent a finding of good cause), which significantly weakens the NCAA’s ability to police NIL conduct in real-time.

Third, the arbitrators must issue written decisions, creating a quasi-precedential record that could clarify the scope of permissible NIL activity. Most importantly, mandatory arbitration functionally removes enforcement authority from the NCAA.

Title IX Challenges

The first legal challenge has already emerged from a group of female student-athletes, who are asserting that the backpay distribution under the settlement disproportionately favors men. They aren’t wrong: Roughly 90% of the payout will go to male athletes, who have historically driven NCAA revenue.

Title IX prohibits sex-based discrimination in federally funded education programs. But this settlement—though privately negotiated—implicates Title IX in unprecedented ways.

The backpay component is on hold pending appeal. But the broader question lingers: How can schools implement a revenue-sharing model that complies with Title IX’s requirements of equal treatment and benefits? Unlike scholarship counts, the “Pool” doesn’t yet account for proportional distribution. Schools will need to design revenue-sharing plans that align with both federal law and the new financial structure—or prepare for the next wave of litigation.

The so-called “Pool”—capped at roughly 22% of the average “Power Five” school’s annual athletic revenue—is serving as a de facto salary cap imputed on Division-I athletic departments.

While it may resemble a salary cap, the settlement doesn’t define what counts against it, how non-cash benefits are valued, or how compensation agreements may affect athlete mobility through the NCAA transfer portal. It merely allows the NCAA to address those gaps by adopting new rules. The settlement’s vagueness will create complexities and opportunities for athletic departments, compliance offices, and general counsel.

Of special note, schools might be disincentivized to say yes to high-cost transfers now that compensation is considered in a fixed pool in the transfer portal. Revenue-sharing agreements could bind athletes to their institutions more tightly than scholarships ever did. And the interplay between the Pool and the portal could soon define recruiting—and litigation—strategy for years to come.

Shaky System Ahead

Future litigation—whether under Title IX, labor law, or state regulation—will test the boundaries of this new model. Universities, conferences and the NCAA itself must not only reassess internal policies but also prepare for sustained external legal scrutiny.

With federal courts now actively prototyping the architecture of college athletics, the question is no longer whether collegiate sports will operate like a business, but how the law will govern it. The rules have changed. What remains unclear is what this will all look like on a granular scale.

The case is House v. NCAA, N.D. Cal., 717, decided 7/6/25.

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

Author Information

Carla Varriale-Barker is a shareholder at Segal McCambridge.

Ryan Musleh is an associate at Segal McCambridge.

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