The Evolving Economics of College Sports

The Issue:

College sports is undergoing an era of rapid and profound transformation with a number of major changes taking place concurrently. The settlement of an antitrust suit that opened the door to allowing colleges to pay athletes directly, the liberalization and extension of the athlete transfer portal, the introduction of private equity, and the growth of sports betting are transforming the college sports landscape. These changes threaten to drive an even bigger wedge than what currently exists between the educational mission of colleges and universities and their promotion of sport teams that garner attention and donations but do little to help the greater academic mission.

The evolution of the House Settlement and possible federal regulatory legislation can still reshape the future of college sports.
The Facts:

A settlement agreement approved in U.S. District Court in June of 2025 allows colleges and universities to make direct payments to student athletes. With the stated goal of maintaining amateurism in college sports, the National Collegiate Athletic Association (NCAA) has historically enforced rules to limit athlete compensation, including athletes’ ability to benefit from the use of their name, image and likeness (NIL) to promote or endorse products or services. A series of antitrust challenges to the NCAA’s compensation rules, however, has prompted changes to this landscape and the doors of NCAA amateurism began to crack open. The House case, brought in June 2020 and settled together with some smaller cases in 2025, provided a more basic challenge, ultimately calling for direct school payment to athletes. The settlement provides for up to 22 percent of average revenue among the top 68 schools (equal to $20.5 million per school in 2025-26) to be paid to college athletes (a) for use by the college and connected entities of athletes’ name, image and likeness (NIL) and (b) for what is designated as revenue sharing. Together with benefits to athletes from scholarships, academic and athletic awards, educational benefits and (inadequate) medical insurance coverage, the total value of benefits to college athletes among the top 68 schools can reach up to approximately 50 percent of revenue in those schools. The 50 percent share is meant to emulate the share received by professional male athletes in the NFL, NBA, NHL and MLB. The House Settlement also allows third parties to contract with college athletes for their NILs. However, it stipulates that these NIL payments must be for the athletes’ publicity (advertising) value, not their roster (playing) value. It also requires that any payment over $600 must be vetted by a new commission to ensure this condition is being met.
Student Athletes also now have greater latitude to change schools. In 2021, the NCAA liberalized its transfer portal (where athletes can essentially declare themselves free agents) by removing a restriction that required transferring athletes to sit out for a year before competing for the new school. The result was that the transfer portal became flooded with athletes seeking higher bids for their services. Meanwhile, also in 2021, following the lead of numerous state legislatures, the NCAA permitted third-party payments for NILs, so long as the payment was for publicity, not roster value. The problem was that the NCAA, fearing litigation, did not enforce this condition, which led to a proliferation of third-party booster collectives directly providing star college athletes with recruiting or retention inducements poorly disguised as legitimate NIL work and operating openly at the direction of coaches. While this player market in college sports was described by many as the wild west, it mainly benefitted the elite football and men’s basketball players who were on their way to the NFL and NBA. State legislatures, wanting their schools to have more successful sports programs, raced to the bottom, each outdoing the other in lifting pay-for-play restrictions. Payments to the elite athletes exploded with little control, at least until the House Settlement was put into place on July 1, 2025.
Despite having reached a legal settlement, uncertainty remains. The House Settlement is being challenged on several grounds in court. The two primary appeals are based on Title IX and antitrust. Title IX requires benefits to be provided proportionately to male and female athletes at higher education institutions that receive federal funding. If the payments are classified as financial aid, women, who are 47 percent of college athletes in the top 68 schools, should receive 47 percent of the benefits. In contravention, the House Settlement allocates between 90 and 95 percent of financial benefits to male athletes. The Settlement also limits NIL and revenue sharing payments from the schools to 22 percent of average revenues. This is a salary cap, and as such violates antitrust laws, unless it is a product of collective bargaining, which it is not. Thus, the future of the House Settlement remains very much in question.
Proposed and passed legislation is also contributing to the uncertainty in college sports. State legislatures have passed widely differing state rules regarding college sports and pay-for-play. Because of the disarray and need for a coherent national policy, the U.S. Congress has gotten involved, with Democrats and Republicans putting forward distinct bills (see here). Various groups (e.g., the Knight Commission on Intercollegiate Athletics and The Drake Group) and individuals, such as Texas oilman and Texas Tech Chair of the Board of Trustees, Cody Campbell, are trying to shape the Congressional proposals.
Sports betting is adding to the changing environment. The Supreme Court lifted the national ban on sports betting in 2018. Since then, thirty-eight states (plus Washington, D.C. and Puerto Rico, and Las Vegas where it was previously legal) have legalized sports betting and introduced new taxes to capture some of the exploding revenue. Many have also legalized betting on college sports. College athletes are susceptible to the possible allure of payments for match fixing. (Even in professional sports, where athletes earn multi-million-dollar salaries the number of cases of professional athletes caught  in sports fixing is rising). Bets can be placed on not just the outcome of a game, but also on the outcome of individual plays and individual athletes, e.g., a pitcher’s first pitch in the bottom of the sixth inning will be a ball. Such bets are difficult to monitor and a wide field of corruption is opened up.  
There is also a privatization of college sports taking place. One recent step has been the investment of private equity into university athletic departments wherein an initial investment entitles the private equity group to a share of designated revenue in the future. Although the terms of this private equity investment vary appreciably from school to school, sometimes involving minority ownership rights in an LLC connected to the athletics department and sometimes simply a revenue sharing deal in exchange for an upfront investment, it portends a shift in the priorities in the management of college sports further away from education.