How NBA Free Agency Works, Explained (2026-27)

Part of The Cap Sheet — our series decoding how NBA front offices actually work. Start with the overview: How the NBA Salary Cap Works, then the money lines in the luxury tax & aprons deep dive.

Every summer, free agency looks like chaos: a rush of reported agreements the evening of June 30, a flurry of "agrees to a four-year deal" tweets, and a pecking order that somehow sorts itself out overnight. It isn't chaos. Here's how NBA free agency works, rule by rule — a strict order of operations that, once you know it, answers most of the "why did that team get him?" questions before you ask them.

The single most useful thing to understand: most free agents aren't as free as the word suggests, and most teams have less money than the cap makes it look. Let's take both apart.

The calendar: the moratorium, explained

Free agency doesn't just "start." It opens in a specific, slightly weird way — with exact times on the clock.

Negotiations open at 6:00 pm ET on June 30. Then, from 12:01 am ET on July 1 until noon ET on July 6, the league is in a moratorium — a quiet period when players and teams can agree to deals but cannot sign them. It's why you see "agrees to terms" on July 1 and "officially signs" on July 6: the handshake is real, the ink isn't yet. The moratorium exists because the league's new financial year — the exact cap, tax line, and apron figures for the coming season — only becomes official once the books roll over on July 1. Deals negotiated against projected numbers get papered once the audit lands and the real ones do too.

A few transactions are allowed to be inked during the moratorium, and the list is a nice tell for how the league thinks — none of them can distort the market that's still forming:

• Draft picks signing their rookie-scale deals (first round) or via the second-round pick exception
• Minimum-salary signings of one or two years
• A restricted free agent accepting his qualifying offer, or signing a max deal with his own team
• Two-way signings and conversions
• And notably: a restricted free agent can sign an offer sheet with a new team during the moratorium — the match clock just doesn't produce an official signing until it lifts

So the reported "done deals" of July 1 are genuinely done in spirit. They just can't count against a cap that technically doesn't exist yet.

The big fork: unrestricted vs. restricted

Every free agent is one of two kinds, and the difference decides everything about his leverage.

An unrestricted free agent is what most people picture: his deal is up, and he signs wherever he likes. A restricted free agent can talk to everyone and even sign an offer sheet elsewhere — but his current team gets the final say. That one asterisk reshapes the entire market for young players.

Restricted free agency, step by step

This is the part that trips people up, so let's be mechanical.

Step 1 — the qualifying offer. To make a player restricted, his team extends a qualifying offer (QO) by the June 29 deadline: a standing one-year contract at a preset amount. Issuing the QO buys the team its right to match. Not issuing it makes the player an unrestricted free agent — a quiet decision that hands a young player his full freedom, and one teams sometimes make on purpose to avoid a bidding war they'd feel forced to match.

How big is the QO? It's formula, not negotiation: for a first-round pick it's his fourth-year rookie-scale salary plus a preset percentage bump (larger for later picks), and for everyone else a set raise on his prior salary or a scale amount. Then the CBA adjusts it with the starter criteria — a playing-time test that stops teams from lowballing guys who became real players, and from overpaying for guys who didn't:

That table quietly moves millions. A late first-rounder who forced his way into the starting lineup gets a top-10-money QO; a lottery pick who never cracked the rotation sees his QO shrink — and sometimes that smaller number is exactly why his team feels safe extending it at all.

Step 2 — the player shops. The RFA negotiates with any team. If an outside team wants him, it doesn't just "sign" him — it signs him to an offer sheet, a fully specified contract (years, money, structure).

Step 3 — the match window. The player's original team now has exactly two days to match the offer sheet (the 2023 CBA cut it from three — small mercy for everyone's July). Match it, and he stays on precisely those terms, whether they like the structure or not. Decline, and he walks on the new team's deal.

Step 4 — the standoff. Here's why so many RFAs re-sign quietly with their own team instead of chasing offers: rival teams know about the right to match, so they're reluctant to tie up their cap space in an offer sheet that might just get matched, freezing their summer for two days for nothing. That reluctance suppresses the market — which is exactly the leverage the old team wanted.

If nobody bites and the player doesn't like his long-term options, he can simply accept the qualifying offer, play one season on that one-year deal, and hit unrestricted free agency next summer — betting on himself to get paid with no strings attached. It's the RFA's escape hatch, and the threat of it is real leverage back the other way.

Why staying almost always pays more

There's a structural thumb on the scale in every negotiation, restricted or not — the incumbent team can simply offer a bigger contract:

On a max-level deal that gap compounds to tens of millions over the life of the contract — it's the CBA deliberately bribing stars to stay put. It's also why "he took less to leave" is usually literal, and why the fifth year is the incumbent's closing argument in every pitch meeting. (What the max itself can be — the 25/30/35% tiers and the supermax — is its own machine; we decode it two stops from now in the series.)

The offer-sheet tricks

Because the old team must match exactly, rival teams design offer sheets to be as painful as possible to match:

• Front-loading or the "poison pill." Stuff the deal with a huge first-year salary or an early giant payment so matching blows up the incumbent's tax and apron math (see the tax & apron deep dive for why that hurts).
• The 15% trade bonus and player options — structural sweeteners that make the matched contract less flexible for the team that keeps him.

None of it changes the total the player gets; it just weaponizes the shape of the deal against the matching team.

The Arenas provision: the special case for the youngest RFAs

One more wrinkle with a name you'll hear on trackers. A restricted free agent with only one or two years of NBA service (think: a second-round steal whose cheap deal expired early) gets extra protection from the Arenas provision — named for Gilbert Arenas, the second-rounder whose 2003 offer sheet his own team couldn't legally match under the old rules.

The fix: a rival team's offer sheet to such a player can start no higher than the non-taxpayer mid-level exception (about $15.0M for 2026-27) in year one, with a standard raise in year two — a number the incumbent can always match using its own exception, even without cap room. The trick lives in year three, where the offer can balloon to whatever the offering team's cap space supports. Even sneakier: the offering team counts the contract's average salary against its cap, while a matching team carries the actual year-by-year numbers — the balloon years land at full weight on the very team the sheet was designed to hurt. It's the poison pill, licensed and regulated.

The other half: why "cap space" is mostly a mirage

Now the money. Fans see a team $30M under the cap and assume it has $30M to spend. Almost never true — because of cap holds.

A cap hold is a placeholder charge the league keeps on your books for a free agent you haven't re-signed or renounced yet, and for every empty roster spot below the minimum. Their purpose is to stop a team from using its cap room to sign outsiders and then re-signing its own free agents over the cap using Bird rights — having it both ways. So until you deal with them, the holds count.

And they're not vague estimates — the CBA sets each hold as a percentage of the player's previous salary, keyed to how strong the team's re-signing rights are:

Read that first row again: a first-rounder coming off a cheap rookie deal carries a hold of triple his old salary. The holds are deliberately fat — often larger than the player's realistic next contract — so a team can't pretend its own free agents cost nothing while it shops.

The practical upshot: a team's real spending room is what's left after the holds — usually far below the headline gap between its payroll and the cap. This is why "they're $25M under the cap" and "they can only offer $9M" are both true at once, and why a reporter's "cap space" figure and a team's actual usable room rarely match.

Renouncing: the price of real room

To turn cap holds into usable money, a team renounces free agents — formally giving up the right to re-sign them over the cap. Renounce enough holds and real cap room appears.

But renouncing has a cost: you surrender the Bird rights that let you exceed the cap to keep that player. So a team clearing room to chase a star is quietly deciding it can live without the players it renounces — because getting them back now means using cap space or an exception, not the easy over-the-cap re-sign. (We go deep on Bird rights and every exception next in the series.)

Two ways to spend, and you pick one

This is the fork that organizes a team's whole summer:

• Be a cap-room team. Renounce holds, clear real space, sign an outside free agent for a big number. The cost: you gave up the exceptions and Bird re-signs to get there.
• Be an over-the-cap team. Stay over the line and shop from your toolbox instead — Bird rights to keep your own guys (the easy over-the-cap re-sign that keeps a homegrown max like Nikola Jokić in his own uniform), plus the mid-level and bi-annual exceptions to add outside help. Most contenders live here.

A team essentially can't do both fully. Clearing max room means renouncing the tools; keeping the tools means no max room. Reading which path a team chose tells you what kind of summer it's having.

A worked example: how the dominoes actually fall

Say a team sits with $150M in guaranteed salary against the $164.961M cap — "$15M under," a fan would say. But it has two of its own free agents on the books: a Bird-rights wing who made $10M (below the league average, so his hold is 190% = $19M) and a first-rounder coming off a $3M rookie-scale year (hold: 300% = $9M). That's $28M in holds before anyone signs anything.

• On paper: $164.961M − $150M = ~$15M of room.
• Reality with holds: $164.961M − $150M − $28M = negative. No room at all.
• To create room: renounce both free agents (wiping the $28M, and their Bird rights with it). Now: real space to sign an outsider — but those two players can only be brought back with cap room or an exception, no longer with an easy over-the-cap Bird deal.

That sequence — hold, renounce, sign — is the actual order of operations behind every "how did they afford him?" summer.

Cap-speak, translated

Keep this next to the free-agency tracker:

Why free agency is a fantasy goldmine

Every signing is a minutes-and-role event, and free agency is where rotations get rewritten wholesale:

• A team signs a starter in free agency → someone who ended last season with those minutes just lost them. Fade the displaced player before the market catches up.
• A young player's team lets him walk (didn't tender the QO, or declined to match) → he lands somewhere with a clearer path to minutes. That's a buy-low with a new runway.
• A contender fills its last spot with a vet on the minimum → a fringe holdover's breakout window just closed.

Free agency has minted plenty of fantasy windfalls exactly this way — a proven guard like Jalen Brunson signing into a bigger role and outrunning his draft price, or a scorer like Tyrese Maxey inheriting the ball when the veteran ahead of him walks. Signings resolve all summer, and projected minutes move with every one. That's exactly what our engine re-prices the moment a deal lands — new role, new minutes, new category value — so you're drafting the post-signing depth chart, not June's. See where everyone lands on our live projections board, and if you're hunting a category edge in the churn, our punt builds guide shows how to turn a role change into a matchup win.

So when free agency opens and your feed floods with "agrees to terms," read it like a GM: who just got squeezed out, and who just got a runway. The fantasy edge is seeing the consequence a step before your league does.

Quick answers about NBA free agency

What is the difference between a restricted and unrestricted free agent?

An unrestricted free agent can sign anywhere, no strings. A restricted free agent can negotiate with anyone, but his current team can match any offer and keep him — so he only truly leaves if his old team lets him.

What is a qualifying offer?

A standing one-year contract a team extends to make its player restricted rather than unrestricted. If the player doesn't find a long-term deal he likes, he can accept it, play a season, and become an unrestricted free agent the next summer.

How does an offer sheet work?

A restricted free agent signs an offer sheet with a new team; his original team then has about two days to match it exactly. Match and he stays on those terms; decline and he leaves.

Why is a team's cap space smaller than it looks?

Cap holds — placeholder charges for a team's own free agents and empty roster spots — count against the cap until the team re-signs or renounces those players. Real room is what's left after the holds, usually far below the payroll-to-cap gap.

When does NBA free agency start?

Negotiations open at 6:00 pm ET on June 30, but a moratorium delays official signings until noon ET on July 6, when the new league year's cap figures become official. A handful of signings — rookie-scale deals, minimums, two-ways, a QO acceptance — are allowed through.

How much is an NBA qualifying offer?

It's formula, not negotiation: a first-rounder's QO is his fourth-year rookie-scale salary plus a preset bump, then adjusted by the starter criteria — 41 starts or 2,000 minutes raises a late pick's QO to 9th-pick money, while a top-14 pick who misses it sees his QO drop to the 15th pick's amount.

Next in The Cap Sheet: Bird rights and the exceptions — the toolbox that lets an over-the-cap team keep its own stars and still add help. Figures reflect the NBA's official 2026-27 cap; mechanics follow the 2023 Collective Bargaining Agreement. New here? Here's who we are and how we think about the game.