Free Agency

NBA Poison Pill Provision: What does it mean for the Knicks?

After RJ Barrett signed his 4 year / $120 million deal, there has been a lot of talk surrounding the New York Knicks and the NBA Poison Pill Provision. A term also known as the “Poison Pill Restriction.”

The Poison Pill provision, when in effect, has a significant impact on how two teams will see a trade. Given the talk surrounding the NBA Poison Pill provision, we thought it would help to break it down and assess its impact on the Knicks pursuit of Donovan Mitchell.

What is the NBA Poison Pill Provision?

The NBA Poison Pill Provision, also known as the “Poison Pill Restriction,” greatly affects a teams pursuit of a marquee player via trade. This provision triggers when a player’s rookie contract is extended before a trade, impacting trade salary matching. RJ Barrett’s recent $120 million extension in 2023 exemplifies this, altering the trade dynamics and limiting potential assets in a deal for Donovan Mitchell. Understanding this provision is crucial for evaluating and predicting the trade’s outcome.

The Poison Pill provision is when a team extends a player’s rookie contract, then trades them before the extension kicks in. An occurrence that is not common in the NBA. So uncommon in fact, that in a recent twitter post by Adrian Wojnarowski, “of the 179 NBA players who’ve had the Poison Pill restriction, only one — Devin Harris in 2008 — was traded.”

In addition to the rookie extension scenario, the Poison Pill can also occur when a player signs a contract using the Gilbert Arenas provision to sign an Early Bird restricted free agent offer sheet. In this contract, the team can include a larger third year option that can have the same impact.

What impact does this have on NBA trades?

The impact of the NBA Poison Pill provision is on trade salary matching. If the player is traded prior to the date of the new rookie extension, the team receiving the player in a trade must view that players contract salary as the average yearly salary of the current contract, and the extension combined. For the team trading the player, the yearly salary cap hit is simply the current yearly salary.

Let’s use RJ Barrett’s situation as an example:

RJ Barrett signs his rookie extension of 4 years / $120 million
His current deal has a cap hit of $10.9 million for the Knicks in the 2022/23 season

If traded prior to July 1st 2023 for Donovan Mitchell
Utah must consider a cap hit of $26.2 million ( $10.9mil + $120mil = $130.9 / 5 years = $26.2 )
At the same time the Knicks only consider a cap hit of $10.9mil

When considering a trade, the salary implications are no longer the same. The same package of players that could be included in a deal before, will not be the same following the NBA Poison Pill provision.

How does the NBA Poison Pill impact the trade for Donovan Mitchell?

Bobby Marks gives a breakdown of the implications of the Poison Pill in this Knicks Donovan Mitchell trade.

Here’s an example of the poison pill restriction and the impact it has.

One column works and the other doesn’t.

Video coming to explain this pic.twitter.com/TCRJXBGQfD
— Bobby Marks (@BobbyMarks42) August 30, 2022

In this example, Marks explains the salary matching differences due to the extension. On the left, the New York Knicks. A package of Barrett, Evan Fournier and Quentin Grimes would be enough salary for Donovan Mitchell. On the right however, you can see that for Utah, this is now too much salary and the deal won’t work.

By understanding this provision, you can see how a deal can still be done, but understand its implications. By signing RJ Barrett to the Rookie extension, the Utah Jazz will now not receive as much in a deal with him included. A deal prior to the extension could have included Barrett, Fournier and Grimes, but after, could only include Barrett and Grimes.

What will happen next in this deal?

The contract extension for Barrett does not exclude him from any trade according to Shams Charania on the Rally. Depending on the structure of the deal, he could still find himself included. Although, if Utah was not happy with the deal prior to his extension, it’s unlikely they want him after. Any deal including Barrett would have less assets than any previous offer.

There are many potential offers being thrown around right now. The most likely players to be included a deal moving forward will be Grimes, Obi Toppin and Fournier.

We won’t go in to too much more detail on the what ifs for this trade. We are awaiting the final details of the trade before we assess what it means for the Knicks. Some other Mitchell trade resources are below.

Conclusion

In conclusion, the intricacies of the NBA Poison Pill Provision, showcased through RJ Barrett’s contract extension, underscore the nuanced impact on trade dynamics. As the New York Knicks navigate potential deals, the provision becomes a pivotal factor, reshaping salary considerations and influencing the composition of trade packages. The NBA Poison Pill Provision introduces a strategic layer to player transactions, demanding careful evaluation and anticipation of its implications in the ever-evolving landscape of professional basketball trades.