Impact of House NCAA settlement on financial planning

Financial advisors’ business case for working with college athletes picked up a multibillion-dollar infusion last month after the resolution of a giant lawsuit that had been in court for five years.

About 389,700 former college athletes will be paid a combined $2.58 billion, thanks to the settlement of House v. National Collegiate Athletic Association (NCAA) approved June 6 by Senior District Judge Claudia Wilken. The agreement will also enable current players in the five largest conferences to receive about $1.6 billion in new annual compensation this year — and it massively alters the rules of name, image and likeness (NIL) pay. Beyond the direct outlays of $2.8 billion to athletes and other recipients, Wilken’s ruling created a new era in NCAA sports in which many colleges will pay their team’s players direct compensation the first time. 

The revenue sharing arrangement for athletes from the so-called Power 5 conferences under a new College Sports Commission, its recently opened online NIL Go portal through a collaboration with Deloitte and fresh guidelines stating that NIL deals must be for a “reasonable” amount tied to a “valid business purpose” could affect NCAA compensation for decades. 

READ MORE: Morgan Stanley, NIL firm team up on NCAA athletes’ financial education

Opening doors

The settlement represents “a full transformation of the college athletics model” and, “for financial advisors, one of the most unique planning opportunities, I would say, of the last decade,” said Kim Curtis, a partner in the Greenwood Village, Colorado-based office of registered investment advisory firm Cerity Partners and a former college basketball player.

“If we could help these athletes transition from short-term spending to long-term wealth building, that’s the golden ticket,” Curtis said. “That to me is, hopefully, why we’re in the business.”

Those new income streams for athletes come with some risks, such as possible tax hits and contractual complexities, according to Jordan Raniszeski, a senior managing partner with Charlotte, North Carolina-based Carnegie Private Wealth, which was one of the sponsors of last month’s AthleteCon conference for athletes, content creators, NIL booster collectives, universities and law and financial professionals. The Livvy Fund, which former Louisiana State University Tigers gymnast Livvy Dunne started in 2023 to aid women athletes at her school in tapping into NIL deals, was a partner alongside the organizer of the event, Athletes.org, which describes itself as a “players association” for college athletes. The event was happening on the day Wilken approved the House settlement.

“It’s a great opportunity for young people, and it’s a great opportunity for us as planners to help kids from a young age,” Raniszeski said. “That power of compounding is so incredible when you’re so young. It’s a really good opportunity, but it takes discipline and it takes good guidance and structure.”

READ MORE: Athlete turned advisor tackles financial literacy at his alma mater

Key terms of the NCAA NIL settlement

The settlement stemmed from lawsuits filed in 2020 by former University of Oregon Ducks basketball player Sedona Prince, ex-Arizona State University Sun Devils swimmer Grant House and onetime University of Illinois Fighting Illini football team member Tymir Oliver. The litigation wound its way through the court process as a 2021 ruling in the Supreme Court spurred the NCAA to legalize NIL pay. Subsequently, athletes playing the most popular sports at the biggest schools began receiving NIL deals worth millions annually. Wilken granted preliminary approval of the House settlement last October, the month after a hearing on it.

“Approving the agreement reached by the NCAA, the defendant conferences and student-athletes in the settlement opens a pathway to begin stabilizing college sports,” NCAA President Charlie Baker said in a message last month. “This new framework that enables schools to provide direct financial benefits to student-athletes and establishes clear and specific rules to regulate third-party NIL agreements marks a huge step forward for college sports.” 

Three types of class members, based on the sport they played between June 2016 and September 2024, will be eligible for settlement payments, but the new revenue sharing and NIL rules for current athletes are getting much more attention in the wake of the ruling. Under the terms, the Power 5 schools can now offer more than 115,000 new scholarships each year and pay athletes as much as 22% of their average annual athletic revenue. That will bring $20.5 million in new compensation for athletes at each Power 5 school this year and an expected $32.9 million annually by the 2034-35 season. After increases of 4% per year in the first three and subsequent calculations published every spring, the settlement amounts to $19.4 billion in pay over the next 10 years.

The settlement provides “levels and types of student-athlete compensation that have never been permitted in the history of college sports, while also very generously compensating Division I student-athletes who suffered past harms,” Wilken wrote in her order approving it.

She also pushed back against criticism that the settlement may hamper enforcement of Title IX rules prohibiting discrimination against women in education or pose a chilling effect on athletes’ ability to get NIL deals. Nothing in the settlement would preclude schools from abiding by Title IX or athletes from filing lawsuits or claims alleging discrimination based on their sex, she wrote. And any athlete who must now report their NIL deals of $600 or more to the new commission will have a means to protest its disapproval of any contract.

“Under the NCAA’s current enforcement system for third-party NIL payments, the NCAA is the only decision-maker with respect to the enforcement of NCAA rules governing third-party NIL deals,” Wilken said. “By contrast, the [settlement] requires that any disputes arising out of NCAA members’ enforcement of the third-party NIL restrictions in the [settlement] be resolved via neutral arbitration.”

READ MORE: 6 tips for advisors to help rich young athlete clients with NIL

Questions and opportunities

Possible implications like that will start playing out in this and coming years, as the commission takes stances on what constitutes the fair market value of NIL deals, Raniszeski said. That amounts to “one of the biggest question marks” to him moving forward, he said. On the other hand, the reliability of guidelines across the largest conferences and programs and payments from the schools themselves rather than third-party NIL collectives could help with planning for taxes and other important personal finance issues for college athlete clients.  

“You’re going to get more consistency and more structure,” Raniszeski said. “We couldn’t even get 1099s for our kids, and it was kind of a mess. … Now that we have an idea of where things are going, it creates a lot of potential for the future.”

He added that he would “encourage a lot of planners to give this space a look,” since today’s college athletes are getting more entrepreneurial in the ways that they’re seeking “to maximize this opportunity that they have, and they really do need professional guidance.”

Advisors trying to tap into athletes as a niche client base could start by trying to forge relationships with the NIL booster collectives, university compliance officers, athletic departments or other stakeholders in the new processes, Curtis said. Those whose firms have a national presence can bring their brands and resources to bear, but advisors from smaller companies could have their own edge with a strong local network.

“It’s a long game, so you better certainly love what you’re doing in making a difference, because at the beginning a lot of it is giving away your time. NIL isn’t just a financial windfall. It’s really a test of maturity, trust and vision,” Curtis said. “Advisors who have the right tools and values will shape not just the athletes’ careers but their lives.”