What's the future of NIL collectives after the House v. NCAA settlement? (2024)

The historic House v. NCAA settlement is moving toward formalizing terms, though it still needs Judge Claudia Wilken’s approval.

In addition to retroactive damages to former Division I athletes and a revenue-sharing model for schools to pay athletes, a crucial aspect of the settlement is establishing new rules regarding name, image and likeness compensation. Part of the settlement is meant to implement more rigid regulations on third-party NIL payments, specifically eliminating the pay-for-play approach common among outside, school-affiliated NIL collectives.

News that the settlement would allow the NCAA and power conferences to require and enforce “true NIL” payments — payments made for fair market value and not pay-for-play inducements — was first reported in May when the settlement terms were initially agreed upon in principle. But last week’s filing of long-form documents provided more details on what those efforts could look like and their impact on NIL collectives.

The option to bring collectives in-house

Collectives emerged in the wake of the NCAA allowing NIL compensation in 2021. These booster-funded organizations developed into school-affiliated organizations (some loosely connected, some less so) that front pay-for-play contracts under the guise of NIL to attract high school and transfer recruits. What started as illegal but unregulated payments became open season following a court ruling in February that essentially blocked the NCAA from enforcing its own NIL rules, lifting the shroud of amateurism off college sports.

In some ways, the House settlement accepts and accommodates this reality while also aiming to put some of that inducement back in the tube.

The settlement’s internal revenue-sharing model is meant to satisfy pay-for-play and NIL. Athletic departments will be allowed (but not required) to distribute up to 22 percent of the average annual revenue of power-conference schools. That will be based on money brought in from media rights contracts, ticket sales and sponsorships, and it is likely to be $20 million to $23 million per school in year one, the 2025-26 season. That annual pool distributed from schools directly to athletes represents NIL because it is calculated largely from the TV money generated by power-conference schools.

The revenue sharing is voluntary, though it’s expected that power-conference schools (and others) will participate to remain competitive. If schools choose to distribute that 22 percent pool, athletic departments can take on that responsibility. The settlement also allows for NIL collectives to be absorbed by athletic departments and become an in-house marketing agency that manages the revenue sharing. While there remain questions about how that money is distributed among athletes, including how Title IX legislation will factor in, the settlement stipulates only that the annual distributions remain under that 22 percent cap.

In-house collectives could pursue permissible, third-party “true NIL” deals for athletes as well that would not count toward the cap, like partnerships with a business or brand. Multimedia rights organizations such as Learfield, which manages branding and live events for some athletic departments, could also contribute to this.

NIL collectives could continue operating outside of athletic departments under the settlement, and college athletes could still sign third-party NIL agreements, whether with collectives or outside businesses and organizations. However, the settlement would put new regulations in place.

Combatting pay-for-play and enforcing “true NIL”

Under the proposed terms of the settlement, college athletes would be required to report all third-party NIL contracts worth $600 or more to a newly created clearinghouse database the NCAA and power conferences would oversee. (And yes, that includes guardrails preventing a single organization from offering a slew of deals worth up to $599 each to the same athlete.)

The settlement also empowers the NCAA and power conferences to form a “designated enforcement agency” that would supervise the clearinghouse and be responsible for determining whether those reported third-party NIL deals qualify as fair market value. In theory, this would root out pay-for-play inducements.

“A compliance system and reporting system has to be built,” Big Ten commissioner Tony Petitti said. “When you’re talking about making sure that kids have the right to pursue their NIL 100 percent, that’s a great thing. But at the same time, it’s got to be real NIL. We need some sort of clearinghouse or some sort of system to evaluate deals for fair market value.”

The long-form filing does not offer more specifics on who would comprise this enforcement agency or how it will come about. The settlement notes college athletes would be able to submit proposed NIL deals to get a ruling on whether they would be compliant and use that insight to inform their decisions. The designated enforcement agency would also have the latitude to levy sanctions if an athlete fails to properly report third-party NIL deals or enters into an agreement that does not qualify as true NIL; specific penalties have yet to be determined, but they could conceivably range from requiring the athlete to vacate the NIL contract to suspensions or stripping of eligibility.

If the enforcement agency takes action against an athlete, that athlete or the school can appeal to an independent arbitrator. The documents don’t specify who these arbitrators will be or how they will be selected, but it does prescribe an arbitrator must rule on an appeal within 45 days and the athlete would be eligible to play until the arbitrator weighs in. Arbitrators would serve three-year terms, and the settlement does not specify whether they would have subpoena power.

While the settlement gives the NCAA and power conferences a lot of latitude, it’s also meant to streamline scenarios that are governed by the NCAA and tend to move slowly and spark litigation.

Skepticism and potential obstacles

There is skepticism within college sports that the oversight of third-party NIL deals would be as simple and efficient as the settlement suggests.

One issue is the settlement would not supersede the current patchwork of state NIL laws, meaning certain schools could elect to adhere to the state law, and laws that conflict with the settlement terms could lead to additional legal battles. The NCAA continues to seek federal NIL legislation.

“If Congress does not act, the progress reached through the settlement could be significantly mitigated by state laws and continued litigation,” NCAA president Charlie Baker and power-conference commissioners said in a joint statement on Friday.

Several Division I schools are likely in favor of either eliminating NIL collectives or absorbing them to curb pay-for-play. One CEO of an NIL collective, who was granted anonymity so they could speak freely on the topic, said a lot of collectives already work closely with athletic departments, even within the rules (limited as they might be), and that moving a collective in-house would be relatively easy.

“We have it set up where it would be turnkey,” the collective CEO said. “We would just roll the entity up into the athletic department, or leave it separate and operating as an independent booster club that is being run by the athletic department.”

The issue is some of the top-tier, best-resourced athletic departments would prefer collectives to remain outside agencies and provide additional NIL opportunities for athletes — a “sweetener,” so to speak. Adding an extra $20 million to the budget will put a strain on plenty of power-conference schools, many of which may have to lean harder on fundraising or university subsidies to balance the budget. But for the richest programs, many of which are atop the Big Ten and SEC, the new revenue-sharing demands won’t be a problem. Their coaches would rather keep those deep-pocketed collectives outside the department and help their cause on the recruiting trail.

One way or another, settlement or not, third-party NIL collectives are likely here to stay.

“I don’t think collectives are going anywhere,” said a different collective CEO, also granted anonymity so they could speak candidly. “There will always be a place for donors who prefer to go another route. And I think it would be a scary proposition for a lot of athletic departments to have to take on something of that magnitude.”

The House settlement is written expressly to eliminate pay-for-play. But multiple coaches, athletics administrators and others familiar with the settlement process have expressed doubts that an approved resolution will be capable of fully stamping it out.

The history of college sports suggests those with the means and motivations will find ways to cut corners.

“Certain places found ways to take care of players under the table long before NIL and collectives were allowed,” said one power-conference athletic director, also granted anonymity in exchange for their candor. “You think this will stop them now? C’mon. Things will just go back to the way they were before.”

— The Athletic’s Scott Dochterman contributed to this report.

(Photo Illustration: Pavlo Gonchar / SOPA Images/ LightRocket via Getty Images)

Justin Williams covers college football and basketball for The Athletic. He was previously a beat reporter covering the Cincinnati Bearcats, and prior to that he worked as a senior editor for Cincinnati Magazine. Follow Justin on Twitter/X @williams_justin Follow Justin on Twitter @williams_justin