What’s next for NCAA, NIL collectives after House settlement talks hit roadblock from federal judge

The federal judge overseeing the largest antitrust case in college sports history asked attorneys to “go back to the drawing board” during a preliminary settlement hearing and clean up or eliminate language tied to name, image and likeness regulations on athletes and NIL collectives.

The hiccup in the preliminary hearing in the House v. NCAA case surprised some, but not many, in the college sports industry, particularly those in the NIL space. Language in the deal allows the NCAA to police NIL collectives and limit boosters from paying athletes through endorsement deals. In what Judge Claudia Wilken argued would amount to a salary cap, the enforcement language in the deal would force boosters to prove payments to athletes are for a “valid business purpose” rather than “pay-for-play.” Wilken was visibly frustrated as she questioned portions of the deal during the hearing with attorneys conducted Thursday via Zoom, particularly those that limit NIL payments.

“I think we’ve got problems with this,” Wilken said. “I don’t have an idea of how to fix this. I will throw it back on you all to come up with something better and consistent. Keep in mind that taking things away from people doesn’t work well.”

NCAA outside counsel Rakesh Kilaru informed the judge the current language tied to NIL in the proposed settlement is “central” to its existence. “Without it,” he said, “I’m not sure there will be a settlement to submit.” Jeffrey Kessler, co-lead attorney for the plaintiffs, told ESPN after the hearing he is “perfectly fine” making Wilken’s suggested changes. “It’s now up to the NCAA. Hopefully, they agree to them.”

Attorneys for the NCAA and plaintiffs were given a three-week window to rewrite portions of the settlement and present an addendum to the judge.

The crux of the issue is language and control, a charge the NCAA has led throughout the history of the House case, even as the organization loses other players’ rights battles in courts across the country. Sports law attorneys, NIL collective leaders, and player advocates who spoke to CBS Sports were not surprised by Wilken’s instructions or her siding with players regarding future compensation.

“It feels like a lot of people in college athletics read the marketing literature on this settlement,” said Charlie Winfield, founder of The Bulldog Initiative, Mississippi State’s NIL collective. “They wanted to be rid of collectives, they wanted it to go away, and they just kind of kept hoping they could write it into a settlement, but it still faces the same legal hurdles that brought them to court in the first place, which are the antitrust and anti-competitive aspects.”

The $2.8 billion settlement in the House v. NCAA case, a landmark legal battle, has far-reaching implications anchored by revenue-sharing and the expansion of roster sizes, which might also spark more legal battles with Title IX implications. In the immediate future, the legal settlement is transformative for players. Not only will past athletes be compensated for prior restrictions on earning from their name, image, and likeness via the $2.8 billion settlement, but the agreement sets the stage for a future revenue-sharing model, a first in the NCAA’s long history, benefiting thousands of collegiate athletes starting as soon as Fall 2025. Schools in the four power conferences will be permitted to share 22% of revenue to players, amounting to as much as $23 million annually, over the next 10 years.

Several groups have formally objected to the agreement since July, and others have objected in public statements, offering that the settlement illegally restricts future players who are not yet members of the lawsuit. Wilken echoed those concerns to attorneys Thursday, asking how a settlement will affect a “six-year-old playing kickball on asphalt” when they become an NCAA athlete. Attorney Garrett Broshuis, who represents players objecting to the settlement, argued it attempts to mirror a labor agreement without a players’ union. The NCAA, of course, does not recognize players as employees.

NIL collectives are fueled by millions of dollars from boosters, who distribute money to players in salary-like agreements that are loosely tied to commercial or endorsement contracts. Most schools distribute millions through NIL collectives, with Ohio State leading the way with more than $20 million in payments. The settlement in the House case could limit or eliminate such deals. Wilken seemed shocked during the hearing when alerted by NCAA attorneys that regulations on “pay-for-play” will not be eliminated in the current deal.

“We’re living in a fairy tale, a fairy tale where we tell ourselves and pretend that what we’re doing with NIL to pay athletes is not pay-for-play,” said Jim Cavale, founder and chairman of Athletes.org. “It’s NIL, but it is pay-for-play. What we’re going to do with revenue-sharing between the schools and the athletes is pay-for-play, and when you try to call it something else, it creates all of these problems.”

The NCAA has remained mostly toothless in enforcing its current NIL regulations. A federal judge in Tennessee granted an injunction in February prohibiting the NCAA from enforcing its NIL rules against athletics departments, players, boosters and collectives. Attorneys general in Tennessee and Virginia believe the NCAA is illegally restricting NIL opportunities for players. The NCAA instructed membership in a letter after the injunction in Tennesseee that it had paused investigations into third-party participation in NIL across the country.

In the House case, regaining enforcement and regulation powers around NIL is paramount to the NCAA.

“The settlement agreement the NCAA and autonomy conferences submitted to the court was the product of hard-fought negotiations that would bring stability and sustainability to college sports while maintaining an education-based model that equips hundreds of thousands of students every year with degrees and tools to succeed throughout their life,” an NCAA spokesperson said in a statement to CBS Sports. “That continues to be our goal, and the NCAA and autonomy conferences will carefully consider the court’s questions, which are not uncommon in the context of class-action settlements.”

The question: how hard is the NCAA willing to fight NIL tied to third parties? Critics argue that the very existence of the NCAA is at stake.

“You’re playing with fire if you want to go to court,” said Jason Belzer, founder of Student Athlete NIL, an agency that helps schools, players and companies navigate NIL. “Why is that a hill they want to die on? With all these different things that creates an entire regulatory system, fight the NIL battle another day. If you want to suppress Ohio State or Alabama’s ability to compensate their student-athletres at the highest levels, you’re just going to motivate them to go do something else completely different from the NCAA in the future.”

Leadership at NIL collectives across the country were not consulted during settlement discussions.

“This was a situation where they thought they could come up with the answers and push them past everybody, and I don’t think they wanted input,” Winfield said. “I think it’s unfortunately part of what has led them to where we are now.”

In the end, experts believe the NCAA and House attorneys will reach a compromise, but future battles likely loom — inside and outside the courtroom. The NCAA argued it wants three cases — House, Hubbard and Carter — to be approved collectively. A separate case, Fontenot v. NCAA, has a similar argument as the Carter case, but the judge denied a stay request from the NCAA, sending the case back to Colorado.

At hand, however, is the House case and how its resolution can paint a road map. The NCAA and its members have pushed for payments from outside collectives to be shifted to the schools. What a compromise involving NIL regulation looks like remains to be seen.

“If I had to bet, in three years, five years, whatever it is, some college athletes are going to be employees because that’s really the only way you can solve all these antitrust problems and actually legally create these restrictions that they want to create, like we see in pro sports,” said Mit Winter, an attorney specializing in NCAA sports law and Title IX at the Kennyhertz Perry law firm.

The next three weeks will determine, at least in the short term, whether NIL collectives and their boosters can conduct business as usual in the new collegiate model. The Power Four conferences are expected to form their own governance structure within the NCAA to manage the new model, but just how far those conferences are willing to stretch their authority is up for debate.