NIL Gets a New Rulebook: Insights into the House Settlement
By Taylor Washington and Claire Borland (Summer Associate)
Approved on June 6, 2025, the historic “House Settlement” marks one of the biggest changes to the landscape of college athletics and the birth of a new era for college athletes and institutions alike. Originally filed in 2020 as an antitrust suit challenging NCAA policy that prohibited athletes from receiving commercial Name, Image, and Likeness (“NIL”) compensation and from sharing in NCAA-generated revenue, House v. NCAA became a class action lawsuit in 2023.[1] The June 6th House Settlement covers three combined class action lawsuits that athletes brought against the NCAA: House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA.[2] The members of the suits alleged that the NCAA rules regulating NIL violated antitrust law by functioning as anti-competitive trade restraints by limiting the earning power of college athletes.[3] The NIL Agreement established by the House Settlement allows colleges and universities to now pay athletes directly, beginning on July 1, 2025.[4] In allowing direct pay to athletes, the 2025 NIL Agreement provides for revenue sharing between schools and athletes.[5] As such, college athletes can now receive payments and benefits that equal up to 22% of the average revenue generated by collegiate athletic programs each year.[6] This amount is capped annually at $20.5 million per institution for 2025-2026. Expected to increase approximately 4% per year, the cap will culminate in 2034-2035 at approximately $32.9 million.[7]
While athletes can continue to sign NIL deals with third parties, the 2025 NIL Agreement allows schools themselves to enter into deals with players. Notably, NIL deals that total over $600 are required to be reviewed in order to determine whether they are for a valid business purpose and reflect a fair market price.[8] Endorsement deals with boosters and other third parties must be for a valid business purpose and cannot be used as recruiting incentives.[9] Accordingly, the NCAA has contracted with Deloitte to oversee a clearinghouse to conduct the reviews, known as “NIL Go.”[10] With the new model also comes a new non-NCAA enforcement organization, called the College Sports Commission, to enforce the House Settlement.[11] Under the 2025 NIL Agreement, traditional NCAA scholarship limits will be replaced by roster limits, which cap the number of players each team can have, ensuring every roster spot comes with a scholarship. While schools can still offer an unlimited number of scholarships, they are now restricted by the $20.5 million annual cap on NIL deals.[12] Further, the House Settlement requires the NCAA to pay approximately $2.8 billion in back pay to athletes who played from 2016 to present day.[13]
Moving forward, higher education institutions should be aware of the potential implications of the House Settlement. Now that such institutions can directly pay athletes and share revenue, the question of whether those athletes are employees arises. If they are considered employees, the athletes could potentially unionize.[14] The new NCAA pay caps and transfer restrictions established by the House Settlement draw parallels to professional sports’ salary caps and free agency limitations, which are legally permitted because they result from Collective Bargaining Agreements (CBAs) negotiated with players’ unions.[15] Current collegiate agreements between schools and athletes vary per institution but the large majority resemble independent contractor deals.[16] Moving forward, higher education institutions should be wary of making agreements with athletes that exercise a higher degree of control over the athlete, such as stricter rules about enrollment, duties to be performed for the team, and permission prior to red-shirting.[17] This level of control, combined with direct compensation, could support classifying the athlete as an employee.
Further, for colleges and universities in Pennsylvania, New Jersey, and Delaware, the Third Circuit court ruled in July 2024 that athletes could not be barred from bringing a Fair Labor Standards Act (“FLSA”) claim.[18] While the court did not explicitly answer the question of whether athletes can be considered employees under the FLSA, it did lay out a test that lower courts should use to make the determination. The Third Circuit directed lower courts to look at (1) whether the athletes perform services for another party (2) necessarily and primarily for the other party’s benefit (3) under that party’s control or right of control (4) in return for “express” or “implied” compensation or “in-kind benefits.”[19] Additionally, the court noted that the answer to the question of athletes as employees turns on whether the relationship between the athlete and college or NCAA reveals an economic reality that is that of an employee-employer.[20] However, despite the Third Circuit’s extensive discussion, the court did not come to a conclusion on whether collegiate athletes are employees.
Although many questions remain regarding NIL in the higher education space, keep an eye out for future posts as we keep you updated on coming legislation and court decisions that will shape how colleges and universities can formulate agreements beneficial to both the school institution and athlete. If you need guidance on NIL compliance and athlete compensation, Obermayer attorneys can help you navigate the new legal landscape with confidence.
[1] See Ralph D. Russo et al., Historic House v. NCAA settlement gets final approval, allowing schools to pay college athletes, N.Y. Times: The Athletic (June 6, 2025), https://www.nytimes.com/athletic/6367741/2025/06/06/house-ncaa-settlement-approved-revenue-sharing/?redirected=1.
[2] See id.
[3] See Dan Murphy, Judge OK’s $2.8B settlement, paving way for colleges to pay athletes, ESPN: College Sports (June 6, 2025), https://www.espn.com/college-sports/story/_/id/45467505/judge-grants-final-approval-house-v-ncaa-settlement; see also House v. NCAA, 545 F.Supp.3d 804, 810 (N.D. Cal. 2021).
[4] See Murphy, supra note 3.
[5] See id.
[6] See Tim Ryan, NCAA Athletes May Call Time Out On Unions After Settlement, Law360: Emp. Auth. (June 24, 2025), https://www.law360.com/employment-authority/labor/articles/2356818?nl_pk=6fd3fbd4-0e18-496b-a067-5696a1986dc5&utm_source=newsletter&utm_medium=email&utm_campaign=employment-authority/labor&utm_content=2025-06-25&read_main=1&nlsidx=0&nlaidx=0.
[7] See Austin Reid & Andrew Smalley, What the NCAA Settlement Means for College and State Legislatures, NCSL (June 9, 2025), https://www.ncsl.org/state-legislatures-news/details/what-the-ncaa-settlement-means-for-colleges-and-state-legislatures.
[8] See Ralph D. Russo et al., Historic House v. NCAA settlement gets final approval, allowing schools to pay college athletes, N.Y. Times: The Athletic (June 6, 2025), https://www.nytimes.com/athletic/6367741/2025/06/06/house-ncaa-settlement-approved-revenue-sharing/?redirected=1.
[9] See Dan Murphy, Judge OK’s $2.8B settlement, paving way for colleges to pay athletes, ESPN: College Sports (June 6, 2025), https://www.espn.com/college-sports/story/_/id/45467505/judge-grants-final-approval-house-v-ncaa-settlement; see also Reid & Smalley, supra note 7.
[10] See Reid & Smalley, supra note 7.
[11] See Murphy, supra note 11; see also Russo et al., supra note 9.
[12] See Russo et al., supra note 9; see also Meghan Durham Wright, DI Board of Directors formally adopts changes to roster limits, NCAA (June 23, 2025), https://www.ncaa.org/news/2025/6/23/media-center-di-board-of-directors-formally-adopts-changes-to-roster-limits.aspx.
[13] See Murphy, supra note 11.
[14] See Parker Purifoy, NCAA Deal Raises Question of Whether Athletes Are Now Employees, Bloomberg Law: Emp. Law News (June 27, 2025), https://news.bloomberglaw.com/product/blaw/bloomberglawnews/exp/eyJpZCI6IjAwMDAwMTk3LWEzMjYtZGFjNS1hNWQ3LWY3YWYwNzk1MDAwMSIsImN0eHQiOiJFTU5XIiwidXVpZCI6IkM1dTdsQlVjQTNudDFqRWNoRi9ld2c9PUJISy9JbC92NE9pMzhWRXM2Q3UzM0E9PSIsInRpbWUiOiIxNzUxMjg1MjUwMDI4Iiwic2lnIjoibmxTTmtuRGVnSmlJLzQ2WnN5Q1dIclcxN0VFPSIsInYiOiIxIn0=?source=newsletter&item=read-text®ion=digest&channel=employment.
[15] See Murphy, supra note 11.
[16] See Purifoy, supra note 17.
[17] See id.
[18] See Johnson v. NCAA, 108 F.4th 163, 167 (3d Cir. 2024); see also Purifoy, supra note 17.
[19] See id. at 180.
[20] See id.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
