College sports have entered a new era. As the result of a recent court settlement, the National Collegiate Athletic Association (NCAA) has agreed to let the U of M and other schools pay their Division I athletes directly.

The profound change began in 2014 with the filing of the class action lawsuit O’Bannon v. NCAA. O’Bannon et al. claimed that the NCAA had violated the Sherman Antitrust Act by profiting from the use of the name, image, and likeness of college athletes in video games and other ways without compensating the athletes. A federal judge agreed.

In a subsequent lawsuit, NCAA v. Alston, the same judge ruled in 2019 that the NCAA’s restrictions on “non-cash education-related benefits” also violated antitrust laws, a decision ultimately affirmed by the U.S. Supreme Court in June 2021. As a result, the NCAA changed its rules to allow college athletes to cash in on the use of their name, image, and likeness (NIL) by making appearances, promotions, and other deals in exchange for payment beginning in the 2021-22 season. At the same time, the NCAA also allowed college athletes to hire agents to represent them in NIL deals.

This past June, the same federal judge, Claudia Ann Wilken, a 75-year-old Minneapolis native who presides over the United States District Court for the Northern District of California, approved a landmark settlement of three antitrust lawsuits brought against the NCAA and the Power Conferences (Big 10, ACC, Big 12, Pac-12, and SEC) alleging that they illegally restricted the earning potential of college athletes.

The House settlement—as it’s commonly known—has three significant provisions. First, effective July 1, it allows Division I programs to share up to 22.5 percent of their revenues with their athletes, paying them an estimated $20.5 million in 2025-26, an amount that will increase each year over the 10-year period covered by the agreement.

Second, the settlement provides for the NCAA to pay almost $2.8 billion in damages to Division I athletes who could not benefit from the use of their NIL, dating back to 2016.

Third, it stipulates roster caps for each team to replace sport-by-sport scholarship limits, meaning fewer players per team but now every rostered athlete can receive a full scholarship. The first $2.5 million in additional scholarships—above previous limits—will count against the revenue sharing cap.

The agreement also provides for a new enforcement organization, the College Sports Commission, headed by Bryan Seeley, a former Major League Baseball executive and federal prosecutor, that will oversee and enforce the new rules around revenue sharing, NIL deals, and roster limits. A clearinghouse managed by Deloitte will vet all third-party NIL deals over $600 to make sure they are for legitimate business purposes and that the amounts paid reflect fair market value. These bodies strip the duties of oversight and enforcement from the NCAA, which was infamously ineffective in enforcing compliance around athlete compensation.

The most significant aspect of the House settlement for the future of college athletics is the way schools will pay their athletes. While technically schools will share revenue generated from the use of players’ NIL in television broadcasts and promotions, in effect they will be paying the athletes to play, on top of whatever the athletes may make separately from NIL deals.

Not all Gopher athletes will share directly in the revenue. Athletic Director Mark Coyle, with the approval of University President Rebecca Cunningham and the Board of Regents, will designate how much each sport will receive, and then coaching staffs of those teams will disperse the amount among their players as they see fit, with those valued more receiving higher amounts. The U of M plans to allocate revenue sharing funds to football, men’s and women’s basketball, volleyball, and men’s hockey so that those programs can be relevant nationally. “If we’re relevant in those five sports, we feel it will benefit all of our programs,” Coyle said in a recent interview.

As part of its revenue sharing, the University will also offer six additional scholarships to women spread among hockey, volleyball, softball, soccer, and gymnastics to help those programs recruit and stay competitive.

Coyle would not say how much each sport will receive. “We’re not disclosing that,” he says. “Nobody’s disclosing that, obviously, for recruiting reasons.”

Most athletic directors have been mum about their distribution plans, though Texas Tech University’s Athletic Director Kirby Hocutt told the Lubbock Avalanche-Journal his department planned to allocate “about 74 percent to football players, 17-18 percent to men’s basketball, 2 percent to women’s basketball, 1.9 percent to baseball and smaller percentages to other sports.” These percentages reflect the revenue produced by each sport, which could conceivably be the model other athletic directors use. Or they could base allocation amounts on how much each sport needs to be competitive. “We have to stay competitive in the sports that drive the vast majority of revenues that fund our department,” says Jeremiah Carter, executive associate AD/NIL and Risk Management.

The football team, which is the largest revenue-producer at the U of M and is responsible for covering 83 percent of the athletic department’s expenses, is expected to receive the lion’s share. 

In addition to receiving a share of their school’s revenues, college athletes will be able to continue to pursue compensation from NIL deals. (See sidebars.)

To this point, some Gopher athletes have earned into the high six figures for NIL deals, though most have earned much less. They have arranged some of those deals—such as paid appearances or social media posts of products—on their own or with the help of an agent, but many have been brokered by the school’s official collective, Dinkytown Athletes.

Since 2022, the group has been collecting money in the form of fan club memberships with various perks at different levels, donations (from individuals and organizations), brand partnerships, and businesses who pay for Gopher athletes to promote their product or service. It pools the money by sport, then offers one-off deals worth about $600 each or bundled contracts—a sequence of one-off deals—to athletes, who can pick and choose among what’s offered.

Under the new revenue sharing agreement, athletes will still be able to field deals from the collective or arrange them independently, but some may not have as much incentive to do so. “If you’re a guy making $800,000, it might not be worth two hours of your time to go make two grand or four grand,” Baratz says.

Since the introduction of NIL money and the inception of collectives, some college supporters across the country have amassed huge caches of money to disperse to their athletes, sometimes under questionable guises. The new oversight measures are meant to eliminate those infractions, and the stated intent of allowing schools to pay their athletes up to the same amount is to level the playing field. In effect, coaches will be able to pay their teams roughly the same amount, promoting more parity.

“I do think the cap of $20.5 million does help create some balance between the programs,” Coyle says. “Obviously you still have the external NIL—schools will have those collectives—but I think there’s hope, with the clearinghouse, that will reduce the [unsanctioned] pay for play that’s been occurring the past couple of years.”

The new arrangement will likely benefit schools like the University whose collectives have not amassed large war chests like some football powerhouses. That will work if everyone plays by the rules, but, historically, that has not been the case for some of the U of M’s competition. “We are going to abide by the rules,” says Derek Burns, cofounder and president of Dinkytown Athletes, as well as a former Gopher football captain. “But there may be other schools that don’t and it’s not enforceable or not enforced very well, with [other] schools finding ways to pay athletes under the table; those schools are going to win and places like the U will suffer.”

The biggest challenge for the U of M’s athletic department will be figuring out how to make up $20.5 million in its annual $150 million-budget (actual $152,572,560 in expenses for fiscal 2024), which ran about a $1.5 million deficit in FY 24 and anticipates a deficit of nearly $8.75 million for the coming year. What’s more, nearly $2 million in support received annually from the NCAA will be diverted to paying off the $2.8 billion in backpay to former players dictated by the settlement. So, to make up that money, Coyle will have to find ways to raise additional revenues and/or cut expenses, as other schools are doing.

Five years ago, during the pandemic, upon Coyle’s recommendation and the Board of Regent’s approval, men’s gymnastics, men’s tennis, and men’s indoor track and field were discontinued after the 2020-21 seasons “based on financial and equity challenges.” Nine men’s and 13 women’s varsity sports remain. When asked about cutting additional sports, Coyle said, “I don’t have any intention of doing that.”

Instead, the athletic department will consider other ways to keep costs down on what is already a lean budget (14th among the Big 10’s 18 schools). For instance, Coyle would like to replace two senior staff members who recently left the department, but to save money he won’t. “We’ve been working closely with campus personnel to reduce expenses as much as possible,” he says.

Some schools are adding “talent fees” to their football tickets or raising concession prices, but Coyle said the U of M does not plan to go that route. Instead, they’ll continue to use dynamic ticket pricing, lean into aggressive fundraising efforts, and get creative about hosting events like the Beyoncé concert two years ago, the World Junior Championships, and Farm Aid this fall that deliver rental fees and a cut of ticket sales.

At this point, it’s not clear how much Title IX, which dictates that schools must provide equal athletic opportunities for men and women, will impact revenue sharing distribution. In its final weeks, the Biden Administration had issued a memo deeming such payments “athletic financial assistance,” meaning they would be subject to Title IX regulations, but the U.S. Department of Education under President Trump recently rescinded that recommendation. It’s reasonable to expect more lawsuits challenging the equity of payments, leaving the issue ultimately to be decided by the courts.

While many believe that Judge Wilkin’s careful deliberation over the settlement details was intended to rule out grounds for appeal, it’s also likely more lawsuits will challenge aspects of the settlement and issues left unresolved. Tops among those, especially now that schools are paying athletes with shared revenue, is whether college athletes are employees. And, if they are, can they unionize? Another case being argued in the courts, Johnson v NCAA, filed in 2019, asserts that athletes are employees entitled to minimum wage.

That will be the next frontier for athletes claiming they deserve a fair—read larger than the $20.5 million already allotted—share of the revenues they generate.

Congress could also intervene. Thirty-two states (but not Minnesota) have laws related to compensating college athletes that differ in their stipulations. Aspects of the House settlement that conflict with those could also trigger legal challenges. To that end, the NCAA and power conference members are lobbying Congress to pass a universal law that will supersede the patchwork of state laws and prevent athletes from becoming employees. “Only Congress can address these issues,” NCAA President Charlie Baker wrote in an open letter the day Wilken approved the House settlement.

Baker acknowledged in his letter the “chaos” that resulted since allowing NIL deals and expressed hope that the House settlement “opens a pathway to begin stabilizing college sports.”

While it’s likely there will be more turbulence before achieving that stability, Coyle sees the U of M as well positioned to get through it.

“In terms of how the settlement is going to help or what it looks like in a few years, I don’t think anybody knows,” he says. “I think there are going to be additional lawsuits that we’ll have to navigate our way through, but being in the Big 10 is a really big deal for the University of Minnesota because we have a seat at the table with the other major institutions who are shaping the future of college athletics.”

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