The NBA Needs To Tweak Its Extension Rules In The Next CBA

Extensions are becoming more commonplace in the NBA. With the salary cap reaching record highs ever year, more players are seizing the chance to lock in life-changing, generational wealth before becoming free agents.

However, the NBA could be hurtling toward a long-term issue unless it changes its extension rules in the next collective bargaining agreement.

Under the current CBA, players can only extend contracts that are at least three seasons in length. The starting salary of a veteran extension can be no higher than 120 percent of their previous salary or 120 percent of the league's annual salary, whichever is higher. They also can't go beyond five seasons, including the years remaining on the current contract.

That issue has already thwarted some teams from locking up their stars before they become free agents. It's likely to only get worse once the league signs new national television contracts ahead of the 2025-26 season.

Back in March, Jabari Young of CNBC reported the NBA is seeking a $75 billion rights package, which would be more than triple its current nine-year, $24 billion deal. If the league secures that kind of a windfall, the salary cap will soar over the ensuing years.

A source told Forbes contributor Morten Jensen that the cap could reach as high as $171 million if the league and the National Basketball Players Association don't reach an agreement on cap-smoothing. Even if they do agree to spread that influx of basketball related income over multiple years, the cap could still "see annual increases to the extent of $15 million," according to Jensen.

That could be a huge issue for teams hoping to sign their players to extensions in the mid-2020s.

If the cap begins to soar by $10-15 million per season, the 120 percent raise may not be enough to convince non-max players to sign extensions. Many of them instead figure to test free agency, which increases the likelihood of more player movement in the latter half of the decade.

The league office might quietly prefer that, as interest in the NBA tends to peak around the trade deadline, the draft and free agency. However, team owners and front offices likely would prefer the ability to lock up more of their players before they ever reach free agency.

The Memphis Grizzlies might wind up being the textbook example of where the current extension rules fall short.

In October, they signed Jaren Jackson Jr. to a four-year, $105 million extension that descends in value each year. His starting salary in first year of the deal is $28.9 million, while he'll earn only $23.4 million in the final year.

After Jackson signed that extension, John Hollinger of The Athletic highlighted the potential long-term problem awaiting the Grizzlies because of how they structured his deal.

"The Grizzlies would need to build an extension off a 20 percent raise off his $23.4 million salary for 2025-26," Hollinger noted. "That maxes out at $28 million—less than the first-year salary on the deal he just signed. It seems unlikely his market value would be that low."

Hollinger added that the Grizzlies could renegotiate and extend Jackson's contract during the 2025 offseason, but they'd need salary-cap space to do so. Otherwise, Jackson is likely to become an unrestricted free agent in 2026, which could short-circuit their ongoing rebuild just as it hits its stride.

The Chicago Bulls faced that dilemma this past offseason with Zach LaVine.

Since LaVine is on a four-year, $78 million contract with annual $19.5 million salaries, the Bulls were limited in how much they could offer him in a typical extension. His starting salary would be $23.4 million, or 120 percent of the $19.5 million that he's earning this year, but he'll be eligible for a projected $35.7 million starting salary if he signs a max deal next offseason.

The Bulls could have renegotiated and extended his contract, but they would have needed roughly $14.2 million in salary-cap space to get him up to a near-max value, per Bleacher Report's Eric Pincus. Instead, they opted to upgrade their roster by acquiring DeMar DeRozan, Lonzo Ball and Alex Caruso, betting that they could convince LaVine to re-sign via Bird rights next summer.

The Bulls can offer LaVine a five-year, $207.1 million contract in free agency, whereas other suitors will be limited to a four-year, $153.5 million deal. They've been one of the best surprises of the 2021-22 season—they're currently +3000 to win this year's title, per FanDuel Sportsbook—so there's little reason to think that he'll develop a wandering eye over the coming months.

However, nothing can be final until July. Until then, the Bulls will have to sweat out the possibility of LaVine leaving them empty-handed in free agency.

If the salary cap does continue to soar, the Bulls and Grizzlies won't be the only teams that have to deal with such a situation. The Philadelphia 76ers could soon find themselves in the same spot with Seth Curry, who's wildly underpaid on a four-year, $32 million deal that runs through the 2022-23 season.

So, what's the solution? The NBA could go one of a few ways:

1. Increase how much teams can offer players as a starting salary in an extension. Rather than 120 percent of their previous salary or the league's average salary, why not 150 percent (or even higher)?
2. Allow teams to use their Bird rights preemptively, which would let them offer a full max extension if so desired. Why limit the Bulls to offering LaVine $12-plus million less for a starting salary this summer than they can next year?
3. Tie starting salaries of an extension to the salary cap itself to prevent massive cap increases from negating the likelihood of extensions. Teams could be allowed to offer a certain percentage of the salary cap as the starting salary of an extension (20 percent? 25 percent? 30 percent?), along with the other preexisting rules.

Such changes wouldn't be unprecedented. The previous CBA limited the starting salary of an extension to 107.5 percent of his previous salary rather than 120 percent, and extensions could only include four total seasons rather than five.

The alterations that the NBA made to extension rules in the current CBA increased the volume of overall extensions, but the new TV deal threatens to upend that progress. The league and the players' union need to negotiate new extension rules in the CBA with that looming windfall in mind.