A federal judge has ordered lawyers negotiating a major deal that could reshape the business model of college sports to “go back to the drawing board” to resolve concerns he has about how the deal would limit the ways sponsors can provide money to athletes.
Judge Claudia Wilken declined to grant preliminary approval to the House antitrust settlement against the NCAA on Thursday. She said she had concerns about several parts of the settlement's terms. Chief among her concerns was a clause that would require any cash boost provided to athletes to be for a “valid business purpose.”
Over the past few years, support groups have evolved to offer payments to athletes that are, in theory, payments for the use of a player’s name, image and likeness, but in practice have served as de facto salaries. The terms of the agreement would make it easier for the NCAA to eliminate those payments.
“What are we going to do with this?” Wilken asked. “I've found that taking things away from people is not very popular.”
Wilken gave attorneys representing the NCAA and the Division I athletes' class three weeks to meet and decide whether they could revise the language or scrap the pending settlement. NCAA chief counsel Rakesh Kilaru told the judge that the revised rules on how class action works are “a central part of the agreement.”
“Without that, I'm not sure there will be a deal,” Kilaru said.
Jeffrey Kessler, co-lead attorney for the plaintiffs, told ESPN on Thursday night that he was comfortable with the judge's suggestion to remove the new language about NIL groups from the settlement.
“We're perfectly comfortable with those changes. Now it's up to the NCAA to decide. Hopefully they'll agree,” Kessler said. “If the settlement falls through, we'll go back to court. If they want to deal with it, that's a decision they have to make.”
The NCAA, its proxy conferences and attorneys representing all Division I athletes agreed in May to settle three major antitrust lawsuits that threaten to upend the business model of college sports. The defendants agreed to pay roughly $2.7 billion in damages to current and former athletes. The parties also agreed to a forward-looking system that will allow schools to pay athletes directly through name, image and likeness deals up to a cap, expected to be $20 million to $23 million per school next year and rising annually. In exchange, the NCAA would have much more leeway to enforce rules it says are designed to protect a competitive balance among schools and preserve what makes college sports unique.
Kilaru told Judge Wilken that the restrictions placed on booster groups in the agreement were not significantly different from the association's current rules, which prohibit boosters from paying athletes for performance or using NIL payments as an incentive to recruit an athlete.
“At any time that rule could be enforced by the NCAA,” he said.
However, a federal judge in Tennessee granted an injunction earlier this year prohibiting the NCAA from punishing boosters or athletes for negotiating any NIL agreements as part of the recruiting process. In that case, the attorneys general of Tennessee and Virginia argued that the NCAA is unlawfully restricting opportunities for student-athletes by preventing them from negotiating the terms of NIL agreements before deciding which college they want to attend.
It's unclear whether Tennessee's court order applied nationwide or only in Tennessee and Virginia, but the NCAA told its members in a letter after the ruling that it decided to “pause and not initiate investigations involving third party participation in NIL-related activities” while the court order remains in effect. The pause on investigations remains in effect, according to the association.
An NCAA spokesperson said the proposed settlement was “the product of arduous negotiations that would bring stability and sustainability to college sports” and that the defendants “will carefully consider the court’s questions, which are not uncommon in the context of class action settlements.”
According to several industry sources, the collectives associated with the nation's top football and basketball programs currently distribute between $10 million and $20 million per year to their players. If the agreement significantly limits those operations, players on those teams could potentially earn less money through the proposed revenue-sharing agreement than they currently earn under NIL deals.
Wilken also told attorneys she was concerned about future college athletes who are not yet members of the class but would be limited by the terms of the 10-year agreement when they begin their college sports careers. Kessler said that if future athletes believe the income agreement is an unfair restriction on their earning potential, they will be free to file a new antitrust lawsuit once they begin their college careers.
The two sides agreed to discuss possible revisions to the terms over the next few weeks. If the parties are unable to reach an agreement, the three cases that are part of the proposed settlement would proceed to trial. The House v. NCAA case was scheduled to go to trial in January 2025 before the parties announced a settlement.
College sports leaders, including NCAA President Charlie Baker, have previously defended the pending agreement as a critical part of solving the industry’s myriad legal problems. NCAA leaders had hoped that a deal providing new benefits to athletes would help them persuade Congress to pass legislation that would add more stability to the business of college sports.
