Game Theory: How the House Settlement’s Revenue-Sharing Forces a “Prisoner’s Dilemma”

By: Ryan Magill*                                                                         Posted: 12/13/2024      

On October 7, 2024, Judge Claudia Wilken, a U.S. District Court judge presiding over the Northern District of California, granted preliminary approval of a proposed settlement in House v. NCAA,[1] a multi-billion-dollar antitrust lawsuit that will permanently reshape the landscape of college athletics.[2]  Among other things, this settlement will allow all division one schools to “revenue-share” up to twenty-two percent of their total athletic budget with their athletes.[3]  For “Power Five” schools, athletes will now get to take home a share of athletics budgets that average north of $20 million annually in 2025 and 2026.[4]  For non-“Power Five” schools, the “revenue-sharing” model will not produce the same numbers due to their smaller budgets, but it will still represent a massive change in a program’s ability to compensate their athletes.[5]  Yet, despite the appearance of “options,” the House settlement essentially forces colleges into a “prisoner’s dilemma” game to stay competitive and relevant.[6]  In spite of available solutions, this “dilemma” will persist, and student-athletes will reap the benefits.[7]

In the Name of Competition: How the Settlement Capitalizes on Schools’ Interests

Athletic departments of division one schools will inevitably consider prospective recruits in their consideration of the effects of the House settlement, since recruiting athletes is a large part of their jobs and collegiate sports bring in a lot of revenue for colleges and universities.[8]  However, following the seismic changes to rules surrounding Name, Image, and Likeness (“NIL”) in 2021 and the incoming revenue-sharing options starting as early as 2025, college recruits now have a greater ability to maximize their earning potential than in previous years.[9]  To compete against other schools in recruiting nowadays, athletic departments will be forced to determine how their institution will address the settlement’s revenue-sharing system, which is what sets up a “prisoner’s dilemma” game.[10]

Consider the following hypothetical example: rival athletic powerhouses in the University of Alabama and the University of Georgia are both members of the named-defendant Southeastern Conference (“SEC”), and the House settlement allows both schools to pull from their massive athletic program budgets to revenue-share up to the maximum limit.[11]  While the two schools could both decide to share less than the maximum, if Alabama shares all twenty-two percent of revenue allowed by the settlement and Georgia only shares fifteen percent, Alabama would likely see more success than Georgia in recruiting top talent because Alabama has the ability to pay their athletes more than Georgia.[12]  Wanting to stay ahead of the competition in recruiting, the “prisoner’s dilemma” dictates that Alabama and Georgia must share the maximum amount of revenue to avoid being rendered obsolete by their rivals.[13]  Alabama and Georgia illustrate the intricacies of the issue, but this dilemma is a reality faced by virtually all Power Five schools.[14]

Meanwhile, a similar dilemma arises with non-Power Five teams on deciding whether or not to opt-in to the House settlement.[15]  For example, the Big East Conference is not a named defendant, and member schools like Villanova University and the University of Connecticut have smaller athletic budgets, which may dictate their decisions on whether to opt-in to revenue-sharing absent conference guidance.[16]  Both schools could stick to the status quo and decide not to opt in, but if Villanova hypothetically did not want to opt in while Connecticut did, then Connecticut would be able to promise revenue-sharing funds that Villanova does not have to offer recruits.[17]  Like Georgia’s hypothetical fifteen percent revenue-share situation, Villanova’s decision to opt-out of revenue-sharing may cost them prospective student-athletes who would help them compete with Connecticut and other Big East competitors, the notion of which might be enough to force Villanova to opt-in under the “prisoner’s dilemma.”[18]

Playing to Win: The Settlement is the “Solution”

Unionization of college athletes presents a viable solution to this “prisoner’s dilemma,” while still progressing college athletes towards maximizing their earnings.[19]  Realistically, the impending House settlement is not the most efficient forum to solve these issues, but collective bargaining between hypothetical student-athlete unions for each conference would effectively address all parties’ issues.[20]  Further, while the potential status of college athletes as “employees” remains an ongoing question, the House settlement explicitly states that its terms could be adjusted in the event collective bargaining between schools/conferences and potential athletes’ unions is allowed.[21]  However, the NCAA does not seem interested in collectively bargaining with college athletes, having already sponsored legislation that attempts to end that debate.[22]

While a mutually beneficial solution exists, this administrative “game theory” dilemma is not a concern for the House settlement because this is exactly what the Plaintiffs want.[23]  Colleges are not fighting the battle against paying athletes anymore.[24]  Instead, schools are way more focused on setting up the systems necessary for them to play the game set out for them in the House settlement.[25]  Now, as the settlement itself says, collegiate student-athletes will make tens of billions of dollars that they have previously been entirely kept away from, over the next ten years.[26]

Many would argue that the administrative headaches explored in this article are completely justified given how the NCAA and member conferences have profited off “unpaid labor” for over a century, especially as college football and basketball became billion-dollar industries.[27]  To critics, this settlement is merely the pendulum swinging back at the greedy conferences who refused to allow athletes to profit from their hard work.[28]  In the end, while the NCAA and its member institutions are forced to play the game, the student-athletes remain the real winners.[29]

* Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2026, Villanova University Charles Widger School of Law.

[1] In re Coll. Athlete NIL Litig., No. 20-cv-03919, 2023 U.S. Dist. LEXIS 216532 (N.D. Cal. Nov. 3, 2023).

[2] See Justin Williams, House v. NCAA Settlement Granted Preliminary Approval, Bringing New Financial Model Closer, The Athletic, (Oct. 7, 2024), https://www.nytimes.com/athletic/5826004/2024/10/07/house-ncaa-settlement-approval-claudia-wilken/ (reporting on Judge Wilken’s preliminary approval of House settlement).

[3] See Plaintiff’s Motion for Preliminary Settlement Approval at 1–2, House v. NCAA, No. 20-cv-03919 (N.D. Cal. July 7, 2024) (overviewing settlement’s plan for revenue-sharing).

[4] See id. at 18 (explaining how “revenue-sharing” injunctive relief would work for Power Five Schools, including estimates on how much athletes would make in total); see also id. at i (naming Southeastern Conference [“SEC”], Big Ten Conference, Big Twelve Conference, Pac-Twelve Conference, and Atlantic Coastal Conference [“ACC”] respectively as defendants alongside NCAA).

[5] See id. at 18 (explaining that all division one schools can opt in to settlement terms on “revenue-sharing”).

[6] For further discussion of how the settlement terms effectively create a “prisoner’s dilemma” game for colleges regarding whether to opt-in and how much revenue to share, see infra notes 7–17 and accompanying text.

[7] For further discussion of how the settlement will inevitably be the only solution to the issues of revenue-sharing, despite a clear additional plan which could ease the transition for schools, see infra notes 18–26 and accompanying text.

[8] See Major Infractions Search Results, NCAA LSDBi, https://web3.ncaa.org/lsdbi/search?q=&types=major (last visited Nov. 10, 2024) (showcasing all “major infractions” documented by NCAA, including 277 infractions); see also Eric Dodds, The ‘Death Penalty’ and How the College Sports Conversation has Changed, Time (Feb. 25, 2015, 6:00 AM), https://time.com/3720498/ncaa-smu-death-penalty/ (documenting first major recruiting violations scandal dealt with by NCAA in 1987 against Southern Methodist University).

[9] See Kevin Dotson & Ben Morse, Former Football Coach Nick Saban Laments the Current Landscape of College Sports, CNN, (Mar. 13, 2024, 5:46 AM), https://www.cnn.com/2024/03/13/sport/nick-saban-college-sports-landscape-alabama-spt-intl/index.html#:~:text=%E2%80%9CAll%20the%20things%20that%20I,be%20more%20successful%20in%20life.%E2%80%9D (explaining legendary former Alabama football head coach Nick Saban’s thoughts on college football recruits focusing on “whichever universities are willing to ‘pay the most money, raise the most money, buy the most players’ in a position to spend their way to an advantage on the field of play.”); see also Mike Barber, Tony Bennett Cites NIL and Transfer Portal Era as Reason He’s Suddenly Retiring at Virginia, AP News (Oct. 18, 2024, 8:24 PM), https://apnews.com/article/virginia-basketball-tony-bennett-retires-7151169d37e4fb6d8ed324671f24cb61 (explaining that head coach Tony Bennett’s decision to retire was based on being “not great at” understanding and using NIL and transfer portal rules).

[10] See Steven Kuhn, Prisoner’s Dilemma, Stan. Univ. Encyc. of Phil. (Sept. 4, 1997), https://plato.stanford.edu/entries/prisoner-dilemma/ (explaining provisions of “prisoner’s dilemma” game).  The NCAA has stated the House settlement allows conferences to establish rules regarding revenue-sharing.  See Ross Dellenger (@RossDellenger), X (Oct. 28, 2024, 12:37 PM) [hereinafter Dellenger 1], https://x.com/RossDellenger/status/1850939909768630539 (presenting NCAA Q&A regarding House Settlement); see also Ross Dellenger (@RossDellenger), X (Nov. 1, 2024, 1:56 PM) [hereinafter Dellenger 2], https://x.com/RossDellenger/status/1852409386821661176 (reporting on plaintiff attorney Jeffrey Kessler’s comments about Ivy League’s non-participation in revenue-sharing).  However, the “prisoner’s dilemma” game is predicated on the two parties being unable to communicate about their situation, which is present here as the House settlement references “anti-collusion provisions” prohibiting schools from coordinating to artificially limit athletes’ earning potential.  See Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 19 (explaining how schools would be subject to audits to “ensure that the schools compete with each other in making benefit and compensation decisions for athletes”).  But it could be a matter of time before the terms of the settlement are even challenged by schools or the NCAA.  See Noah Henderson, With NCAA Revenue Sharing Emerges a New Antitrust Challenge, Sports Illustrated (Oct. 8, 2024), https://www.si.com/fannation/name-image-likeness/nil-news/with-ncaa-revenue-sharing-emerges-a-new-antitrust-challenge (explaining that revenue-sharing earning, absent collective bargaining, invites “price-fixing” accusations).

[11] See Jason Clinkscales, Georgia vs. Alabama Football: Battle of the Big Budgets, Sportico (Sept. 28, 2024, 10:17 AM), https://www.sportico.com/leagues/college-sports/2024/georgia-alabama-football-battle-big-budgets-1234799018/ (“In 2022-23, the last full year available in Sportico’s college sports financial database, Alabama had the fourth-highest total operating expenses in the nation at $212.0 million while Georgia ranked 13th at $186.6 million.”); see also Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 18 (“Division [One] schools can provide their student-athletes with previously prohibited direct benefits worth up to [twenty-two percent] of the Power Five schools’ average athletic revenues each year.”).

[12] See Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 18 (holding that details of “revenue-sharing” are decisions made by each school); see also Dellenger 1, supra note 10 (presenting NCAA Q&A regarding House settlement which confirms that each school makes their own individual decisions regarding revenue-sharing).

[13] See Ryan Phillips, Five Interesting Facts About the Alabama-Georgia Rivalry, Sports Illustrated (Sept. 26, 2024), https://www.si.com/college-football/five-interesting-facts-alabama-georgia-rivalry (explaining history of college football rivalry between University of Alabama and University of Georgia).

[14] For further discussion of how all Power Five schools are bound by the terms of the House settlement, including the requirement to engage in “revenue-sharing,” see supra note 3 and accompanying text.

[15] For further discussion of a similar challenge faced by non-Power Five schools regarding “opting in” to the House Settlement, see infra notes 15–17 and accompanying text.

[16] See Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 18 (explaining how settlement wants non-Power Five schools to opt-in).  The Settlement only names the Power Five conferences, of which the Big East is not included.  See id. at 2 (“Preliminarily approving a proposed class action settlement with the National Collegiate Athletic Association, Pac-[Twelve] Conference, The Big Ten Conference, Inc., The Big [Twelve] Conference, Inc., Southeastern Conference, and Atlantic Coast Conference.”).  For further discussion of the role of the conferences in “revenue-sharing,” see supra note 9 and accompanying text.

[17] See Dellenger 1, supra note 10 (presenting NCAA question and answer explaining opt-in decisions are independent school decisions for all division one institutions).

[18] See No. 1 Huskies Visit Villanova for Saturday Night Showdown, Univ. Conn. Athletics, (Jan. 19, 2024, 12:23 PM), https://uconnhuskies.com/news/2024/1/19/mens-basketball-no-1-huskies-visit-villanova-for-saturday-night-showdown.aspx (detailing men’s basketball rivalry between University of Connecticut and Villanova University).

[19] For further discussion of the benefits of collective bargaining with college athletes to this issue, see infra notes 19–20 and accompanying text.

[20] See Henderson, supra note 10 (explaining how avoiding “price-fixing” antitrust accusations requires collective bargaining like pro sports).

[21] See Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 20 (holding Settlement’s position on athlete collective bargaining).  Specifically, the settlement states:

Importantly, the Injunctive Relief Settlement takes a neutral position and thus will not interfere with any collective bargaining efforts between college athletes and Defendants or NCAA member schools, in the event that a change in law or circumstances permits collective bargaining. If that occurs, the benefits permitted under the Injunctive Relief Settlement may be made part of any collectively bargained compensation package or alternative structure. Thus, the Settlement will not preclude the parties to any such bargaining from agreeing upon additional, expanded, or different benefits than those permitted by the Injunctive Relief Settlement.

See id. (stating House settlement’s position).

[22] See Ross Dellenger, Why This Could Be the Most Consequential Election in College Sports History, Yahoo! Sports (Nov. 4, 2024, 2:57 PM), https://sports.yahoo.com/why-this-could-be-the-most-consequential-election-in-college-sports-history-194605687.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAAvJzBFPg7rZ-YpMGWzN2JkkROdBx5D1zfYVIMuKvVgBC7vdBDGcah_AGfyMedM-icvl-Fg0V7kyQ-LY_tOUm9u_vB5EaOwuLMkIUgBjqEf9Mq3vjta0M9nAZY12B-Nd4A8-q8g-mCKdg1tjAhzzSmmxZPeIFI4tBkekgNcY43UY (“In their most recent lobbying efforts, the conferences are requesting that any bill (1) prohibits college athletes from becoming employees and (2) codifies the NCAA’s settlement of the House antitrust lawsuit, which would likely entail the granting of a limited antitrust exemption.”).

[23] See Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 19 (explaining how House settlement forces schools to compete for athletes so athletes receive more compensation).

[24] See O’Bannon v. NCAA, 802 F.3d 1049, 1061 (9th Cir. 2015) (explaining NCAA’s reliance on Supreme Court decision in NCAA v. Board of Regents of University of Oklahoma to rule against plaintiff challenge concerning restraining trade related to student-athletes’ name, image and likeness); see also NCAA v. Alston, 141 S. Ct. 2141, 2147 (2021) (exploring further challenges on limits to student-athletes' education-related benefits).

[25] See Chris Low, Tennessee Increases Ticket Prices by 10% to Help Pay Athletes, ESPN (Sept. 17, 2024, 2:56 PM), https://www.espn.com/college-football/story/_/id/41302985/tennessee-ups-season-ticket-prices-10-help-pay-athletes (explaining University of Tennessee’s plan to increase ticket sale price to boost revenue available to share with athletes).

[26] See Plaintiff’s Motion for Preliminary Settlement Approval, supra note 3, at 11 (“[A]chieving injunctive relief that will enable future college athletes to receive tens of billions of dollars in new forms of benefits over the next ten years.”).

[27] See Sean Gregory, Why the NCAA Should Be Terrified of Supreme Court Justice Kavanaugh’s Concurrence, Time (June 21, 2021, 6:24 PM), https://time.com/6074583/ncaa-supreme-court-ruling/ (criticizing NCAA’s prior business model which allowed it to profit without paying student-athletes).

[28] See id. (reporting on Kavanaugh’s concurrence in Alston).

[29] See David Cobb, House v. NCAA Settlement Winners and Losers: Athletes Take Monumental Step, Non-revenue Sports at Risk, CBS Sports, (May 24, 2024, 8:56 AM) https://www.cbssports.com/college-football/news/house-v-ncaa-settlement-winners-and-losers-athletes-take-monumental-step-non-revenue-sports-at-risk/ (explaining how athletes won, and NCAA lost settlement).