Why Fair Market Value Has Become the Most Important Concept in NIL

Cory D. Raines
Aug 4
4 min read

For the first few years of NIL, most of the conversation focused on one question:

Can college athletes get paid?

Today, the more important question is different.

How much should they be paid?

That shift has made fair market value one of the most important concepts in college sports.

With the implementation of the House settlement, the creation of the College Sports Commission, and the launch of the NIL Clearinghouse, fair market value is no longer simply a contract negotiation issue. It has become a compliance issue.

Understanding what fair market value means, and how it may be evaluated, has never been more important for athletes, collectives, businesses, and universities.

Why Fair Market Value in NIL Matters More Than Ever

Every market determines value differently.

Professional athletes negotiate salaries.

Public companies negotiate acquisition prices.

Businesses negotiate licensing agreements.

NIL is no different.

The challenge is that NIL is unlike almost every other marketplace.

College athletes often have different audiences, different social media reach, different athletic accomplishments, different local recognition, and different commercial opportunities.

Two athletes on the same team may have dramatically different market value.

That makes determining fair market value far more complicated than simply comparing compensation.

Why Everyone Is Talking About Fair Market Value

Recent developments have changed the conversation.

The College Sports Commission and the NIL Clearinghouse are now reviewing certain NIL agreements to determine whether compensation reflects a legitimate commercial purpose or whether payments exceed what appears to be fair market value.

That represents a significant shift from the early years of NIL, when relatively few mechanisms existed to review the economic substance of agreements.

Instead of simply asking whether a deal exists, regulators are increasingly asking whether the compensation can be justified.

There Is No Universal Formula

One of the biggest misconceptions surrounding NIL is that fair market value has a single definition.

It doesn't.

There is no published formula that automatically determines what an athlete should be paid.

Instead, multiple factors may influence value, including:

Athletic performance
Social media audience
Engagement rates
Geographic market
Brand recognition
Position and sport
Commercial demand
Expected deliverables
Comparable marketplace transactions

No single factor determines value by itself.

Documentation Matters More Than Ever

As scrutiny increases, documentation becomes increasingly important. Businesses entering NIL agreements should be prepared to demonstrate why compensation was agreed upon and what the athlete is expected to provide in return.

That may include:

Social media campaigns
Public appearances
Autograph sessions
Commercial advertisements
Content creation
Licensing rights
Community events

The clearer the business purpose, the easier it becomes to explain the economics behind the agreement.

Fair Market Value Is Not the Same as Revenue Sharing

This distinction is becoming increasingly important.

Revenue sharing involves direct payments from universities under a separate framework.

NIL compensation remains tied to legitimate commercial activities between athletes and third parties.

Understanding the difference will become increasingly important as both systems continue developing alongside one another.

If you're unfamiliar with the differences, read our article What Is Revenue Sharing in College Sports? How It Differs from NIL.

What This Means Going Forward

Fair market value is likely to remain one of the most significant issues in college athletics for years to come.

Future disputes will probably focus less on whether athletes can receive compensation and more on whether that compensation accurately reflects the commercial value being exchanged.

For athletes, businesses, collectives, and universities alike, documenting the business purpose behind an NIL agreement may become just as important as negotiating the agreement itself.

The NIL marketplace is maturing.

As it does, expectations around transparency, documentation, and compliance will continue to evolve.

Key Takeaways

Fair market value is becoming one of the most important compliance issues in NIL.
There is no universal formula for determining an athlete's market value.
Compensation should reflect legitimate commercial value.
Proper documentation may become increasingly important during compliance reviews.
Understanding the difference between NIL compensation and revenue sharing is essential.

Frequently Asked Questions

What is fair market value in NIL?

Fair market value generally refers to the reasonable commercial value of an athlete's name, image, and likeness based on the specific facts and circumstances surrounding the agreement.

Who determines fair market value?

There is no single formula. Depending on the context, parties may consider factors such as market demand, audience size, engagement, athletic performance, and comparable commercial opportunities.

Why is fair market value important?

Recent NIL oversight has placed greater emphasis on whether compensation reflects legitimate commercial value rather than simply the existence of an agreement.

Does social media determine fair market value?

No. Social media may be one factor, but it is only one of many considerations that may influence an athlete's commercial value.

Is fair market value the same as revenue sharing?

No. Revenue sharing and NIL compensation operate under different legal and business frameworks.

Continue exploring our NIL and Sports Law series:

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About the Author

Cory D. Raines ("Cory Raines") is a legal consultant, entrepreneur, and founder of Raines Legal Group and PROTIPPZ. He writes about NIL, athlete compensation, sports law, business strategy, and the evolving landscape of college and pro athletics.