13.12.2024
As 2024 comes to an end, it has been a year full of incredible moments for the NCAA. On the sports front, Caitlin Clark became the tournament's all-time leading scorer, establishing herself as a national phenomenon comparable to legends such as Pete Maravich or Johnny Manziel. Financially, the NCAA signed a television contract worth approximately 1 billion dollars with ESPN. However, these events are not the highlights or even the most memorable moments of 2024. That position is occupied by the House Settlement, in which the NCAA, for the first time, opens itself to the possibility of sharing the income generated by its competitions with its main protagonists — its athletes.
To assess the importance of this fact, we must put the NCAA and its competitions in context. NCAA stands for the National Collegiate Athletics Association. It is the governing body of university sports competitions in the United States, whose level of followers and economic power is at par with that of professional sports. For instance, the audience of the NCAA men's basketball tournament final is higher than that of the NBA final. The same is true for television revenues, which exceed billions of dollars annually. However, the distinguishing feature of competitions played under NCAA rules is the amateur status of the athletes.
Historically, NCAA athletes have been prohibited from receiving purely economic benefits and are, instead, limited to receiving educational benefits in the form of scholarships, which are themselves subject to numerous limitations. These regulations have been enforced by the NCAA with a harsh sanctions regime, with the association expelling athletes who violate the rules and imposing athletic sanctions on athletes who violate university programmes. In the face of this regime, there have been numerous court proceedings challenging the legality of these restrictions. However, the NCAA managed to emerge victorious from these lawsuits, basing its defence on the landmark case NCAA v. Board of Regents of University of Oklahoma, 468 U.S. 85 (1984). In the Board of Regents, the rules had a pro-competitive effect of offering a differentiated product from professional sports competitions, which determined their legality. However, the situation has changed dramatically over the last ten years.
In 2014, the Northern District Court of California ruled in the O’Bannon v. Nat'l Collegiate Athletic Ass'n, (7 F. Supp. 3d 955 (N.D. Cal. 2014), that the NCAA regulation preventing athletes participating in its competitions from earning financial gain from the use of their image violated the Sherman Act (the US Antitrust Law). The court held that the NCAA regulation essentially fixed the price at which universities could compete to recruit athletes and this conduct was prohibited by the Act and not justified by the NCAA’s objective of differentiating its competitions from professional sports. As a result, it ruled that the NCAA should allow athletes to earn up to $5,000 per season, which would be available to them once their NCAA career was over. However, the NCAA appealed the ruling and the Ninth Circuit upheld its appeal (O'Bannon v. NCAA, No. 14-16601 (9th Cir. 2015), overturning the earlier ruling.
The appeal was a considered a pyrrhic victory for the NCAA. However, a few years later, athlete Shawne Alston filed a lawsuit with the same purpose, to have the NCAA's restrictions on athlete compensation declared illegal. In this case of National Collegiate Athletic Association Athletic Grant-In-Aid Cap Antitrust Litigation, Case No. 14-md-02541-CW (N.D. Cal. Mar. 28, 2018), both the Northern District Court of California and the Ninth Circuit ruled in favour of the petition regarding the restrictions on educational benefits, but upheld the restrictions on purely financial compensation. Dissatisfied with this ruling, the NCAA appealed to the Supreme Court, which issued a judgement that would be a turning point for the NCAA. In Alston vs NCAA No. 19-15566 (9th Cir. 2020), the Supreme Court unanimously ruled that restrictions on educational benefits would come under the ambit of price fixing. With arguments mirroring those in the O'Bannon case, the existence of possible justifications that would make the restrictions compatible with the Sherman Act were ruled out and rejected by the court.
With regard to the limitations on purely economic benefits, while the Court did not directly rule on their legality, it made a series of arguments casting doubt on their compatibility with the Sherman Act. The concurring opinion of Justice Kavanaugh went even further, asserting that the NCAA regulation was highly questionable from a legal standpoint, as it introduced a series of restrictions lacking any economic justification, which would not be permissible in any other sector. He concluded his opinion with a warning, emphasizing that the NCAA was not above the law. Following the ruling, the NCAA was quick to adopt major changes, allowing athletes, for the first time, to receive economic benefits from the exploitation of their name and image by adopting the NIL (Name, Image, Likeliness) Policy. However, the new regime contained a number of restrictions, including a ban on direct remuneration from universities to players and a ban on NIL recruitment deals.
These restrictions rendered the changed insufficient for student athletes. Thus, they demanded that the NIL benefits regime be extended to allow recruitment benefits. Additionally, they demanded compensation for not having been able to obtain revenues for the use of their image as a result of a regulation that was contrary to the Sherman Act. Lastly, they demanded to be paid directly by the university for which they competed. All of this led to a series of legal proceedings, the resolutions of which have transformed the NCAA throughout 2024.
Regarding the ban on recruitment NIL deals, the issue was the subject of the case in Tennesse v. NCAA (3:24-cv-00033, (E.D. Tenn.)). In this proceeding, the states of Tennessee and Virginia argued that the NCAA rule prohibiting the use of NIL offers for the recruitment of athletes was contrary to the Sherman Act, and prayed for an injunction prohibiting the enforcement of the rule. The Court granted the plaintiffs' requests and the NIL offers to get top athletes to attend certain universities became a reality. As a result, 2024 has seen Great Osobor decide to play for the University of Washington in exchange for a NIL offer valued at $2 million. This was dwarfed by the 10.5 million dollars that Bryce Underwood will receive when he joins the University of Michigan in 2025.
However, the real gamechanger for NCAA competitions is not in the recruiting offers, but in the possibility for universities to directly reimburse their athletes, as well as in the compensation of damages resulting from the NIL bans that were in place until 2021. These issues were the subject of the House Case (also known as the College Athlete NIL Litigation, 4:20-cv-03919, (N.D. Cal.)),the resolution of which will mark a turning point for the NCAA. In this regard, the different lawsuits, which were ultimately processed jointly, involved potential damages in excess of 4 billion dollars, a figure that put the viability of the organisation at risk. Faced with this situation, the NCAA, unlike in O'Bannon and Alston, decided to negotiate a settlement with the plaintiffs instead of risking a conviction. After months of negotiation, the parties reached a settlement, which was preliminarily approved by the Court. The main points of the settlement are as follows:
With regard to the damages arising from the NIL bans, the parties agreed on an indemnity consisting of 2.78 billion dollars, which was to be paid over the course of ten years.
With respect to the possibility for universities paying their athletes directly, it was settled that a kind of salary cap similar to that present in the major leagues would be established. This would mean that the NCAA would redistribute between 1.5-2 billion dollars among its athletes.
Lastly, the limits on athletes who could receive scholarships were eliminated, so that every athlete on the roster could receive aid.
This ends a historic injustice, as it made no sense for athletes who generated millions and millions of dollars to be penalised for receiving a tiny fraction of what they generated. The new paradigm of NCAA competitions looks radically different from the way we have known these competitions during more than 100 years of their history. We will remain focused on the evolution of the sector and will always remember 2024 as the year the NCAA abandoned its amateur model to give way to a more professional sports model, better suited to the economic figures that its competitions generate.
Authored By: Miquel Aznar Company, Pre-Doctoral Researcher at University of València (Spain).
Edited By: Ojasi Gopikrishna
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