House long-form settlement challenges future of NIL collectives

The House v. NCAA settlement filed Friday night in the Northern District of California took aim at athletes profiting from third-party, donor-driven NIL collectives.

For months, collectives have been viewed as imperative to circumvent the coming revenue-sharing cap. Not having to follow Title IX rules and being able to offer a competitive advantage, collectives are expected to be important in the next model just like they have the last three years.

The words “true NIL” and “fair market value” have been tossed around since the NCAA and Power Five conferences signed off on the settlement’s term sheet in May. A new voluntary reporting system for deals that surpass $600 is scheduled to start next month. Plus, the NCAA is creating a public database that it hopes will allow athletes to assess fair market value.

What the settlement would mean for collectives remained unknown until Friday. The settlement spells out that compensation must be “at rates and terms commensurate with compensation paid to similarly situated individuals.”

“NCAA and conference rules prohibiting Boosters (individually or collectively) of a Member Institution from entering into NIL licenses with or for the benefit of current or prospective student-athletes at a given Member Institution unless the license/payment is for a valid business purpose related to the promotion or endorsement of goods or services provided to the general public for profit, with compensation at rates and terms commensurate with compensation paid to similarly situated individuals with comparable NIL value who are not current or prospective student-athletes at the Member Institution,” the settlement filing states.

Settlement creates clearing house for NIL deals

Beyond “commensurate” payment, the settlement says all third-party NIL deals of $600 or more must be approved by a clearinghouse that will vet contracts. If not approved, the settlement says a new third-party arbiter could deem athletes ineligible or result in a school being fined. The filing also stated athletes who enter into multiple NIL agreements or receive NIL payments from the same third parties with an overall value of $600 or more will need to submit contracts or payments.

Athletes can appeal to a neutral arbitrator, which will be quicker than the current NCAA process. An arbitrator must rule within 45 days, however, but extensions are allowed. Rulings are “final and binding.”

NIL collectives could be handcuffed

While the settlement does not ban collectives, it handcuffs them unlike ever before. Since a preliminary injunction was handed down against the NCAA in February, collectives have operated with ease. The NCAA even announced it was halting all investigations into the third-party organizations.

Speaking to a handful of collective leaders Friday night, some described it as “bullshit” while others called it “comical. The expectation is the language will be challenged in the courtroom.

“All this is doing is giving the NCAA power back over their athletes,” said Russell White, president of The Collective Association, which has over 40 members. “This will take away opportunities for athletes to earn money off their name, image and likeness, which is the problem that got us to where we are in the first place.

“The fact the NCAA is unable to stay out of their way on these things is incredible to watch.”