NCAA could face bankruptcy in aftermath of antitrust lawsuits

NCAA and power conferences could face $20 billion in damages, risk bankruptcy if they reject settlements in three antitrust cases

Kirby Lee-USA TODAY Sports

The current state of college athletics is on the verge of being completely uprooted.

Per a document obtained by Yahoo Sports, the NCAA and its power conferences could lose $20 billion in back damages and risk filing for bankruptcy if they reject settlements in the House, Hubbard and Cart antitrust cases and lose in court.

The proposed settlement, which was given to ACC leaders during their annual spring meetings, states the NCAA would pay $2.776 billion in backpay to student-athletes for the use of their name, image and likeness prior to 2021. Those damages would be paid out over 10 years, if the NCAA agrees on the settlement.

If it doesn’t and loses in court (which some predict would be likely), then the NCAA would likely have to pay the aforementioned $20 billion in back damages immediately, per Yahoo Sports. Such a hefty price tag without a 10-year grace period “would, in all likelihood,” result in the NCAA and its conferences filing for bankruptcy.

If the NCAA agrees on the proposed settlement, it and its conferences would pay $277 million annually over the course of 10 years. About 60% of that would come from a reduction in distribution to its schools. The other 40% would derive from reserves, other net incomes and operating expenses. 

According to Yahoo Sports, the NCAA would have to reduce distribution to its schools by $160 million per year.

The settlement also contained a new compensation model that’s aimed at putting a revenue-sharing cap on how much compensation schools are permitted to give student-athletes. The document revealed institutions are permitted to distribute 22% of an average of power conference school’s media rights, ticket sales and sponsorships. 

That percentage is fluid and unsettled, according to Yahoo Sports. A projected revenue cap of about $21 million is being shared with college leaders. As much as $5 million is credited toward annual Alston-related payments ($2.5 million annually) and any new scholarships the school adds as part of a new scholarship model ($2.5 million annually).

The documents outlined a new scholarship model that would lift scholarship limitations and implement roster limits that would allow schools to offer scholarships to an entire roster.

It would be catastrophic for the NCAA to deny the settlement and lose in court. The document states that a judge is likely to invalidate restrictions on schools paying student-athletes directly, not to mention the 75% reduction in NCAA distribution over a decade period if it loses in court.