Hoops Rumors Glossary: Second-Round Pick Exception

When an NBA team selects a player in the first round of the draft, there’s never any concern about how the player will be signed, regardless of how far over the salary cap the team might be. The rookie scale exception allows teams to sign as many first-round picks as they need to, within a predetermined salary range, without requiring cap room.

However, there hasn’t historically been a similar cap exception for second-round picks. That means clubs intent on locking up their second-rounders to three- or four-year contracts have had to use cap space or a portion of the mid-level exception to do so. If a team wanted to give its second-round pick more than the minimum salary, it would require cap room, the mid-level, or another exception such as the room or bi-annual.

In the 2023 Collective Bargaining Agreement, the NBA and NBPA addressed this issue by adding a new second-round pick exception, which looks like a win for both sides. Teams will have more freedom to sign their young players to multiyear contracts without having to worry about carving out cap room or exception money for them.

Players, meanwhile, don’t have to worry that their new team’s cap situation might force them to accept a minimum-salary contract or a two-way deal. Of course, some late second-rounders will still sign a two-way deal or for the minimum salary, but a team will no longer be able to point to its lack of spending power to explain why that’s the only offer on the table.

Like the rookie scale exception, the second-round pick exception isn’t limited to a single use. It can be deployed as many times as needed in a given league year.

The second-round exception can be used to sign a player to either a three-year contract that includes a third-year team option or a four-year contract that features a fourth-year team option. Here’s what the salary structure looks like:

Three-year deal

• The first year can be worth up to the minimum salary for a player with one year of NBA experience.
• The second and third years are worth the second- and third-year minimum salaries for a rookie.
• The third year is a team option.

As our chart of minimum salaries shows, in 2023/24, the maximum three-year salary for a contract with this structure would be about $5.9MM. Here’s the year-by-year breakdown (option year in italics):

Four-year deal

• The first year can be worth up to the minimum salary for a player with two years of NBA experience.
• The second year can be worth up to the second-year minimum salary for a player with one year of experience.
• The third and fourth years are worth the third- and fourth-year minimum salaries for a rookie.
• The fourth year is a team option.

In 2023/24, the maximum four-year salary for a contract with this structure would be nearly $8.8MM. Here’s what it looks like from year to year (option year in italics):

In any deal that uses this four-year contract structure, the salary increase or decrease between the first and second season can’t exceed 5%. For instance, a team wouldn’t be permitted to negotiate a contract that starts at the rookie minimum ($1,119,563) and jumps to $2,120,693 in year two.

Players who are signed using the second-round pick exception won’t count against a team’s cap between July 1 and July 30 of their first season. That will allow teams to preserve all the cap room they need until July 31 without having to worry about their second-rounders cutting into it. And it will position those players to sign their first NBA contracts before taking part in Summer League games.

The introduction of the second-round exception doesn’t mean that teams must use it to sign their second-round picks. They’re still permitted to use cap room or another exception to negotiate deals with those players. That would be necessary in situations where the player has the leverage to command a salary greater than the two-year veteran’s minimum.

This has already happened a couple times in 2023/24. Second-round picks Vasilije Micic (Thunder) and Sasha Vezenkov (Kings) have reportedly agreed this offseason to three-year contracts worth $23.5MM and $20MM, respectively.

Both players are experienced EuroLeague stars who will be arriving in the NBA several years after being drafted in the second round, so their new deals will exceed what a team can offer using the second round pick exception. They’ll be signed using either cap space or the room exception.

Finally, it’s worth noting that no matter how his NBA career plays out, Kings rookie wing Colby Jones has already earned a minor claim to fame by being the first player to ever sign a contract that uses the second-round exception.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement.