Seller Beware - House Settlement Claim Purchase Offers: An Offer He Can Refuse

Background & Introduction: 

As discussed in greater detail in the second installment of Wink Thinks, Full House: Athletes Hold the Cards in Historic $2.77 Billion NCAA Settlement & Beyond, on May 23, 2024 the NCAA and the ACC, the Big Ten, the Big 12, the Pac-12, and the SEC (collectively, the “P5”) announced that a settlement had been reached in the consolidated antitrust litigation of three class action lawsuits filed by former student-athletes against the NCAA and the P5. The three class action lawsuits consist of (1) House v. NCAA, (2) Hubbard v. NCAA, and (3) Carter v. NCAA (collectively, the “House Class Action Lawsuits”). On April 7, 2025, there was a final hearing before Judge Claudia Wilken of the U.S. District Court of the Northern District of California to approve the settlement of the House Class Action Lawsuits (the “House Settlement”), and subsequently on June 6, 2025 Judge Wilken approved the House Settlement. This article (i) examines a current financial issue being presented to many former P5 football players as offers relating to the damages payments owed to them under the House Settlement, and (ii) provides an overview of such offers and a framework for how to evaluate them. 

As a quick recap, the key financial terms of the House Settlement provide for the following¹: (1) the payment of approximately $2.7 billion into a settlement fund to settle consolidated antitrust claims set forth in the House Class Action Lawsuits relating to the back payment of such funds over a 10-year period to a class of approximately 14,500 former athletes who were members of Division I athletic teams from June 15, 2016 until November 3, 2023 (i.e., the date of the class certification in the House Class Action Lawsuits)² and could have received compensation for “pay-for-play” (i.e., athletic services) or the commercial use of their NIL rights and group licensing rights for video games and broadcasts if not for the NCAA prohibitions on such compensation and commercialization³; and (2) direct payments from schools to student-athletes in the form of a revenue sharing model which allows schools to pay approximately 22% of total revenue to student-athletes (which, in dollars, was approximately $20.5 million in Year 1 (July 1, 2025 – June 30, 2026) and includes a 4% per year automatic escalator of the revenue figure for the first three years of the agreement, with a mutual reevaluation of terms in Year 4). As previewed, the focus of this article is to evaluate a current trend involving offers being made to former players relating to former players’ rights to receive their allocated portion of the NIL Claims Amount. 

With respect to the distribution of the NIL Claims Amount to former Division I football players, the key split is between (i) P5 / Notre Dame FBS football players on full grant-in-aid scholarship (who fall into the House Settlement’s “Football and Men’s Basketball Class”) and (ii) other football players (e.g., group-of-five players, the “G5”) (who generally fall into the House Settlement’s “Additional Sports Class”). Once categorized into either the Men’s Football and Men’s Basketball Class or the Additional Sports Class, the available damages are then broken into four buckets: (1) Broadcast NIL (BNIL) (this is the largest bucket for P5 football players and this bucket is distributed pro rata based on the sport and years played); (2) Video Game NIL (based on sport and years played); (3) Lost Opportunities (this bucket is the most individualized category and applies a “before and after” methodology whereby the model looks at what an athlete actually earned from third party NIL after July 1, 2021 and then uses any post-July 2021 evidence to estimate what a student-athlete likely could have earned in earlier years when NIL was still prohibited, subject to formulaic, class-wide adjustments); and (4) Additional Compensation (this bucket compensates for athletic services (i.e., pay-for-play) with approximately 75% of the funds available in this bucket being paid to football players, 15% being paid to men’s basketball players and 5% being paid women’s basketball players, and within football, each former player’s amount is calculated using a formula including a standard minimum amount, plus adjustments for seniority, recruiting star rating and certain performance metrics). Taken together, for a former P5 / Notre Dame football player, the total damages amount typically consists of the sum of some combination of: (1) a BNIL amount based on years played, (2) a video game amount based on years played, (3) a lost-opportunities amount (if there is qualifying post-2021 NIL data), and (4) an additional-compensation amount based on the football share of the fund, then adjusted by the minimum base, plus seniority, recruiting profile and performance.

While the amount of damages available to each former player varies on a case-by-case basis, Plaintiff’s counsel in the House Class Action Lawsuits provided the following payout guideposts for each of the four buckets of damages for each of the Football and Men’s Basketball Class and the Additional Sports Class. For the members of the Football and Men’s Basketball Class: (1) BNIL-related damages range from $15,000 to $280,000 (with an average of $91,000), (2) video game-related damages range from $300 to $4,000, (3) lost opportunities-related damages range from under $1 to $800,000 (with an average of $17,000), and (4) additional compensation (i.e., pay-for-play) related damages (with an unreported range but an average of $40,000). For the members of the Additional Sports Class (i.e., former G5 football players), BNIL damages are not available to this class and the pay-for-play average damages amounts are considerably lower with an average of approximately $1,400. 

The Issue (Offer) Being Presented to Many Former Division I College Football Players:

As previewed in the above Background & Introduction, the House Settlement provides that the back-damages payments owed to certain former Division I football players are scheduled to be paid annually over 10 years, not in one lump sum. Accordingly, former players should not financially plan for one lump-sum check, but instead should prepare and plan for 10 annual installment payments through 2035. The offer being presented to many former Division I college football players is an opportunity to receive an immediate lump sum payment in exchange for the rights to a former player’s future damages payments, but this offer usually comes at a steep cost (discount) at a former player’s expense. 

Time Value of Money: Conceptual Overview 

The issue with these offers is rooted in a simple concept with which we are all inherently familiar – the time value of money – the fundamental financial principle that money available now is worth more than the same amount in the future due to its capacity to earn a return in the form of interest or capital gains (e.g., receiving $100 today is better than $100 a year from now because if you invest that $100 at 5% interest, you will have $105 in one year, whereas waiting means you will only have $100 in one year, which will have less purchasing power due to inflation). This intuitive financial principle is the reason why an offer to receive a lump sum of cash immediately sounds enticing; however, the key to understanding whether the offered lump sum amount is a “good” or “bad” deal depends on first understanding the foundational concepts (and related formulas)⁴ upon which the time value of money is built:

(1) Present Value: the current worth of a future sum of money (calculated by discounting the future amount based on a specific interest rate). Formula:   

Present Value = Future Value / (1 + r)ⁿ 

(2) Future Value: the value that a current sum of money (or asset) will grow to over a specific period of time at a given interest rate. Formula: 

Future Value = Present Value * (1 + r)ⁿ

In other words, the present value formula allows you to assess the value of a future amount today, and the future value formula allows you to assess what your current sum of money (or asset) will be worth in the future. 

While the first two formulas are helpful to understanding the general time value of money concept, the key formula for this article and understanding how to evaluate an offer to purchase former players’ future damages payments from the House Settlement is the Present Value of an Ordinary Annuity (PVA) formula. The PVA formula, set forth directly below, calculates the value today of a series of future payments rather than today’s value of a single lump sum in the future.

(3) PVA = Payment Amount * [1 – (1 + r) ⁻ⁿ/ r]

Time Value of Money: PVA Formula Applied to House Settlement Claim Offers 

Once equipped with the conceptual understanding and the PVA formula for how to value an offer for a lump sum payment today based on series of future payments, a former player can properly evaluate the lump sum offer. For an illustrative example, let’s first assume a former P5 football player is entitled to $225,000 in damages from the House Settlement, which would be paid in 10 equal annual installments of $22,500 (i.e., $225,000 / 10 = $22,500). Next we must assume a discount rate. The discount rate is the most important factor in this equation and it is the factor that generally determines whether a former player is getting a “good”, “fair” or “bad” offer (acknowledging that each individual player’s circumstances differ). A reasonable discount rate for claims of this nature would likely be between 5-8% (as the payments pursuant to the House Settlement are relatively reliable deferred payments).⁵ For purposes of this illustrative example, we can assume a discount rate of 6%.  Next, we can apply these assumptions to our PVA formula: 

PVA = Payment Amount * [1 – (1+r) ⁻ⁿ/ r] 

$173,739.04 = $22,500 * [1-(1+0.06)⁻¹⁰/ 0.06]

In other words, at a 6% discount rate, the “present value” of the 10-year stream of future payments in this example is $173,739.04; however, it is critical to note that changing the discount rate by even a few percentage points can have profound impacts on the present value (i.e., the lump sum offer amount). Set forth below is an illustrative table showing a range of discount rates from 5% up to 25% applied to our illustrative example for a former player entitled to $225,000 in total damages over 10 equal annual installment payments of $22,500 each. 

Illustrative Table & Cautionary Warning 

As reflected in the above Illustrative Table, even a simple 3% increase in discount rate from 5% to 8% can result in an approximate $23k reduction in present value (i.e., lump sum offer amount) from ~$174k to ~$151k. While each former player’s financial and life circumstances differ from one another (e.g., health, number of dependents, career stability, etc.), and therefore each former player’s need for immediate cash consequently differs, former players should be aware of these offers and the potentially predatory nature of the discount rates applied to such offers.⁶ Unfortunately, there are actors in this space utilizing discount rates of 20-25% in their lump-sum cash offers to former players and such offers also include referral bonuses for encouraging other similarly-situated former football players to sell their rights to their future House Settlement damages payments on the same predatory terms, thereby creating a contagion of predatory practices against former players. In our Illustrative Example & Table, a discount rate of 25% would yield a present value lump sum offer amount of $80,336.32 (which is a mere 35.71% of the total value owed to the former player in our example). To view the equation another way, from the purchaser’s (offeror’s) viewpoint, the purchaser in this example would make a gross dollar profit of $144,664 (i.e., $225,000 - $80,336 = $144,664), a profit margin on total collections of ~64.3% (i.e., $144,664 / $225,000 = 64.3%), and return on invested capital of ~180.1% (i.e., $144,664 / $80,336). In other words, even if a former player is in need of immediate cash and is therefore enticed by a lump-sum offer, this example highlights that there is plenty of room for negotiation with respect to the discount rate (and consequently, the lump-sum offer amount) in the purchaser’s financial model. As a public service announcement to any former player, beware of the potential significant discounts baked into any offers to purchase House Settlement claims and engage qualified representation to evaluate the merits of any offer to sell such claims. 

Disclaimer 

The content of this article is intended solely for general informational and educational purposes and should not be construed as legal advice, financial advice, tax advice, investment advice, or a recommendation regarding any claim, settlement right, assignment, sale, or other transaction. Any analysis of potential claim values, discount rates, present values, or transaction structures is illustrative only and may not reflect the actual facts, risks, timing, tax consequences, enforceability, or market conditions applicable to any specific situation. Readers should consult their own attorneys, accountants, financial advisors, and other qualified professionals before making any legal, financial, or business decision. Use of this article does not create an attorney-client relationship or any other advisory or fiduciary relationship. 

¹ For a complete discussion of the House Settlement, please see: Wink Thinks, Full House: Athletes Hold the Cards in Historic $2.7 Billion NCAA Settlement & Beyond.    

² A class certification is a pre-trial stage in a class action lawsuit where a judge officially determines if a lawsuit can proceed on behalf of a large group (i.e., a class) of similarly-situated people. 

³ Of the approximate $2.7B available, approximately $1.976B (the amount remaining after legal fees) has been allocated to a settlement fund (the “NIL Claims Amount”) and the amounts paid to student-athletes from the NIL Claims Amount depends on (i) which settlement class they fall into, and then (ii) which type(s) of damages they qualify for. 

⁴ The components of the formulas include: interest/discount rates (r), the number of periods (n), and a current (PV) or future amount (FV). 

⁵ While a purchaser of future House Settlement damages payments will want to be compensated for paying a cash lump sum upfront and taking on collection and timing friction/risks, these future payments are closer to a structured receivable with some timing and settlement administrative risks rather than the risks associated with very distressed discount rates (which are typically 15% or higher). 

⁶ A predatory discount rate for a present value calculation in a settlement agreement is generally one that significantly exceeds prevailing safe investment returns or market interest rates, resulting in an unjustifiably lower lump-sum payment for future, guaranteed, or structured payments (GainBridge.com: Selling a Structured Settlement: How To, Pros and Cons, and Alternatives). While not defined by a specific percentage, factors indicating a predatory discount rate include ignoring risk-free rates, excessive compounding, targeting vulnerable parties in need of cash (at rates often above 15%), and misrepresenting the offer as a true time value of money calculation.