As the House case nears a potential settlement, Division I universities and their associated NIL collectives have established strategic plans for the dawn of the “revenue sharing era” of college sports. As the ground is shifting in the NIL world once again—perhaps more substantially than at any point before—college athletes and their agents should be prepared to effectively navigate the legal and contractual challenges that will undoubtedly arise in this new era.
Background
After the NCAA permitted collegiate student-athletes to monetize their name, image, and likeness on July 1, 2021, college sports entered a new era. What began with athletes being able to monetize their right of publicity (i.e., sign endorsement deals), NIL quickly shifted to a quasi pay-for-play model in which NIL collectives—legal entities funded by groups of donors—sought to pool funds to entice student-athletes to attend their preferred university.
Current Landscape
Since the beginning of NIL, collectives have become substantially more robust. Now, many are comprehensive operations with full-time fundraising staff, official partnerships with universities, and multimillion-dollar budgets. Many college athletes have agreements in place with NIL collectives (some are long-term deals, and some are worth several million dollars) that are set to be substantially impacted by the House settlement.
The House Case
The House case is a class action antitrust lawsuit against the NCAA and its members which originated in 2020. The plaintiffs and the NCAA and Power 5 conferences (all of which are defendants) have preliminarily agreed to a $2.8 billion settlement to resolve the case. While the agreed-upon damages are substantial and will impact current and former college athletes significantly, the proposed settlement also establishes a new model for college sports.
Instead of the current structure (where top athletes are recruited to universities with monetary offers from NIL collectives), the post-House landscape will allow Division I universities to directly share media and licensing revenue with athletes, in the form of NIL sublicensing agreements. The currently pending settlement would establish a revenue sharing “cap,” which would be determined each year based on average revenues. The cap is expected to be $20.5 million per school during the 2025-26 academic year, allocated across all sports.
Legal Implications
College athletes stand to be affected by the House settlement in a variety of ways. It is critical that athletes and their agents understand the legal implications of contracts that athletes are signing with universities and NIL collectives.
Current NIL Collective Agreements
Since the issuance of a preliminary approval of the House case settlement in October of 2024, universities and their NIL collectives can largely be described as operating in two distinct buckets. The first bucket includes collectives that have announced they will be winding up operations at the end of June 2025, right before universities can begin directly sharing revenue with athletes under the settlement agreement. Universities in this class have asked donors to allocate their donations directly to the university athletic department, instead of a third-party NIL collective. NIL collectives supporting efforts at these universities have also offered athletes contracts which expire at the end of June, right when their revenue sharing deals will likely begin.
Universities and NIL collectives in the second bucket have taken a different approach—one could argue a more conservative approach. This approach has seen collectives offering long-term deals to athletes, some of which expire years after the House settlement might be approved. Importantly, the long-term collective deals reviewed by our firm all appear to permit the following: (1) the collective may assign the agreement to the university entirely, should the House case be settled and (2) the collective may reduce the compensation owed to the athlete on a dollar-for-dollar basis with the amount paid to the athlete by the university under any future revenue sharing agreements.
MOUs and Revenue Sharing Contracts
Universities in both buckets described above have begun sending athletes (and in some cases, signing) a memorandum of understanding (MOU) which outlines the essential terms of the athlete’s ultimate revenue sharing contract with the university. Based on MOUs which have been reviewed by our firm, the MOUs provided by universities are all: (1) conditioned on the ultimate settlement of the House case and (2) subject to future “Long-Form” agreements that will be entered into by the athlete and university (i.e., revenue sharing contracts). In other words, the universities are attempting to bind the athletes to their commitments, while simultaneously giving themselves opportunities for an out if the House settlement is not approved or is significantly altered.
Notably, these revenue sharing agreements are likely to be the primary vehicle for compensation directed to athletes under the forthcoming model. While it remains a point of uncertainty (perhaps the biggest one left to be decided) of how and if NIL collectives have any place in the revenue sharing era of college sports, athletes should expect that university revenue sharing agreements will be their primary income source. Based on the MOUs reviewed by our firm, athletes should consider how the following terms may impact them:
- Is the compensation amount unilaterally determined by the university? Can it amend the compensation owed at any time?
- What would happen if the athlete were to transfer or be removed from the team? Are there any liquidated damages owed?
- When and/or why may the university terminate the agreement?
- Are any rights or claims waived by the athlete by entering into the agreement?
- How might this impact any collective contract already in place?
What Happens to Revenue Sharing if the Settlement is not Approved?
Athletes must consider the possibility that the House settlement is not ultimately approved. While it appears likely that the settlement will be approved, it is not guaranteed. Notably, if the settlement is not approved, MOUs and revenue sharing contracts preliminarily entered into by athletes and universities may be void and/or unenforceable. Depending on the specific terms and conditions, the contract may be conditioned entirely on the settlement being approved.
For athletes at universities operating in the first category (described above, in Current NIL Collective Agreements), athletes might find themselves in a precarious scenario. Depending on the timing, athletes may be left without an operating collective contract and no transfer portal opportunity to find a new institution. This is certainly speculative, but not beyond belief.
Likewise, athletes at universities operating in the second category should consider how the settlement not being approved may affect them as well. Long-term contracts offered to our clients by NIL collectives have included language that the collective may, if the settlement is not approved, renegotiate and then reduce compensation unilaterally. Provisions such as these create significant risk to the athlete and should be considered very cautiously.
Key Takeaways
Regardless of whether the House case settlement is approved or not, collegiate athletes must be cognizant of the contractual implications of the agreements they have signed. In particular, athletes must consider:
- How might an athlete’s collective contract be affected by the settlement? Would the settlement cause it to be void, assignable to the university, or reduced on a dollar-for-dollar basis with any other agreements (such as an MOU or revenue sharing agreement) they sign?
- What long-term (i.e., past June 2025) obligations does the athlete have? How might that change if the settlement is or is not approved?
- Who has promised the athlete compensation? Is it conditioned by or affected by the House settlement?
All athletes (and their agents) that are reviewing a university-issued MOU, revenue sharing agreement, or NIL collective agreement should consider working with experienced counsel to determine how their rights and obligations may be impacted by the contract.