How could an MLB salary cap work? Lessons from NBA, NHL, NFL

Four days after Major League Baseball officially proposed a salary-cap system to the MLB Players Association for the first time in more than three decades of labor negotiations, union interim executive director Bruce Meyer held a 40-minute teleconference in which he summed up the players’ position on the overhaul the league wants to implement.

“The cap system they propose is not just bad for all the reasons that we believe cap systems are always bad,” Meyer said, “but they’ve effectively managed to cobble together the worst system for players in any of the major sports and it’s not even close.”

Strong rhetoric is to be expected in any labor fight, particularly one in which the league is pushing for a fundamental change to how the game operates. And Meyer’s pointed criticism of the league’s proposal — a 50/50 split of baseball-related revenue, a $243.5 million ceiling and a $171.2 million floor with all television revenue shared equally — took aim at the 125-page plan delivered to the union.

The MLBPA’s position remains unflinching: The two dirtiest words in the English language are salary cap. Though the size of the league’s proposed floor initially intrigued some on the players’ side, the more they learned about the details, the less enamored they became. Players understand that a majority of fans want a cap. They also believe the system MLB is proposing would be actively worse for them and that addressing competitive balance does not necessitate a salary cap.

Fully evaluating the league’s proposed system remains difficult until MLB presents more information, including firm details of the game’s reserve system, its draft plans and other nuances. But the information released so far invites comparison, which is particularly informative because MLB spent significant time studying the NFL, NBA and NHL caps and communicating with officials from each league to better understand those systems.

For this exercise, we’ve enlisted three ESPN experts on the matter: NFL insider Dan Graziano, NBA front office insider Bobby Marks and NHL senior writer Greg Wyshynski, who provide an insightful look at how the three sports operate inside of their cap systems. Following their analyses, we’ll explain the similarities and differences of MLB’s proposal to all three and what all of it means for baseball’s labor negotiations.

NFL

Explain your sport’s cap in 150 words or less: It’s a hard cap in that teams must be under it at all times, but it includes several team-favorable workarounds. The most prominent is the rule that allows teams to prorate signing bonus money evenly over as many as five years (provided the contract is at least that long) for cap accounting purposes. The cap is computed via a formula directly tied to league revenue, and per the 2020 CBA: The players receive between 48.5% and 48.8% of league revenue, depending on how big the TV contracts get over the life of the deal. There’s also a salary floor that requires the league to spend at least 95% of the total cap, in cash, over specific three- and four-year periods and each team to spend at least 90% of the total cap, in cash, over those same blocks of time. There are financial penalties for teams that don’t comply.

What do players like/not like about it: Acknowledging that players don’t like salary caps in general, the benefit to them in this case is that they’ve been able to tie the cap to revenue. As NFL revenues have skyrocketed, so has the cap, and the owners can’t do anything to keep it from growing. The cap has increased by at least 5% every year since 2014, with the exception of 2021, when it dropped by 8% following the Covid-19 season. It rose by 14% in 2022, 8% in 2023, 14% in 2024, 9% in 2025 and another 8% this year. A salary cap that was $182.5 million per team just five seasons ago is set at $301.2 million per team for 2026.

Things players don’t like about it include devices such as the franchise player designation, which allows a team to keep one player off the free agent market each year by tendering a one-year deal, and the manner in which teams use the cap as a cudgel in salary negotiations.

What do owners like/not like about it: The owners have sold the cap to the public as a parity-maintenance device. Different teams make the playoffs in the NFL every year and few stay bad for very long. The cap and revenue-sharing rules are the stated reasons, and as a result what is in fact a wage-restriction device has been successfully marketed to the fans as good for the game. It allows a small-market team such as the Green Bay Packers to spend just as much as the Dallas Cowboys on players.

I think if you gave the owners truth serum, they’d tell you they don’t like the lack of control over cap growth — league revenues are audited by the players association, so there’s no way to fudge the numbers to keep them artificially low. Some teams — mainly those with relatively cash-poor owners — also have complained in recent years at league meetings about the bonus proration system, which some believe the more cash-rich owners are using to outspend their competitors while staying under the cap.

What’s something the average fan might not know: Most teams build contracts with “void” or “dummy” years to take advantage of the proration rules. In 2023, for example, Philadelphia Eagles quarterback Jalen Hurts (who had one year left on his deal at the time) signed a five-year, $255 million extension. Because of the way the Eagles structure their contracts with option bonuses each year, there are dummy years in the Hurts contract that run all the way out through 2035. They can pay him a $1.215 million minimum salary, for example, in 2026, and the rest of his compensation comes in the form of a $50.285 million option bonus that can be spread out for cap accounting purposes over as many as five years, so they have to count only $10.057 million of it against this year’s cap. They do this every year of the deal, which is why there are currently seven void years in the contract after its actual conclusion in 2028 to help with cap management.

Is there any push to make changes in the next CBA, and what are they? One of the primary issues in the next CBA — the current agreement expires in March 2031 — is going to be the owners’ desire to expand the regular season from 17 to 18 games. The NFLPA is under new leadership for the second time in three years, and it’s hard to know what its priorities will be when it’s time to negotiate. But if the owners are set on expanding the season to 18, I expect the players to push for a larger share of the revenue pie, and if that’s the case it could lead to a discussion about changes to the manner in which the cap is calculated.

As far as structural changes to the cap, it’s been a fact of life since 1994 — an ironic date, when laid side-by-side with baseball. And while agents and players will sometimes complain about devices such as the franchise tag and non-guaranteed contracts, players drafted into the league this year were born 10 years after the cap was introduced. They know of no other system. There could be changes to league rules and the structure of the season, but in terms of the fundamentals of the cap and how it works, the only thing that stands out now is the potential for an internal dispute among owners about the rules regarding bonus proration. — Graziano

NHL

Explain your sport’s cap in 150 words or less: The NHL instituted a hard salary cap in 2005-06, and it cost them only an entire locked out season to do it! The salary cap range is based on the previous season’s hockey-related revenue, which the players and owners split 50/50.

For 2026-27, the cap will climb to a record $104 million, an $8.5 million increase over this season. The salary floor will be $76.9 million. The cap calculation includes salaries retained in trades, contract bonus overages and dead-cap charges for contract buyouts. Teams must be cap-compliant when the season starts and can use mechanisms such as long-term injured reserve (LTIR) exceptions to get there. The NHL and NHLPA instituted what amounts to a “playoff salary cap” beginning this season, as teams must keep the total cap hit of dressed players under the regular-season ceiling.

What do players like/not like about it: Obviously, no player loves his earning power being artificially depressed by a hard cap. There are certainly franchises that would break through the ceiling to pay for premium talent under a different system but are unable to under a hard cap. For the top-end players, the maximum salary can be only 20% of the current cap. Though there are few players who would come anywhere close to that figure — Minnesota Wild forward Kirill Kaprizov’s record eight-year, $136 million contract extension accounted for only 16.35% of the cap — it means the NHL’s biggest stars aren’t compensated anywhere near as much as top players in other sports.

That established, what the cap also does is prey on the humility of “logo on the front, not the name on the back” hockey culture. Megastars such as Sidney Crosby and Connor McDavid are compelled to take less than market value for their teams to have the flexibility to build around them. McDavid’s two-year contract extension that starts in 2026-27 has a $12.5 million average annual value, which is less than teammate Leon Draisaitl’s $14 million.

Unrestricted free agency doesn’t arrive until players are 27 years old or have accrued seven-plus NHL seasons. The salary cap can squeeze the middle class pretty hard, especially veteran players who can be replaced with younger, cheaper labor. But here’s the thing: The players are much happier under the current cap system thanks to exploding NHL revenues.

One agent said he heard the NHL’s salary cap projection is $123 million for 2028-29. That’s an incredible rise in earning potential and one reason the most recent CBA negotiations were the smoothest of Gary Bettman’s tenure as commissioner, which started in 1992. The average minimum salary in the NHL will rise to $1 million by 2029 under that CBA. Even if they could be getting more under a different system, players are pretty content with the current one.

What do owners like/not like about it: Before the cap, teams were spending around 75% of their revenues on salaries. Now it’s 50%. Owners have been very happy with the system, which has kept salaries in check by and large while revenues continue to grow. Some teams would like to spend more to build better rosters because they could afford to, such as the Toronto Maple Leafs and New York Rangers. But many more are quietly happy that the cap means they need not.

One interesting aspect of the level financial playing field is how franchises are enticing players to sign as free agents or remain with their teams. No-trade or no-movement clauses have become valuable enticements. Some very average players own full trade protection, a symptom of the cap.

One of the biggest issues in the NHL recently has been the perceived advantages of teams in states that charge no income tax, sparked by Stanley Cup wins for the Florida Panthers, Tampa Bay Lightning and Vegas Golden Knights and deep playoff runs by the Dallas Stars. These teams are able to offer contracts with lower cap hits because players keep more of their salaries. The NHL and NHLPA continue to monitor the issue, even as both say finding a fix is challenging.

What’s something the average fan might not know: The cap space a team has entering the season is not the cap space it has at the trade deadline. The NHL salary cap uses a daily accounting formula that changes as players enter and leave the lineup for things such as minor league demotions or injuries. The cap looks at player salaries as a day-to-day figure. Because the trade deadline is deep into the season, teams have to pay only around 21% on the salaries they acquire.

It’s more beneficial for teams to accrue cap space than to have to use long-term injured reserve on a player, especially now that the latter has stricter rules under the new CBA that limit cap relief to the league-average salary ($3.82 million in 2024-25) if the player is expected to return that season. Full relief is allowed only if the player is ruled out for both the regular season and playoffs. The new playoff salary cap rule was a response to how teams were using LTIR to create non-cap-compliant teams for the playoffs — keeping a player on injured reserve through the end of the season only to have him miraculously come back for Game 1 of the playoffs.

Is there any push to make changes in the next CBA, and what are they? Not at the moment. The sides agreed to a new four-year CBA that officially begins this September, although some rules were fast-tracked to this season. The new CBA has an 84-game regular season and shortened preseason, as well as shortened contract lengths (maximum seven years for a player re-signing with his own club, six years in free agency).

The lost season in 2004-05 and the 2012 lockout that cost half a season were grounded in how much the players were making. The 2012 lockout, for example, saw the players making 57% of the revenue. The owners proposed they make 43% and then 47%. The players proposed 53%. They ended up agreeing to an even split that has held since 2013. Will it continue when this deal is up in 2030? That is anyone’s guess. — Wyshynski

NBA

Explain your sport’s cap in 150 words or less: It’s a soft cap with financial penalties for teams that exceed the luxury tax, roster-building restrictions for those at or over the first and second apron and a 51/49 revenue split to players. Introduced in the 2023 CBA but not phased in until last offseason, the first and second aprons (set dollar amounts dividing teams that exceed the cap) leveled the playing field by reducing roster mechanisms for high-spending teams at or over the threshold. Gone are the days of teams simply outspending their competition –adding an expensive All-Star in a trade or free agency can be perilous. Teams typically try to retain their own players using a rule known as Bird rights that allows them to exceed the cap to retain their own players. The softness of the cap has led to exorbitant penalties, of which 50% is then distributed evenly to teams below the luxury tax.

What do players like/not like about it: The Warriors’ Draymond Green was outspoken last summer about the second apron’s effect on NBA free agency (which begins this year at 6 p.m. ET on June 30).

“Baffled at the fact that NBA free agency is over,” Green posted on Threads in July. “Quite frankly it never really started. The level of anticipation leading up to July 1st was as exciting as the fireworks on the 4th. … One can only point to the ‘New CBA’ and the 2nd apron (hard cap) for absolutely putting an end to Free Agency as we once knew it.”

Green has a point, but not to the extent where players are losing money. The ability to extend for more money and years with the team that originally drafted them has players prioritizing guarantees over the risks of entering free agency. Since the CBA started with the 2023-24 season, the average number of rookie and veteran extensions per year is 30 players compared with 20 during the previous CBA.

What do owners like/not like about it: Besides the 11-year, $76 billion national TV deal that started this season, the league likes the parity relating to roster building but not at the expense of player salaries. “The mechanism of the collective bargaining agreement was very clear: We are trying to give incumbent teams an advantage to draft, develop and keep players,” commissioner Adam Silver said during last summer league.

For the eighth straight season, the NBA will crown a different champion. Thirteen teams have made the NBA Finals in that stretch.

What’s something the average fan might not know? There’s an argument over whether the new CBA squeezes the middle-class player — a similar discussion to what’s going on in uncapped baseball. Veteran guard and former NBPA president CJ McCollum told Front Office Sports: “There’s a misconception that players aren’t being compensated the same ways they have in the past. That’s not true. Guys are making more money than they ever have. The middle class is making more money than they ever have before.”

Because of increased revenues, McCollum is correct. The question, as always with the middle class, is about proportionality, and teams last offseason used the nontax midlevel exception twice as often.

Is there any push to make changes in the next CBA, and what are they? The 65-game rule for players eligible for award honors continues to be a topic for discussion. The league’s rule, put in place in the current CBA as part of the push to curb load management, states that players (with few exceptions) become ineligible for major individual awards — Most Valuable Player, Defensive Player of the Year and All-NBA honors among them — if they fail to play in at least 65 games.

This season, Los Angeles Lakers star Luka Doncic and Detroit Pistons star Cade Cunningham were originally ineligible for postseason honors because they failed to meet the games-played criteria. Both players eventually filed an appeal to the league and were deemed eligible due to the “extraordinary circumstances” clause in the CBA. They were named to the All-NBA first team. Despite finishing third in scoring, Minnesota Timberwolves star Anthony Edwards was denied an appeal after playing 61 games. Had Edwards been named All-NBA this season, he would have become eligible to sign a four-year, $300 million supermax extension in summer 2027.

“I’m not ready to support a change yet,” Silver said before Game 1 of the NBA Finals. “Of course, when we sit down to negotiate a new collective bargaining agreement with the players, we’re happy to talk about it. But I think what gets left out, anywhere we draw the line, there’s always going to be players on the other side of that line.” — Marks

What it all means for MLB

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MLB’s proposal is ideologically closest to the NHL system, with resemblances to the NBA and one particularly important distinction it shares with the NFL: a hard cap.

Baseball’s proposal does away with any flexibility at the top end of the system, in the same way that the NFL’s system offers no leeway for teams to extend the cap. In the NBA, there is more gray area for teams at the top through the tax-and-apron system, and NHL teams use LTIR to exceed it.

Otherwise, the NFL’s system is quite different from MLB’s proposal. Football uses a gross revenue-share system, something that’s easier when more than half of revenue comes from one place: national media rights. The NFL also funnels any revenue shortfalls or excess into the cap number for the next season rather than using an escrow system, which holds back a portion of player salaries to cover potential revenue shortfalls.

The NBA and NHL, on the other hand, use escrow — and it cost basketball players $480 million in guaranteed money last year. The MLBPA has lambasted the escrow system as a threat to one of its long-held economic strengths: fully guaranteed contracts. MLB has proposed a variable number for its escrow hold — up to 10%, which is what the NBA withholds every year — but that’s not compelling to the union. Even if they could wind up being paid more in the case of excess revenue, the potential loss of guaranteed money is universally disliked by players, for whom the escrow proposal has become a real talking point.

Like the NBA and NHL, the gap between the top and bottom in MLB’s proposal is bigger than the NFL’s system. Hockey, for example, sets a ceiling and floor 15% from the average payroll determined by dividing qualifying hockey-related revenue by 32 teams. MLB proposed the same sort of deal, only with a 20% spread on both ends.

Were the MLBPA ever to engage with the league on a salary cap proposal — there is zero indication it intends to in this labor cycle — the definition of baseball-related revenue would cause the most consternation. MLB told the MLBPA that its revenue definition would be in line with other capped sports. While other leagues do not share multibillion-dollar expansion fees or revenue from team-owned businesses adjacent to the stadium, the MLBPA believes the exclusions and deductions in MLB’s proposal would be particularly onerous.

One potential example: The league argues that if players are going to benefit in a 50/50 split from the additional revenue teams receive from significant investments in stadium projects, teams should be allowed to deduct their contributions to new stadiums or renovations in revenue calculations, as they do today when calculating net local revenue in the uncapped system. Players have balked at what such deductions would do to take the actual revenue split well below the 50% MLB touts.

MLB claimed that at a 50/50 split, players would make more money next year than this year. Beyond not taking into account that player salaries have grown every year in the current collective bargaining agreement that’s expiring Dec. 1, MLB includes amateur signing bonuses — for players in the 20-round draft as well as international amateur free agents — in its revenue split. In order for major league players to make more next season under the league’s proposed numbers, the $550 million or so in amateur bonuses expected this year would need to be slashed by hundreds of millions of dollars.

The league’s chief argument against the perceived downsides of its proposal: Players will make more money. Not just next year but every year in a capped system. Since the last time MLB proposed a cap in 1994 and the union rejected it, league revenue growth has exceeded that of player salaries. Players can lock in a guaranteed sum, the cap can erase the massive payroll disparity that exists, and owners can increase their franchise values because of a cost-controlled system. Everybody wins.

Whatever the guarantee, the union has long held tight to the notion that any cap on salaries is inherently bad for players. And the one proposed by MLB in particular, the MLBPA argues, is worse than the NFL because football doesn’t have escrow, worse than the NBA because it is a hard cap, and worse than all three because it contains the most deductions from sport-related revenue. Add in the fact that the league has positioned itself to propose gutting amateur signing bonuses, and the union’s stance, as Meyer said in his news conference, is: “Their proposal is worse than the proposal in 1994.”

What’s unclear still are the mechanics of MLB’s proposal. It did not include anything on the reserve system — and whether players would reach free agency in five years instead of the current six — in its initial proposal. It also didn’t specifically address the reduction in amateur-entry pay or its long-stated desire for an international draft.

In other words, there’s plenty more to know about a cap system MLB touts as straightforward when compared with an NBA system laden with exceptions and aprons, an NHL system that fluctuates literally depending on the day and an NFL system with void years and bonus floating. Just how complicated MLB’s reserve proposal is remains to be seen, but simplicity was a goal for the league when formulating what it knew would be regarded by players as an affront.

With the first exchange of proposals done — the MLBPA wants a competitive-integrity tax to hold low-spending teams accountable, an increase of the base competitive-balance tax threshold from $244 million to $300 million, and hundreds of millions more spent on players via the pre-arbitration bonus pool and increased minimum salaries, among plenty of other asks — now we wait. Discussions will continue over the next few months, with both sides highly unlikely to deviate from their positions.

Until one relents, progress will be slow, if not nonexistent, and baseball’s unending debate — to cap or not to cap? — will continue unabated.