The Costliest Free Agency Signing in Sporting History? A Snapshot of NBA Salary Caps and the LA Clippers Scandal
The LA Clippers’ pursuit of Kawhi Leonard may go down as the costliest free agency signing in sporting history. Earlier this month, an almost yearlong investigation by the law firm Wachtell, Lipton, Rosen & Katz (WLRK), conducted on behalf of the NBA, found that the LA Clippers had engaged in a pattern of misconduct, violating multiple significant salary cap circumvention rules under the league’s Collective Bargaining Agreement (CBA) [1]. The investigation’s findings have decimated the Clippers’ future, slapping the franchise with a $30 million fine and stripping their first-round draft picks in 2029, 2030, 2031, 2032 and 2033 [2].
The Legal Framework of NBA Salary Caps
The NBA runs on a ‘soft’ salary cap basis, meaning teams can exceed it through exceptions. NBA players are guaranteed 51% of the money the league makes in any given year, and this money takes the form of Basketball Related Income (BRI) [3]. The salary cap is formalised each year once the exact figures and organisational revenue are finalised. The salary cap’s ‘soft’ nature depends on player compensation remaining visible and reportable, allowing teams to exceed it only with the league’s permission [4]. The salary cap exists to level the playing field amongst all teams and ensures that the wealthiest teams cannot spend exorbitant amounts of money on superstars [5].
The current NBA salary cap circumvention rules are outlined in the 2023 Collective Bargaining Agreement (CBA). The CBA is a contract between the league and the NBA Players Association, and sets out the rules of player contracts, trades, the salary cap and several other player-related matters. Of relevance is Article XIII of the CBA, which prohibits players and organisations from engaging in unauthorised agreements that circumvent the salary cap rules. For instance, Article XIII s1(b) prohibits teams from entering into agreements with a sponsor, business partner or third party where the sponsor, business partner or third party pays or agrees to pay compensation for basketball services to a player [6]. Article XIII s2(a) prohibits teams and players from engaging in secret or informal understandings that offer future contract renegotiations, extra compensation outside of the official contract and special investment or business opportunities [7]. As a whole, Article XIII prevents disguised sponsorships and ‘independent’ endorsement deals that are really just quiet extensions of a player’s salary arranged by the team itself.
The LA Clippers Scandal
After leading the Toronto Raptors to an NBA championship in 2019, Kawhi Leonard was signed by the LA Clippers as an unrestricted free agent [8]. In the same year, the Clippers acquired Paul George, another NBA superstar, to form what seemed to be a championship contending team. Fast forward seven years, and the Clippers have not been able to put together a real championship run. Leonard’s tenure, meanwhile, has been riddled with injury.
In September 2025, following a report by journalist Pablo Torre, the NBA opened an investigation regarding a $28 million endorsement contract between Leonard and Aspiration Fund Adviser LLC (Aspiration), a since-bankrupt fraudulent environmental company [9]. Steve Ballmer, the owner of the LA Clippers, had invested $50 million into the company. It was the exact off-court arrangement that the CBA rules prohibited. The LA Clippers were circumventing the salary cap by essentially paying Leonard additional income through third-party sponsors. In a podcast episode later in 2025, Torre revealed that Clippers co-chairman Dennis Wong had invested $1.9 million in Aspiration nine days before Leonard had been paid $1.75 million in 2022 [10]. The scheme persisted throughout Leonard’s tenure and had managed to evade scrutiny for years. As the investigation continued to unfold, Torre published Leonard’s other undisclosed endorsement deals with Daktronics [11].
WLRK’s investigation found that the Clippers had violated the CBA’s circumvention rules by ‘affirmatively initiating off-court income opportunities between Leonard and four companies doing business with the team: Aspiration, Boingo, Daktronics, and Lockton’ [12]. The organisation had also induced the companies to enter into the agreements by offering and providing them with business from the Clippers [13]. Finally, the Clippers also made improper payments to Leonard and his affiliates [14].
The Fallout
On September 2, the NBA announced the severe penalties for the salary cap circumvention. The Clippers must pay a $30 million fine, forfeit five first-round picks, and Steve Ballmer faces a one-year suspension for knowingly arranging the deals [15]. Leonard must pay a comparatively light $700,000. The Clippers’ prior offences in 2015 meant that the penalties were especially harsh. Since the penalties were announced, Leonard has made the decision to return to the Toronto Raptors, leaving behind a shattered franchise.
Setting punishments aside, the harder question this case raises is one of future enforcement. The investigation was only initiated following Torre’s report, and as Ken Jacobsen highlights, the NBA cannot scrutinise all player endorsement deals [16]. The nature of the system makes circumvention difficult to police at scale. However, that difficulty may be exactly what this investigation opens the door to. The Clippers scandal may give the league greater leverage to push for tighter oversight on third-party sponsor deals in the next round of CBA negotiations. If nothing else, the Clippers scandal has given the league a blueprint for how teams cheat and how they get caught.
References
[1] https://www.nba.com/news/nba-investigation-findings-la-clippers
[2] https://www.espn.com/nba/story/_/id/49806356/nba-announces-punishments-clippers-kawhi-probe
[4] Ibid.
[7] Ibid.
[8] https://en.wikipedia.org/wiki/Los_Angeles_Clippers_salary_cap_scandal.
[9] https://www.espn.com/nba/story/_/id/49806356/nba-announces-punishments-clippers-kawhi-probe
[10] https://en.wikipedia.org/wiki/Los_Angeles_Clippers_salary_cap_scandal.
[11] Ibid.
[13] Ibid.
[14] Ibid.
[16] Ibid.