For the first time ever, all Division I colleges and universities may decide to compensate their student-athletes directly through revenue sharing under the terms of the House v. NCAA settlement, signaling a new chapter for college sports and ushering in additional opportunities for college student-athletes to monetize their name, image, and likeness (NIL).
Still, colleges and universities cannot pay their respective student-athletes unlimited amounts of money. Under House, which is slated to go into effect on July 1, colleges and universities may share up to $20.5 million directly with student-athletes for the upcoming academic year. The settlement also has important, immediate implications for high school student-athletes, athletic directors, and administrators to navigate as well.
House, however, is not simply about colleges and universities choosing to participate in revenue sharing. The $2.8 billion dollar settlement, which received long-awaited final approval from Judge Claudia Wilken on June 6, is multi-layered and contains many other elements, including guidance about how higher education institutions may directly compensate their student-athletes, changes to roster limits, increased scholarship opportunities, and allocation of damages for lost NIL, video game, and broadcasting opportunities. Combined, all of these changes implicate antitrust, employment, Title IX, immigration, and federal appeals issues, among other things. In fact, there are already two separate appeals that claim the calculations for lost damages ignores Title IX.
Consequently, there are multiple vantage points from which to analyze House and all the ways that it will impact not only college sports but also high school athletics, professional sports, and other stakeholders in the college athletics space.
With that in mind, this particular alert will focus on high school student-athletes and provide key takeaways for high school student-athletes, athletic directors, and administrators in the aftermath of the House settlement approval.
Recruiting Changes
Over the last couple of years, widely recruited high school student-athletes have been pressured into committing to one college over the other during the first two years of high school because NIL deals were being leveraged as recruiting incentives. But, as of July 1, the earliest a school may provide a written NIL offer or other additional payments to a high school athlete is on August 1 of the student’s senior year of high school, though the athlete — who is presumably of age — may not sign the deal until the applicable signing dates.
This specific rule change is intended to reduce efforts to bind high school students that barely have any high school experience and encourage high school students and their families to consider more than just NIL during the recruiting process. Of course, this new rule change likely will not preclude verbal NIL offers and negotiations, but it might prevent a 14-year-old freshman from choosing a school based on NIL alone and encourage them to fully participate in the recruiting process.
College Sports Commission Will Scrutinize NIL Deals
Before House was approved, some high school student-athletes entering college were able to negotiate NIL deals with third parties, including for-profit and nonprofit collectives and brands. These deals could range from lower value social media endorsements to six figure paid appearances and autograph sessions. Under House, these student-athletes may still negotiate third party NIL deals, but any deal that exceeds $600 must be reported to NIL Go and will be subject to review.
NIL Go, a newly created software platform by the College Sports Commission with the help of a consulting firm, is the designated reporting entity to which all Division I student-athletes must report all NIL payments from third party deals worth $600 or more. NIL Go will be primarily tasked with determining whether certain deals leverage a student-athlete’s NIL to advance a valid business purpose and are within a reasonable range of compensation.
For now, it seems like the process of assessing whether a deal is within a reasonable range of compensation will be largely subjective. Reasonableness, by definition, is such a subjective standard, and although it was likely used to give the parties some flexibility, many factors can easily skew whether something is in fact reasonable. What is reasonable, for example, at a public university in Georgia may differ from what is reasonable at a smaller, private university in California.
Regardless, if NIL Go decides a third-party deal does not fall within a reasonable range of compensation or does not advance a valid business purpose, the deal would be designated as “not cleared” and the student-athlete could initiate an appeal that could wind up in arbitration or work to renegotiate the deal.
In sum, gone are the days when collectives and fans could pay their favorite athletes any amount of money without justification. This new process for certain third-party deals will result in much greater scrutiny for NIL deals than ever before.
Cap on Revenue Sharing
Another important recruiting consideration arising from House is how the revenue cap could impact colleges and universities in different ways. It has already been reported that football players will receive the most money from the new revenue sharing model. But at schools — like the ones in the Big East — that do not have football programs, other athletes may have greater opportunities to receive larger portions of their school’s revenue. In theory, these schools might be able to spread the designated revenue sharing funds across more sports and in greater amounts. High school student-athletes being recruited to play at the Division I level should be especially sensitive to this.
Roster Limits and Scholarship Amounts
House also marks the elimination of scholarship caps and the creation of roster limits by sport. This will allow for colleges and universities to focus on awarding more scholarship dollars to a set group of people as opposed to having larger teams with fewer people on scholarship. So, schools may offer as many scholarship dollars as they want and can afford provided that the school is also complying with new roster limits.
In anticipation of the roster limits, some college coaches began retracting scholarship offers earlier this year from current collegiate athletes and high school athletes who previously committed. The final settlement, however, includes a carve out for some of these athletes. Athletes whose roster spots were or would have been eliminated are exempt from the new roster limits for the remainder of their eligibility. These athletes are considered “Designated Student-Athletes” and do not count toward any school’s roster limit.
There has been a lot of debate about whether roster limits actually benefits student-athletes seeking to play at the collegiate level. On one hand, the roster limits will likely reduce opportunities for walk-on athletes who would agree to be full members of a team without the benefit of a scholarship. On the other hand, if each sport is bound to the same roster size, coaches may decide to award greater scholarships amongst a set number of people. But ultimately roster limits are intended to even the playing field and keep things relatively fair across the same sports. Schools don’t want their competitors assembling large numbers of players on one roster.
High school student athletes should be mindful of the new roster limits and how schools are responding to this new requirement. It is likely that most sports will see an overall reduction in roster sizes, adding more pressure and competition to the already strained high school recruiting process.
GHSA Eligibility
Last July, the Georgia High School Association (GHSA) amended its rules to place additional limits on how student-athletes can participate in NIL activities. As we outlined in a client alert last year, the amendment, which came nearly a year after Georgia joined a list of states that allowed high school athletes to monetize their NIL, precludes student athletes from joining or receiving any money or benefit from a NIL collective or NIL club. All other GHSA NIL rules remain in effect. So, while the GHSA continues to let students to monetize their NIL, last summer’s amendment added additional guardrails on high school NIL activity in Georgia.
That said, with all the headlines generated around House, there will be increased scrutiny on all NIL deals, including those involving a junior or senior high school student interested in competing at the collegiate level. High school administrators and athletic directors along with high school student-athletes are therefore best suited to weigh how state law and the GHSA NIL rules may apply even when negotiating deals for the next level. New policies and guidance following final approval of House to ensure they are not screwing up their remaining high school eligibility or jeopardizing their collegiate eligibility.
Final Takeaways
No doubt House is a landmark settlement that has already upended collegiate sports, opening the door for all Division I student-athletes to be compensated directly from their respective schools. But the settlement also comes with practical changes to the way in which NIL has been handled since July 2021 and significant legal considerations. Indeed, signing a NIL contract as a rising high school senior that gives a third party unfettered discretion to license or control the student’s NIL at 17 could burden the student as they transition to college and then into their post-collegiate playing careers.
It is therefore critical that athletes — including high school students with aspirations to play at the next level — have any and all contracts reviewed to ensure compliance with competing laws, policies, and rules, but to also ensure the student is protected.
Looking ahead, be on the lookout for additional alerts from us about the House settlement. These alerts will focus on other issues and considerations that are more relevant to other stakeholders in the college athletics space, ranging from ongoing questions about whether certain settlement terms ignore Title IX to how the settlement impacts the transfer portal to validity of portions of the settlement relating to the appeal and arbitration process.
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