The Second Apron and Antitrust Law in the NBA’s 2023 Collective Bargaining Agreement
Written by Rohan Punj | March 26, 2026
In the NBA, the Collective Bargaining Agreement (CBA) is a legally binding contract between the NBA and the National Basketball Players’ Association (NBPA). The agreement serves as the league’s legal foundation, governing everything from salary caps and free agency to drug testing and player benefits (“Collective Bargaining,” 2023). The NBPA and NBA owners renegotiate the terms of the CBA roughly every seven years, often with a mutual opt-out clause after the sixth year. During negotiations, a high-stakes process governed by the National Labor Relations Act (NLRA), both the NBPA and the NBA league office survey their respective members to identify key priorities. Representatives from both parties meet to negotiate a term sheet outlining major changes, and once negotiators agree on the core terms, a preliminary deal is announced. Following the agreement, the proposed CBA is submitted for a vote; if approved by a simple majority of the 30 teams and the NBPA membership, it is ratified. The current CBA was finalized in 2023 and runs through the 2029-30 NBA season.
The 2023 CBA introduced several significant updates to the league’s labor and economic framework. Regarding investment and lifestyle changes, it allows players to hold passive ownership stakes in NBA and WNBA franchises through a union-selected private equity fund and to invest in and promote sports betting and cannabis companies (“Collective Bargaining,” 2023). However, beyond these off-court provisions, the contract also introduced controversial reforms that affect the structure of the league. Most notably, the CBA introduced the Second Apron System, a high-spending threshold set $17.5 million above the luxury tax line that operates as a de facto hard cap (“Collective Bargaining,” 2023). Teams that surpass this threshold face numerous roster construction penalties, including the loss of the Mid-Level Exception (MLE), trade restrictions, limitations on aggregating player salaries, draft pick penalties, and prohibitions on signing players waived during the season above the non-taxpayer mid-level, marking a significant shift in the league's competitive and regulatory framework.
Historically, NBA CBAs have attempted to balance two competing priorities: regulating team spending across the league while preserving competitive balance among teams. Earlier CBAs have been able to manage these concerns effectively through mechanisms such as the league’s soft salary cap, maximum contract limits, and player retention exceptions (Wang et al., 2025). This allowed teams to retain their own players while limiting excessive spending disparities across the league, ultimately creating a system that restrained spending without fully eliminating roster flexibility or player mobility. However, the restrictions introduced under the 2023 CBA depart from this traditional framework by imposing significantly harsher penalties on teams that exceed the second apron threshold. The severity of this threshold raises significant antitrust questions regarding whether such restrictions constitute anticompetitive restraints.
In general, sports leagues occupy a unique position in antitrust law as they must balance their nature as competitive businesses with the need for cooperation to produce a functioning league. Under the Sherman Act, agreements between competitors that restrict trade or suppress competition are generally prohibited. However, sports leagues operate through coordinated rules governing player movement, team spending, drafts, and scheduling, which may appear anti-competitive if implemented in other industries. Courts have therefore recognized certain limitations within professional sports when those restraints are collectively bargained between leagues and players’ unions. Following Brown v. Pro Football, a case in which the NFL unilaterally implemented a fixed salary for developmental squad players after contract negotiations, the Supreme Court ruled that the non-statutory labor exemption shields professional leagues from antitrust liability (Brown v. Pro Football, Inc., 1996). This permits leagues to impose certain labor-related restraints, such as salary caps and spending restrictions, when those rules arise from the collective bargaining process. This framework has allowed sports leagues to avoid the anticompetitive label and govern themselves independently.
Nonetheless, even though the non-statutory labor exemption provides professional sports leagues with significant protection from antitrust scrutiny, that protection is not absolute. For example, in the case Mackey v. National Football League, the court struck down the NFL’s “Rozelle Rule,” which required teams signing a veteran free agent to compensate the player’s former team with players or draft picks, holding that the rule constituted an unreasonable restraint in violation of the Sherman Act (Mackey v. National Football League, 1976). In doing so, the court established a three-part test, the “Mackey Test,” for determining whether a restraint qualifies for the non-statutory labor exemption: it must primarily affect the parties to the labor relationship, concern a mandatory subject of bargaining, and result from bona fide arm’s length negotiations.
Although the 2023 NBA CBA passes the Mackey Test, allowing it to be protected under the non-statutory labor exemption, it still raises pivotal antitrust concerns. Firstly, the hard-cap nature of the second apron and its $17.5 million threshold can be viewed as an unlawful price-fixing mechanism that limits team spending on player labor. Additionally, since teams in the second apron lose access to the MLE and are barred from aggregating multiple player salaries, they are forced to construct their rosters using only “max contract” star players and “minimum contract” veteran players. This reduces the market for middle-tier players, distorting a labor market in which wages should be determined by demand rather than artificial thresholds. Lastly, since second apron teams cannot take back more salary than they send out in trades or use cash to facilitate deals, the league limits player mobility and restricts transactions. Ultimately, while the CBA is currently protected by the non-statutory labor exemption, it remains crucial that the NBA and NBPA address such antitrust concerns because, as previously established, the exemption is not absolute and can still be challenged. Legal actions may arise from rival leagues, duty of fair representation claims by middle-tier players, and non-union actors such as draft prospects and agents.
References
Brown v. Pro Football, Inc., 518 U.S. 231 (1996)
CBA - National Basketball Players Association. (2019). Nbpa.com. https://nbpa.com/cba
Mackey v. NFL, 543 F.2d 606 (1976)
Wang, Z., Lu, Y., Kuo, O., & Kelly, K. (2025, July 24). From Soft Caps to Hard Lines: How the NBA’s Latest CBA Reshapes Spending and Teambuilding Strategy. Sheppard.com. https://www.sheppard.com/insights/blogs/from-soft-caps-to-hard-lines-how-the-nbas-latest-cba-reshapes-spending-and-teambuilding-strategy
