NIL Lawsuit Challenges NCAA Restrictions on Athlete Earnings and School Partnerships

A recently filed proposed class action is the latest legal challenge in the post-House settlement era of college athletics. The lawsuit, brought on behalf of two college football players, claims that the NCAA, major college sports conferences, and the College Sports Commission unlawfully implemented the terms of the House settlement, specifically in states that have passed legislation prohibiting restrictions on college athlete earnings for their name, image and likeness (NIL). While the lawsuit presents allegations only, it could bring abrupt changes to the college sports world, particularly in states such as Mississippi and Tennessee.

The House Settlement and its Aftermath

 The historic House settlement opened new doors and revenue to college athletes. It established a revenue-sharing model which allows universities to pay current and future student-athletes up to nearly $21 million directly during the 2025-2026 school year. In the wake of the House settlement, the “Power 5” conferences (ACC, Big Ten, Big 12, Pac-12 and SEC) established the College Sports Commission (CSC) as an independent regulatory body tasked with reining in NIL compensation for student-athletes. 

This newly filed suit claims that the NCAA, the “Power 4” conferences (the lawsuit does not include the Pac-12 conference as a “power” conference), and CSC conspired to restrict athletes’ earnings by capping revenue-sharing payments and banning NIL benefits from “associated entities,” such as university boosters or collectives that represent schools. The lawsuit claims that this restriction on NIL benefits violates student-athletes’ state NIL rights, since many states have enacted legislation that prevents the restriction of NIL compensation for student-athletes. The suit claims that the NCAA was aware the House settlement did not preempt these respective state laws and is effectively attempting to implement rules to circumvent them – i.e., through the use of the CSC and its associated clearinghouse, NIL Go.

Mississippi’s NIL Law

In 2021, the Mississippi Legislature passed the Mississippi Intercollegiate Athletics Compensation and Publicity Rights Act, which is commonly referred to as Mississippi’s “NIL Law.”  This legislation governs how student-athletes at Mississippi colleges and universities may receive compensation and enter into agreements regarding their publicity rights. Among its many provisions, this legislation ensures that student-athletes are allowed to receive compensation for the use of their NIL, including cash payments, gifts, endorsement deals and licensing agreements. Importantly, this legislation also establishes certain restrictions on Mississippi colleges and universities, including that schools:

• • May not prohibit student-athletes from earning NIL compensation
  • Cannot revoke scholarships or eligibility based solely on an athlete’s NIL earnings
  • May impose reasonable regulations consistent with governing athletic bodies (e.g., NCAA)

Tennessee’s NIL Law

Like Mississippi, Tennessee also passed NIL legislation which prohibits the limitation of NIL compensation for student-athletes through its 2025 expansion of broad statutory protections in Tennessee’s Intercollegiate Athletes Names, Image, or Likeness Law. Further, Tennessee’s own attorney general has joined with other attorneys general in objecting to CSC enforcement architecture on similar grounds.

What Could This Change for Schools and Athletes?

Should the class action be certified and the plaintiffs succeed in their suit, this would add fuel to the fire for student-athletes to argue that CSC/NCAA caps and third-party screening rules cannot be enforced to the extent they conflict with any state’s enacted NIL law. Should the class action not be certified, or unsuccessful, institutions would remain subject to the House/CSC enforcement model while continuing to operate in tension with a state statute designed to block association interference.

With increased scrutiny on the substantial amount of NIL compensation promised to student-athletes, this latest filing could add to the momentum for federal legislative action such as SCORE or the SAFE Act.

As tension between state NIL statutes and the enforcement model of the House settlement continues to rise, the landscape post-House appears to be much like the settlement’s back pay to athletes: not going anywhere anytime soon.

Please contact Nash Gilmore, Katy Solares or any member of Phelps’ sports team with questions.