Lalit Modi

What was generally regarded as the most effective way to deal with this is a hard salary cap. And that's what the NFL has. Every year you have a dollar amount that is the same for every team. You cannot spend more than that dollar amount. It is simply not allowed. And how high that dollar amount is, is the result of collective bargaining between the players union and the ownership group.

What was generally regarded as the most effective way to deal with this is a hard salary cap. And that's what the NFL has. Every year you have a dollar amount that is the same for every team. You cannot spend more than that dollar amount. It is simply not allowed. And how high that dollar amount is, is the result of collective bargaining between the players union and the ownership group.

Just taking the three big U.S. sports leagues. NFL, clearly the gold standard, has the best way to manage competitive parity, which is the hard salary cap. Next is the NBA. They're somewhere in the middle. The NBA has a soft salary cap, which means, yes, there's a salary cap, but under some exceptions, you can go beyond it, and then there's an associated luxury tax with going beyond it.

Just taking the three big U.S. sports leagues. NFL, clearly the gold standard, has the best way to manage competitive parity, which is the hard salary cap. Next is the NBA. They're somewhere in the middle. The NBA has a soft salary cap, which means, yes, there's a salary cap, but under some exceptions, you can go beyond it, and then there's an associated luxury tax with going beyond it.

This is a big problem. Not as big a problem as baseball, which I'll tell you about in a sec. But the reason this is a problem is it all of a sudden introduces the amount of wealth that your ownership group has outside of the business of running the team and outside of the league.

This is a big problem. Not as big a problem as baseball, which I'll tell you about in a sec. But the reason this is a problem is it all of a sudden introduces the amount of wealth that your ownership group has outside of the business of running the team and outside of the league.

now starts to play a factor in how much you can spend for players and starts to affect the competitive balance of the league.

now starts to play a factor in how much you can spend for players and starts to affect the competitive balance of the league.

Now, in theory, the luxury tax should address this because you're then now redistributing some of that extra money that you're spending on salary and an equal amount to other teams. But in practice, it doesn't really work out this way.

Now, in theory, the luxury tax should address this because you're then now redistributing some of that extra money that you're spending on salary and an equal amount to other teams. But in practice, it doesn't really work out this way.

So if you look at competitive dynamics in the NBA versus the NFL, you get dynasties in the NBA, like the Warriors or the Lakers or the Celtics or the Spurs a few years ago. Yep. Cavs, Heat. Yep. The Heat. The Spurs are the anomaly because they're not in

So if you look at competitive dynamics in the NBA versus the NFL, you get dynasties in the NBA, like the Warriors or the Lakers or the Celtics or the Spurs a few years ago. Yep. Cavs, Heat. Yep. The Heat. The Spurs are the anomaly because they're not in

a major market, but all those other cities, all those other teams I was talking about, San Francisco, Bay Area, Los Angeles, Miami, these are big markets.

a major market, but all those other cities, all those other teams I was talking about, San Francisco, Bay Area, Los Angeles, Miami, these are big markets.

Somewhere in the middle. Then you've got Major League Baseball. Major League Baseball has no salary cap at all. They do have what is called a quote-unquote competitive balance tax, which sort of operates like a soft salary cap like the NBA. But in practice, it's a total sham. Because in the NBA, there are at least strict rules about when and how and how much you can exceed the salary cap by.

Somewhere in the middle. Then you've got Major League Baseball. Major League Baseball has no salary cap at all. They do have what is called a quote-unquote competitive balance tax, which sort of operates like a soft salary cap like the NBA. But in practice, it's a total sham. Because in the NBA, there are at least strict rules about when and how and how much you can exceed the salary cap by.

In baseball, it's just like, hey, there's some tiers, and if you go into the higher tiers of excess over the competitive balance thresholds, you pay more. But there's no cap on how much you can pay. You can pay an infinite amount and then just pay penalties to an infinite amount. So last year, in 2024, nine teams in Major League Baseball exceeded the competitive balance tax threshold.

In baseball, it's just like, hey, there's some tiers, and if you go into the higher tiers of excess over the competitive balance thresholds, you pay more. But there's no cap on how much you can pay. You can pay an infinite amount and then just pay penalties to an infinite amount. So last year, in 2024, nine teams in Major League Baseball exceeded the competitive balance tax threshold.

By far, the worst offender were the Los Angeles Dodgers, who exceeded it by $100 million. Which is just ridiculous. And then, of course, they won the World Series. Like, duh. Gee. Gee, how did that happen? And why did the Dodgers feel comfortable exceeding it by $100 million and paying such a huge luxury tax? Oh, guess what? They're in Los Angeles, the biggest media market in the U.S.

By far, the worst offender were the Los Angeles Dodgers, who exceeded it by $100 million. Which is just ridiculous. And then, of course, they won the World Series. Like, duh. Gee. Gee, how did that happen? And why did the Dodgers feel comfortable exceeding it by $100 million and paying such a huge luxury tax? Oh, guess what? They're in Los Angeles, the biggest media market in the U.S.