The NBA cap spike in 2016 allowed the Warriors to sign Kevin Durant. Another spike could be coming.
- There is a buzz in the NBA that legal sports betting could create another salary cap spike, paving the way for free agency spending sprees.
- On Tuesday, the NBA announced a deal with MGM Resorts to become the official gaming partner of the league, the first such deal for the four major American sports leagues.
- It’s unclear when and how much legal sports betting might affect the league, but some think the NBA will continue to monetize it, creating a “windfall” that could once again raise the cap.
The NBA on Tuesday announced an official partnership with MGM Resorts to make MGM the gaming partner of the NBA and WNBA.
The deal, the NBA’s first sports betting partnership, comes after New Jersey, Delaware, and Mississippi legalized sports betting, paving the way for a Supreme Court decision.
Before the official announcement was made, however, there was already buzz around the NBA about the impact of online gaming on the league.
In particular, two league sources theorized to Business Insider that online gaming could cause another spike in the salary cap, much like the league saw in 2016 after a new, $24 billion TV deal kicked in.
“Eventually it will be monetized, and it will be a huge windfall for the league,” one league source said.
“I know that it’s a topic of conversation, and people are wondering, is another spike coming?” said another source.
Before the new TV deal, which created more revenue, thus raising the salary cap, it’s been reported that the NBA Players Association rejected a proposal to artificially “smooth” the cap spike over several years. That created a one-time spike in the salary cap that gave teams more money to spend on the 2016 pool of free agents.
In a wild summer, teams handed out 19 deals worth $70 million or more. Some of the flexibility afforded from the cap spike allowed teams to make consequential moves — like the Warriors having the cap space to sign Kevin Durant.
Following the spending spree, however, many cap sheets were clogged up, tempering free agency the past two summers.
This coming summer is already slated to be another busy one, as more teams have cap space while almost half the league’s workforce is set to hit free agency. The notion of another cap spike caused by money pouring in via gambling could have players and teams once again preparing to cash in.
“Players who are signing right now, if there is a spike coming, they want to be free agents when there’s a spike,” said one of the league sources. “They just watched that happen. And teams, at the same time, if there’s a spike coming, they wanna have as much flexibility as they can during that time.”
The NBA didn’t immediately respond to a request for a comment on the premise.
According to ESPN’s Darren Rovell , the deal with MGM is expected to be three-year, $25 million deal. MGM gets to use NBA, highlights, videos, and logos while also receiving direct data from the league to help with in-game betting. Meanwhile, the NBA will advertise MGM as the official gaming partner of the NBA and WNBA.
The deal with MGM by itself seemingly wouldn’t be enough to raise the salary cap significantly, but the overall legalization of betting could. NBA Commissioner Adam Silver told Bloomberg in March that in-game bets would drive up engagement considerably. In May, Dallas Mavericks owner Mark Cuban said franchise values would double as a result of legal sports betting.
According to Rovell, in three to five years, as many as 20 states may have legalized gambling, creating more lucrative opportunities for sports leagues.
A lump of cash from the new TV deal threw the league’s finances for a loop three years ago. Another windfall could be coming in the form of betting, and some in the league appear to be already gearing up or at least considering the prospects.
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