College athletes could soon earn dramatically different salaries.
At issue is a lawsuit called House v. the National Collegiate Athletics Association (NCAA), a class action lawsuit seeking to change the way college players are paid for endorsements referred to as name, image and likeness (NIL) business, as well as for a share of broadcasting revenues.
The NCAA could have to pay up to $20 billion if it loses the case, while a settlement could reach $2.7 billion in compensation for late payments as well as a reorganization of how student athletes are paid.
The NCAA and conferences will meet in the coming days to decide on the terms of a deal.
The process
The House v. NCAA was filed by Grant House and Sedona Prince, two college athletes, against the NCAA and the Power 5 conferences – Pac-12, Big Ten, Big 12, Southeastern and Atlantic Coast – in the U.S. District Court Northern District of California’s Oakland Division in 2020.
The lawsuit focused on the eight-year, $8.8 billion extension the NCAA signed to broadcast coverage of the March Madness basketball tournament, as well as seeking retroactive damages for payments the lawsuit alleges were wrongfully withheld. .
College sports is big business, with huge sums of money flowing in and out.
Football and basketball at Division I schools – considered the best of the three levels of college sports – produced revenue of $7.9 billion during the last academic year, according to data compiled by the Department of Education.
Overall, Division I athletics generated nearly $17.5 billion in revenue in 2022, according to a report from the NCAA, the governing body for college sports.
NIL agreements result from an NCAA policy change in 2021 that allowed student-athletes to profit from sponsorship opportunities.
The move came after California started a national trend in 2019 by passing a law authorizing athletes to earn sponsorship money, followed by a landmark 2021 U.S. Supreme Court ruling that said student-athletes could receive sponsorship-related payments. education, reshaping the landscape of college sports.
But the college athletes in the House lawsuit say current NIL rules and an “anti-competitive” college system hurt their chances of making money.
The current system also “undermines schools’ efforts to compete freely for top college recruits,” the lawsuit alleges. Schools can be severely punished if they break these rules.
As college athletes, Iowa basketball star Caitlin Clark and football player Caleb Williams have appeared in commercials for major national brands such as State Farm and Wendy’s, but the class action lawsuit says the broader harms of the current restrictions are “obvious ”.
“Many college athletes have created significant value in their NILs and, in the absence of the challenged restrictions, would receive compensation for their use in an open market,” the lawsuit says.
The lawsuit claims the NCAA restricts how much student athletes can earn outside of employment.
For example, the lawsuit says that an NCAA statute, which regulates the jobs athletes can hold at their universities, “specifically prohibits athletes from receiving ‘any remuneration for value or utility that the student-athlete may have for the employer ( external) due to the publicity, reputation, fame, or personal following he or she has obtained due to athletic ability.”
“The damage is compounded by the fact that only a small percentage of college athletes will play professionally. And while this fact is often touted by the NCAA as a justification for not compensating them, it highlights that for most student-athletes, college is when their NIL is most valuable.”
In 2021, the Supreme Court opened the door for greater compensation for student-athletes when it unanimously ruled that NCAA rules prohibiting compensation to student-athletes violated antitrust laws.
However, commissioners of major college conferences said two years later that the Supreme Court’s decision resulted in a complicated series of state laws that undermined college sports and could ultimately lead to the collapse of sports programs in the United States.
The rise of college transfer has offered athletes the freedom to change allegiances more regularly, and students are no longer required to lose a year of eligibility after switching programs.
Athletes’ increasing use of the transfer portal, commissioners said, has become problematic in college sports, especially for student-athletes seeking to earn a degree.
They said college boosters have taken advantage of the current patchwork of laws to help their universities recruit the best athletes by promising big payouts — to the detriment of colleges in other states that are forced to play by a different set of rules. .
CNN has reached out to the NCAA and the five conferences listed as defendants for comment.
When approached by CNN for comment, the National Association of Collegiate Athletic Directors declined to comment.
The potential deal
According to documents distributed among power conference presidents and administrators and obtained by Yahoo Sports, losing the case at trial would result in payments worth $20 billion to the defendants and could force the NCAA to file for bankruptcy. The report did not detail who wrote the document.
A defeat at trial would also free the athletes from the NIL system, the plaintiffs claim. “So essentially, if we win, there would be a market completely free of NIL, including broadcast payments,” Jeffrey Kessler, one of the lawyers representing the plaintiffs, told The Athletic.
When approached by CNN, Kessler declined to comment, saying, “Negotiations are ongoing.”
Any settlement will likely be in the range of $2.7 billion in damages for late NIL payments, according to reports, as well as include a system in which about $20 million a year can be distributed directly from a school. power conference for your athletes.
By ESPNthe NCAA would pay the damages while the conferences would implement the revenue sharing structure in the future.
According to ESPNthe ACC and Big 12 voted to approve the deal on Tuesday.
The potential agreement comes against a backdrop of gradually changing attitudes toward college athletes receiving payments.
At the beginning of this year, members of the Dartmouth College men’s basketball team became the first college athletes to vote to join a union, a significant milestone in the rapidly changing business of college sports.
For more news and newsletters from CNN, create an account at CNN.com
