The federal court in the Northern District of California is scheduled to hold a Final Approval Hearing on April 7, 2025 to decide whether to approve the $2.576 billion settlement of a class action lawsuit, In re: College Athlete NIL Litigation, between the plaintiff class of current and former Division 1 college athletes and the National Collegiate Athletic Association (“NCAA”), and the Pac-12 Conference, The Big Ten Conference, Inc., The Big 12 Conference, Inc., Southeastern Conference, and Atlantic Coast Conference (collectively, the “Power Five Conferences”) as the group of defendants. If approved, the settlement will reshape the economic landscape of college sports. We highlight key aspects of the settlement below. 

Payment of $2.576 billion in damages to Division I college athletes.

Under the settlement, the NCAA and the Power Five Conferences have agreed to pay $2.576 billion in damages for college athletes who have been denied compensation for the use of their names, images, and likenesses (NILs) and for their athletic performances.  The settlement amount will be divided among eligible class members categorized as follows: 

• The Football and Men’s Basketball Class of Power Five Conferences (including Notre Dame) at any time from June 15, 2016 through September 15, 2024; 
• The Women’s Basketball Class of Power Five Conferences (including Notre Dame) at any time from June 15, 2016 through September 15, 2024; and 
• The Additional Sports class depending on the sport, years played, and their NIL deals at any time from June 15, 2016 through September 15, 2024.

Division I college athletes to receive direct payments and benefits from Division I schools over the next ten years.

The settlement also provides injunctive relief that will enable future college athletes to receive tens of billions of dollars in new forms of direct payments and benefits from NCAA Division I schools over the next ten years that were previously prohibited. All 363 Division I schools (not just the Power Five Conferences) will be permitted, but not required, to provide their student-athletes with direct payments and benefits worth up to 22% of the average athletic revenues generated each year by the member schools of the Power Five Conferences (the “Pool” amount). The annual Pool amount is estimated to be more than $20 million per school in the 2025-26 school year and will grow to $32.9 million per school by 2034-35. 

The additional Pool compensation and benefits will be in addition to existing scholarships and other benefits currently permitted by NCAA rules, including third-party NIL payments. In other words, the NCAA cannot create rules that reduce existing benefits provided to NCAA Division I college athletes and must continue to allow third-party NIL payments. Counsel for the class of college athletes can audit the revenues and Pool calculations to ensure they are recorded properly and to enforce anti-collusion provisions to ensure fair competition among schools when making benefit and compensation decisions for athletes. 

Additional changes to NCAA and conference rules.

The injunctive relief also requires the NCAA and Division I conferences to change their rules to permit the new direct payment and benefits from schools to student-athletes allowed by the settlement. The rule changes will also address, at a minimum, the following: 

• Allow payments for institutional brand promotion of student-athlete NIL; 
• Continued permission for student-athletes to earn NIL payments from third-parties;
• Limitations on alumni boosters to make fair market value payments to student-athletes for NIL deals; 
• Number of seasons/length of time college athletes are eligibility to receive benefits;
• Progress required toward a degree for college athletes to be eligible to receive these injunctive relief benefits;
• Notice of the settlement and its terms to all incoming Division I student-athletes, and a 60-day window for such student-athletes to file written objections to the continuation of the settlement;
• Elimination of all limitations on the number of scholarships that a Division I school can provide to members of a team; and 
• Establishment of a neutral arbitration system for resolving NCAA eligibility disputes between individual athletes, Division I schools or conferences, and the NCAA.

The NCAA and Power Five Conferences are already in the process of implementing processes and procedures to comply with the settlement agreement, including the formation of a Settlement Implementation Committee (the “Committee”) made up of 10 athletics directors (two from each defendant conference) and the legal and compliance teams from the Power Five Conferences and the NCAA to address various components of the settlement. The Committee has also engaged technology providers and consulting companies to (a) develop a cap management and reporting platform for direct payments from institutions to student-athletes and (b) create a system to track and evaluate Division I student-athletes’ third-party NIL deals valued at $600 or more. 

The settlement will not preclude collective bargaining efforts.

In the event that a change in law or circumstances permits collective bargaining, this settlement will not preclude the plaintiffs, defendants, or member schools from negotiating a collective bargaining agreement that allows for an alternative compensation package or structure. 

The U.S. Department of Justice expressed concerns about the proposed settlement

In January 2025, the U.S. Department of Justice (the “DOJ”) filed a Statement of Interest in the proposed settlement expressing concerns that the settlement would allow the NCAA to continue fixing the amount its member schools can pay students for the use of their NIL. According to the DOJ, although the settlement raises the level at which payments to student-athletes are capped, it is still an anti-competitive restraint among schools for payments above the cap, and the NCAA may attempt to use the court-approved settlement as a shield against future antitrust actions seeking more complete injunctive relief. In its Statement of Interest, the DOJ requests the federal court to either (a) decline the proposed settlement, or (b) clarify that approval of the proposed settlement does not constitute a judgment of the competitive impact of the revenue-sharing Pool model or a determination that the model complies with antitrust laws. 

Key Takeaways

Final approval of the proposed $2.576 billion settlement is scheduled for April 7, 2025.  The settlement amount will pay for damages incurred by current and former Division I college athletes.  The settlement also provides injunctive relief that permits all Division I schools to provide direct payments and benefits over the next ten years to college athletes for use of their NIL based on an annual revenue percentage of the Power Five Conferences.  This would be in addition to other scholarships and benefits permitted by the NCAA and other NIL payments college athletes may receive from third-parties. Even if the settlement is approved, the parties are not precluded from collectively bargaining for an alternative payment structure, and the cap on payments by Division I schools to student-athletes may still face antitrust scrutiny under federal laws.

Reed Smith’s Sports and Entertainment teams will continue to monitor these NIL developments at the collegiate level.