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House settlement hearing signals transformational change in college athletics
@Source: sandiegouniontribune.com
Hours before the ball goes up when Houston and Florida meet for the NCAA men’s Division I basketball championship, the gavel will come down on the House settlement.
How fitting that the NCAA Tournament, the organization’s biggest moneymaker, coincides with one of college athletics’ most transformational moments.
U.S. District Court Judge Claudia Wilken is scheduled to conduct a final hearing Monday in an Oakland courtroom on the House settlement, a class-action lawsuit that most notably addresses NIL compensation, revenue sharing, implementing roster caps and eliminating scholarship limits.
While it is a final hearing, it is not expected to be the final say in the matter when Wilken hears from those who object to the settlement.
“I, personally, don’t think she will gavel it that day,” San Diego State athletic director John David Wicker said in February during an event for SDSU football season ticket holders at Snapdragon Stadium. “It will take a week or two for her to give final approval, but she could give final approval.”
Added Wicker: “Most people think it’s going to go through looking mostly like it does right now.”
House vs. NCAA is a lawsuit filed five years ago on behalf of Arizona State swimmer Grant House and TCU basketball player Sedona Prince against the NCAA and Power 5 conferences. More than 100,000 other college athletes have joined in the class-action case.
The lawsuit seeks damages for being denied name, image and likeness compensation as well as lifting restrictions on revenue sharing of broadcast rights.
If approved, the settlement would provide $2.8 billion to the claimants for lost NIL compensation.
It also would allow schools to share revenue directly with athletes for the first time. Each school could distribute as much as $20.5 million across all sports during the 2025-26 school year, which starts July 1. That figure would rise each year.
Half of the Power 4 schools reportedly plan to pay out the full $20.5 million, a figure derived by calculating 22% of average annual revenue from power-conference schools.
“If anyone wants to write us that check right now, we’ll be happy to share that amount,” Wicker joked at the season ticket holder event, “but, otherwise, we’ll be at a number lower than that.”
Much lower.
Like virtually all Group of 5 schools, SDSU is expected to distribute only a fraction, perhaps 10%, of the available cap.
Schools have been modeling how that money would be distributed, with some contemplating giving 75% to football, 20% to men’s and women’s basketball and 5% to all of the school’s other sports.
“The good thing is we’re going to be able to take contributions to the athletic department to help us with our revenue sharing in addition to scholarship checks and all of that to keep us most competitive,” Wicker said.
Revenue sharing, with most of the money going to football, is where Title IX lawsuits could be waiting in the wings. The House settlement does not address Title IX concerns.
Still to be determined is how collectives, outside groups that generate money for NIL distribution, operate going forward.
Collectives like Aztec Link and the MESA Foundation, which primarily focus on SDSU football and men’s basketball, respectively, are loosely tied to the university. While operating independently, there has been talk about bringing collectives like these in-house. The suggestion has been met with varying degrees of pushback.
Looming larger is another piece of the settlement that will create a “clearinghouse” to review NIL deals. The accounting firm Deloitte has been named to handle reviews.
“The settlement agreement says that every Division I athlete must report NIL deals of $600 or more in total value, whether lump sum or in the aggregate,” said Jay Johnston, CEO and general counsel for Roy, a platform for athletes and schools to meet reporting requirements.
There could be confusion in the extent of Deloitte’s authority, which, according to a revision of the settlement, includes only “Associated Entities and Individuals,” the negotiated phrase when the term “boosters” was determined to be too broad.
What about third parties not associated with the university?
“Who are they to say what the local pizza shop should pay the star basketball player?” said Johnston, who spent a decade as a plaintiff’s attorney handling class-action lawsuits. “Even though Deloitte’s getting contracts, they don’t have authority over a majority of contracts that are going to be done.”
Any sense that NIL is being restricted is certain to lead to additional lawsuits.
An additional part of the settlement that was not part of the original lawsuit is roster restrictions (added) and scholarship limits (eliminated).
This could be perceived as helping or hurting athletes, depending on how specific sports are valued at each school. Could, for instance, scholarships be shifted from a traditionally underperforming soccer team to a volleyball team that has enjoyed years of success? That remains to be seen.
“We’re working through right now what our scholarship allocation is going to be for all of our sports,” Wicker said.
While much more will need to be done once the House settlement goes through, Johnston said it is good to have a “framework” going forward.
“This is about trying to take what was the wild, wild West and say, ‘those days are done,’ ” Johnston said. “We’re now bringing some regulations in to create some stability in what’s taking place. Stability is lost in college sports. … The reality is when you’re trying to put some regulations in place. It’s so everyone is playing by the same rules. I think that’s what everyone is trying to get back to.
“It’s a start. We’ve got a long ways to go.”
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