The NBA CBA (Collective Bargaining Agreement) is a contract between NBA team owners and the NBA players’ union. It informs all manner of details surrounding basketball operations, from trading decisions, to endorsement deals, to payrolls and BRI. The most recent renegotiation concluded in April, 2023 and the resulting CBA is valid until 2029.
A basic understanding of the NBA CBA can bring a lot of clarity to league operations. The National Basketball Players Association (NBPA) hosts a full copy of the current CBA on its website. But this is not light reading. So the goal here is to touch on some of the key features of the CBA in a more accessible form.
And the latest CBA did introduce a few wild changes:
- Marijuana is no longer a banned substance (not that it kept players from partaking in the past)
- The In-Season Tournament
- Teams got an extra 2-way contract
But let’s take a closer look at some of the most important changes to the NBA CBA in 2023.
Changes to the NBA CBA in 2023
The In-Season Tournament
This is an obvious port-over from the WNBA with the Commisioner’s Cup. The NBA version that has become such a resounding success, was introduced with the 2023 CBA.
NBA players can now smoke weed
Under the 2023 NBA CBA, marijuana is no longer a restricted substance in the NBA. This is a notable change and it will be fascinating to see the broader effects it has on the league. Pro sports are notably anti-weed, presumably due to widespread restrictions on its use.
But marijuana may well prove to have significant effects on athletic performance and recovery. And you’d have to have your head in the sand to miss the cultural affiliations between marijuana and basketball.
Players can own a stake in the league
For the first time in NBA league history, active players will be able to own minority shares in NBA and WNBA teams. Players will be able to invest in a portfolio of ownership stakes in multiple NBA franchises. This is notable, as no other league allows its players to hold ownership shares.
Salary cap changes in the 2023 NBA CBA
Salary cap gets a little confusing. I’ll try and mix the explanation with the changes here.
See, the salary cap basically serves to split the league’s Basketball Related Income (BRI) evenly between ownership and players. It is based on a prediction of the upcoming seasons revenue as it is divided among the 30 teams in the league.
Two big adjustments show up in the latest NBA CBA. First, with the new agreement, licensing will now fall under that umbrella of ‘basketball-related revenue’. This adds to the total revenue, so it adds to the salary cap.
And second, they’re introducing cap smoothing. Cap growth will now be limited to 10% annually. If revenue growth calls for a cap increase above 10%, that growth will be rolled over to the following year. This is a response to situations in the past where revenue has fluctuated and led to some boom and bust cycles in player contracts.
Specifically, in 2016 a new broadcasting deal jacked up the salary cap, leading to record contracts across the board. By 2018 that had dried up and contracts were back down. This was understandably frustrating for players who happened to enter free agency in 2018.
Luxury tax changes in the 2023 NBA CBA
Closely related to the salary cap, the luxury tax is a penalty imposed upon ownership and paid to the league and teams that have stayed under the cap. Currently the tax kicks in at 53% of revenue divided across 30 teams and gets more aggressive in $5 million brackets as you go further above the line.
That luxury line won’t change under this CBA, but there will be some changes installed to the bracketing system. That $5 million bracket will increase each year in synch with the salary cap. So if the cap goes up 8%, the bracket size increases by 8%.
A new luxury apron
Along with the luxury tax, there are some additional restrictions to what you can do with your roster once you’ve exceeded the cap by around $6 million. This is referred to as the luxury ‘apron’. The new NBA CBA adds another apron at around $17.5 million.
The new restrictions will make it a little harder for teams with deep pockets like the Warriors and the Clippers to go out and sign rosters far exceeding the league average. But it won’t affect their ability to maintain their current rosters by signing existing players.
Trade restrictions
Teams above that $17.5 million luxury apron will get some trading restrictions as part of their penalty.
First, they can no longer send out cash. This occurs sometimes when a team needs to get rid of a player to clear some cap space, so they add some cash to the recipient as part of the deal. They also are not allowed to trade first-round draft picks more than 6 years into the future. And, they are not allowed trades that increase their existing salary payout.
This will be impactful. It will make it harder to trade for your second or third superstar. Most of the earth shattering trades of the past few years would not be allowed under this rule. You know, like everything the Nets have gotten away with.
Awards Changes
Players must now play in 65 games to be eligible for major individual awards. We’ve had a lot of discussion about load management lately, and the fans are frustrated with showing up to games and not seeing their favorite players. Makes sense that the league would push for this kind of thing. The big hidden factor in that salaries and extensions are often tied to these awards.
Along with the play threshold, the all-NBA teams will become positionless. So we’re likely to see some impactful players get iced out of accolades and contract wins, but we’re also probably going to see some more all-NBA Centers. The old system only left space for 3 Centers, while you could have six of both guards and forwards.
Contract extensions
Previously, teams were restricted from offering a contract extension that bumped a players salary more than 20% in the first year of the new deal. This meant that a player you picked up on the cheap who worked out well would likely be lost to free agency. That limit is getting bumped to 40%.
Additionally, rookie-extensions (extensions to a contract with the team that started you) are now allowed to go to 5 years. The previous limit was 4.
Supermax expansion
In addition to the broader salary cap, the NBA maintains caps on what an individual player can make. I literally do not understand this structure and every article I can find is contradictory or confusing. One of these days I’ll sit down and sort it out.
What I do know is that the biggest contract you offer a player is known as the supermax. This is a deal that promises 35% of the salary cap to a single player. That’s a lot of bread, and justifiably requires jumping through some hoops in terms of production and even awards.
In the past, only two players could be rostered at each tier of the max extension. Those restrictions have been lifted. Reportedly, teams can max all they want and acquire more maxed players, though I have a feeling the details will work out a little differently.
Changes to the draft
We’re going to see some adjustments to the draft.
The NBA has a specified pay structure for first-round picks, known as rookie scale. This allows teams to sign their first-round selections regardless of existing cap space. With the new NBA CBA, they’re adding a scale for second-round picks.
In the past, a second-round prospect could be signed to a minimum contract to save cap space. this tends to result in a successful late pick getting traded early in their career. It’s not great for the fanbase, or the player, or the team. This will help save certain teams from themselves.
The new CBA also dictates that all players that participate in the NBA Draft combine undergo physical exams. The results of these exams will be provided to teams drafting in the players expected draft range. This will make it harder for agents to hide medical information from teams.
And finally, it is also notable that the new CBA will not bring high schoolers back into the draft. This has been a hot topic lately but it’s pretty unlikely. The NBPA, who negotiates on behalf of the players, has no incentive to increase competition with its membership.
Players can invest in previously restricted business ventures
This mostly pertains to sports gambling and cannabis businesses. With the new CBA, players are now able to invest in and endorse cannabis and sports betting products and businesses. There are still some restrictions, but the broader gate has been opened. Expect some CP3 Draft Kings ads and strains named after players other than Gary Payton.
Changes to NBA free agency
It looks like we’re losing the taxpayer mid-level exception. What on earth is the taxpayer mid-level exception you may well ask if you have a life outside of professional basketball transactions.
Roughly, the taxpayer mid-level exception is a caveat that allows a team that is already at the top of their salary cap to boost the contract of a player on a short term deal.
See, if you’re pushing the salary cap, you might be likely to pad out the bottom of your roster with 1-year deals. But you’re only allowed what’s known as ‘bird-rights’ at the end of that deal. This means you can only extend a 1-year contract with a 20% maximum salary increase.
That’s bonkers. A decent player will often use a 1-year deal as a showcase to catch the next bigger deal. So there was this exception that allowed you to contribute an extra $6 million or so to sweeten the pot with minimized penalty and restriction.
This new NBA CBA ditches that special exception. Removing this is likely to increase player flight after those 1-year deals. But it also may mean fewer 1-year deals.
Additional two-way contracts
The 2023 NBA CBA allows for an additional two-way contract on team rosters. Teams were previously limited to 2 two-way contracts. They can now secure 3 players on two-way contracts at any time.
Two-way contracts are contracts offered to players early in their career, allowing them to play for a developmental team in the G League that is associated with the team. If a player is injured or otherwise removed from the roster, these players can be quickly brought up to fill the spot.
In return, these players are guaranteed a salary at 50% of the NBA rookie minimum. This is a strong bump to the standard G League salary, and players are extended NBA salaries for any period of time where they are brought up to an NBA roster.
Increasing two-way contracts effectively increases the number of players in the NBA in any given season, as i increases the max roster to 18 during the regular season and 21 in the off-season.
Takeaways
There’s a lot of dense information loaded into the NBA CBA. And it’s a slog to get through it. Like I said, I still can’t wrap my head around the supermax. But at the core of this agreement is the relationship between the NBA and its players. And understanding this relationship is crucial to understanding operations in the league.
I just hope I’ve helped you take a leap forward in not being that fan who rambles on about hypothetical trades and management moves that are legally impossible. Not to take away from the bottom line of your cardiologist or anything, just to save my own ears.