⏜ Our radical plan to replace the NBA draft ⏜
What if you could penalize tanking, decrease randomness, reduce perverse incentives, and give teams more control over their fate? There's one big catch: you have to ditch the draft for an auction.
Don’t get me wrong: I’m excited about the NBA playoffs. But my interest in the NBA regular season has been flagging in a way that it hasn’t in a long time. There’s a simple reason: it’s the tanking. A full third of the league — five teams in each conference — basically gave up on the season at some point between October and February. The identities of the 10 playoff and play-in teams in each conference were practically locked in a few weeks ago — and they’re literally locked in now.
The NBA is acutely aware of the issue, though it’s unclear whether the league considers it a real problem or just a PR issue. (Here’s why it’s an actual problem: about half the games on any given night “feature” a tanking team. I’m not about to pay $200 a ticket to see a team that isn’t even trying to win play the Knicks at MSG.) And the solutions it has proposed are mostly tinkering around the edges with the current rules, full of the same kinks and quirks that will be exploited by future Sam Prestis and Daryl Moreys.
Maybe that’s because it’s not quite clear what the league wants. Losing isn’t the same thing as tanking, and perhaps it’s fine to reward the former but not the latter. Up to a point, you might want to help teams for sustained losing as opposed to a one-year fluke like this year’s Indiana Pacers, but maybe not if they’re perpetual basement-dwellers. Other things equal, you probably don’t want the same team to get a #1 or #2 pick several times in a short period or for a potential contender to luck into a top four pick. Meanwhile, the myriad of pick swaps and trade conditions creates weird cliffs in the system and perverse incentives. And while there’s a lot of focus on losing teams, it’s also not clear you want winning teams to be able to trade draft capital seven years out when ownership and management may turn over anyway once it’s time to pay the piper.
So what if I told you there’s an alternative that could accomplish all of the following?
Introduce explicit penalties for tanking or for repeatedly failing to reach even the play-in game.
Substantially simplify trade rules.
Flatten the lottery odds to the extent desired by the league, especially toward the top.
Protect teams against themselves by limiting the amount of future capital they can trade.
Eliminate cliffs in the system, such as when a team would have to give away its pick if it climbs above a given position in the standings.
Reduce the element of luck: bad teams would still be rewarded with better capital, but they wouldn’t be quite as subject to the literal bounces of the lottery balls.
Reduce the chance of already good teams landing top picks.
Put some curbs on the same team repeatedly winning top picks.
Provide teams with more flexibility to suit team needs, such as carrying over capital from season to season or acquiring depth rather than a single highly touted prospect who isn’t a good fit.
Usually guarantee a team the opportunity to call its shots if there’s a player it really likes in the rough vicinity of its board.
And make “draft night” — now auction night — even more strategic and fun.
Sounds pretty good, right? But it does require one leap of faith. As I’ve been teasing at, we’ll be getting rid of the “draft” per se. No, I’m not advocating for all players to simply become free agents, although there are worse ideas. I don’t think it’s inherently a bad idea to “redistribute the wealth”. But every fantasy football nerd’s favorite solution, an auction rather than a draft, provides for a lot more flexibility to tweak the knobs to the league’s desired levels.1
True, you could accomplish some of these things within a draft format. But once I started down this path, the auction route proved far more flexible. For instance, you can penalize teams in a proportionate way for tanking by deducting a little bit of capital instead of either giving them a slap on the wrist or employing a “nuclear option” like taking away draft picks entirely.
The basics of ARC
The gist of the system is this: the draft would be replaced with an auction-type system, where teams bid on eligible players each June with Acquisition Rights Capital or ARC. I thought about calling this something cheeky like “DraftBucks”, but a) there’s not really a draft any longer, and b) I wanted to go with the sort of technical term that could plausibly appear in the CBA. ARC, of course, can be traded, but the mechanisms for doing this are simpler than under the current draft format. A unit of ARC can alternatively be designated with an arc symbol ⏜.
Needless to say, the devil is in the details for any proposal like this. There are 21 rules governing the use of ARC. You could tinker with most of them without really messing with the overall spirit of the system, however.
Let’s start with the two most important rules:
At the end of each season, teams receive between 25 and 100 ARC based on their order of finish. As under the current system, playoff teams are slotted 1-16, (though the two NBA finalists would be ranked first and second2) followed by non-playoff “lottery” teams.
There are no more swaps or conditional picks. Instead, all trades involving future asset rights are made with ARC. All trades or player acquisitions involving ARC must be made in whole units; ARC cannot be fractionalized.
Rule #2 is, I hope, relatively self-explanatory. ARC is fungible, so there’s no benefit in trading, say, Miami Heat ARC for Minnesota Timberwolves ARC. So, instead of “the Rockets acquired Giannis Antetokounmpo for Reed Sheppard, Jabari Smith Jr. and [insert long and convoluted description of picks and swaps]” the transaction wire would read as “the Rockets acquired Giannis Antetokounmpo for Reed Sheppard, Jabari Smith Jr. and 50 ARC”. There’s actually a lot less to keep track of.
As for the allocation, here’s what I had in mind:
There are some subtleties here. Under the current system, the steepest part of the curve, in terms of the expected value gain from dropping an additional position in the standings, is roughly between the 20th and 23rd positions. For instance, the 20th-ranked team has just a 9.4 percent chance of lucking into a top-four pick; that nearly triples to 26.3 percent for the 23rd-ranked team. Teams in this region can usually play a little bit and have a plausible chance of at least making the play-in round. But the NBA’s current setup strongly deters them from competing; our ARC system would reduce the marginal gain from losing in this region of the curve by roughly half. Instead, under ARC, the steepest part of the curve is for teams that have made playoffs anyway; it’s flatter toward the top and the bottom. And the ARC allocation for the three worst teams would be completely flat, similar to how the league awards the same 14 percent chance of receiving the #1 overall pick to the bottom three teams now.3
Here’s how I estimate what each draft slot is worth. The metric we use to evaluate player outcomes in our new NBA draft model, PRISM, is based on Estimated Plus-Minus (EPM). We tallied the number of wins a player produced above replacement level in his first seven NBA seasons (when he’s most likely to be on some sort of cost-controlled contract with his original team4), rounding below-replacement-level seasons up to zero. I then drew a smooth logarithmic curve over this data based on a mix of the average WAR and the median WAR historically associated with each draft slot. Overall, we calculate that ~55 players in each draft class5 produce enough expected wins to be worth a guaranteed contract, which is a close empirical match for how NBA teams behave in reality.6
Under our system, there are 1860 ARC distributed to teams in any given season. (As we’ll get to later, teams can have their ARC allocation penalized under some circumstances, but any “taxes” the league collects are redistributed into the system.) If we divide ⏜1860 by the expected value above replacement level associated with each draft slot, we come up with the following:
As you can see, draft value becomes nonlinear toward the top: the #1 overall pick is worth about twice as much as the #7 pick. Having looked at a lot of other “draft charts”, I’m comfortable that’s somewhere in the right ballpark.7 But value tends to flatten out once you get out of the lottery. The first half of the second round can produce tangible value — sometimes even a lot of value (Nikola Jokic was drafted at #41). But the back half of the second round literally zeroes out; teams are usually indifferent toward keeping the players they select at all.
The chart does hint at one important feature of the system: there’s a ⏜100 cap on how much a team can bid on any given player. If several teams make the same bid, then the league goes back to the ping-pong balls to determine who gets him. So there is still some element of luck: typically, in any given draft, the top three picks will be worth more than the max 100 ARC allocation. You can’t just stockpile ARC and guarantee yourself a Wemby or a Cooper Flagg, in other words.
We’ll return to some of these details later, but first let me run one more comparison between ARC and the existing rules. This chart shows the expected value of each draft slot under the current system based on the lottery odds for first round picks and compares it to each slot’s ARC allocation under our new model. Importantly, the expected value estimates also include second-round picks, which provide a sneaky benefit to the worst teams since the first half of the second round is worth a lot more than the back end. (Under ARC, there’s no more second round because there’s no more draft; teams just keep bidding on players until certain criteria are exhausted.)
So yes, we’re taking a little bit from the poor and giving it to the rest of the league. Finishing in one of the bottom eight positions in the standings is now worth slightly less, especially in the bottom three. But it isn’t that big a shift, and the largest benefits convey to the league’s middle class.
Plus, even if we’re giving them less capital, we’re probably reducing variance for the worst teams. A typical draft features three players who are worth a ⏜100 max bid, and three teams each season who are guaranteed to receive 100 ARC. Surely, some other teams will acquire the capital for a ⏜100 bid via trade (or because they have some ARC left over from previous seasons; there’s a mechanism for that). But generally, teams will have more control over their own destiny. If there’s a player they really like — say, Steph Curry in 2009 — they can grab him, provided he’s not a max player. There’s also a rule (#10) that prevents the same team from repeatedly winning “mix bid” auctions over a multi-year period.
The auction process
During the auction, teams take turns nominating players in inverse order of finish. They must bid at least ⏜1 on any player they nominate. A team may pass on its nomination and still bid on players nominated by other teams, but they can’t nominate players once their turn comes up again in the rotation once they pass.
When a player is nominated, all teams have 7 minutes to submit simultaneous bids (reduced to 5 minutes on the second day of the auction8). All bids are then revealed, and the player is awarded to the highest bidder.
The maximum bid is ⏜100.
If 2 or more teams tie for the highest bid, the winning team is chosen by lottery among the tied bidders.
Teams may acquire a maximum of 4 players through ARC in any given season.
ARC budgets and player trades are frozen 72 hours before the auction. A team cannot select a player and immediately trade him, though in line with the NBA’s current rules, he can be traded 30 days after he signs a contract.
The draft ends when all remaining teams have passed on their nominations, have acquired 4 players, or have exhausted their ARC budget. There is no more “second round” under ARC, although teams may sign rookies who aren’t selected through the system as free agents.
The most important rules are #5 and #6, but they’re the ones we’ve already covered. By design, the top three picks are usually worth more than the maximum bid of ⏜100; the average #1 overall pick has a value of about ⏜140, for instance. So in most halfway decent draft classes — maybe not the Zaccharie Risacher draft — there will be multiple max bids for the first few players. Teams will face challenging decisions as to whether to acquire enough ARC to make a max bid; what’s interesting is that for every additional team that plans to bid the max, the odds of winding up with the player decline.9
I’m less hung up on some of these other rules. There is probably some slight tactical advantage to having the right to nominate a player, but it likely isn’t much.10 We might see some unconventional strategies, too, like a team nominating the equivalent of a second-round pick and hoping to get him for a few ARC while holding their fire for a bigger bid down the line; there’s nothing that says the best players have to be nominated first.11 The action would be frenetic on auction night, with new information revealed at every turn. So frenetic, in fact, that as per Rule #8, I think it’s just too chaotic to allow teams to acquire ARC on draft night. Instead, front offices would lock in their budgets and have three days to make their best-laid plans.
Multi-year planning
A team may win a player with a maximum ⏜100 bid at most 2 times in any 3-year window and 3 times in any 5-year window.12
Teams must spend at least ⏜25 in any 3-year window. It’s use it, or lose it. If a team doesn’t meet this requirement, any outstanding ARC is deducted from its account.13
Teams can go into ARC debt, provided they’re guaranteed to meet the ⏜25 spend per three years requirement under Rule #11.
Unused ARC rolls over to the next season, but with an escalating tax schedule. Teams pay a 10 percent tax rate on the first ⏜10 of ARC savings, a 20 percent tax rate on the next ⏜10 and so forth.14
All ARC subtracted via fines or taxes will be reallocated evenly to other teams.15 Thus, the total amount of ARC in the system is preserved.
The rollover provision under Rule #13 is intended more for “spare change” than for teams to stash large amounts of ARC. Joseph’s work for PRISM found that there’s meaningful and somewhat predictable variation in the strength of different draft classes. Still, the taxes get punitive if you try to retain more than about ⏜20 or ⏜30. And even if you can’t find a good fit for your ARC in the auction, you can always trade it.
Rules #11 and #12 are probably the more important constraints. Under Rule #1, each team is guaranteed to pick up at least ⏜25 every season. Under Rule #11, they can borrow against this and go into ARC debt, but they’re still required under Rule #11 to have enough left over to spend at least ⏜25 in any given three-year span.
On the surface, this is more flexible than the current Stepien Rule, which requires teams to make a first-round pick every other season. Under Rules #11 and #12, a team has to make the equivalent of a late-first-round pick only once every three seasons instead.16 However, under ARC, a team won’t really be able to trade draft capital more than two years in advance17, whereas draft picks can be traded up to seven years in advance under current rules. And it’s the picks in the out years that tend to be most valuable, since acquirers hope that the contending club will play through its competitive cycle and crash out to the lottery by the end of the window.
This is a big change. A lot of NBA tanking discourse takes what you might call a “demand-side approach”, i.e. by focusing on the fact that teams have a lot of desire to acquire high future picks to the point where they frequently tank. What can be neglected is the supply side: there’s a lot of opportunity to acquire such picks because teams can trade draft capital seven years out and they often take an incredibly short-term focus. Reducing the potential for long-term, franchise-compromising moves would protect contending teams (like the Phoenix Suns when they acquired Kevin Durant) from themselves. But it would also decrease the amount of draft capital available to rebuilding teams from trading their own star players. With less draft capital available, they might have to “settle” for acquiring player talent in return, which would keep them more competitive. Or they might be more inclined to keep their own players since there won’t be as many too-good-to-refuse offers.18
Rule #10, meanwhile, is intended to slightly reduce the amount of luck under our system. A team can acquire a ⏜100 player — basically, a guy who is a legitimate top 3 pick — at most two times in any three seasons or three times in any five seasons. If you’re going to spread the wealth around to losing teams, you might as well spread it a bit more evenly.19
Anti-tanking measures
If a team has missed the playoffs and play-in game for more than 3 consecutive years, it’s subject to a 20 percent tax on its annual ARC allocation.
The league will deduct ARC from teams for tanking or failing to uphold the competitive integrity of the league. If the league suspects a high likelihood of tanking, it will publicly issue a team a warning that it’s been placed under heightened scrutiny. The maximum allowable fine without a warning is ⏜5. Once a team is under heightened scrutiny, the maximum allowable fine is ⏜20 for first-time offenders and unlimited for repeat offenses, with the clock resetting after seven seasons.
Two-thirds of the 30 NBA teams make either the playoffs or the play-in tournament every season. It just isn’t that hard to do. At the end of the 2025-26 season, the only ongoing three year play-in/playoff droughts will belong to the Brooklyn Nets, Utah Jazz and Washington Wizards.
So I have no trouble punishing these teams under Rule #15. More than three years in the wilderness is when season-ticket holders start to give up hope. Would Jaren Jackson Jr., Trae Young or Anthony Davis have been shut down if the Jazz or Wizards could reset their clocks by sneaking into the play-in game? Maybe not. Under this rule, a team with a 3-year drought would actually acquire more ARC if it made the play-in than if it finished with the 5th-worst record.
Rule #16 is likely to be more controversial because it’s more subjective. But the league makes subjective judgments all the time, such as when disciplining players. It’s also fined teams like the Jazz and the Mavericks before for tanking, although the amount of the fines is trivial for billionaire owners. Rule #16 would set up a two-tiered system so teams weren’t totally blindsided; taking away a few ARC and putting them under heightened scrutiny (so for instance, they’d need to see the receipts for purported injuries) would be the warning shot. Repeated, blatant tanking once teams were on probation would be punished more harshly.
Every half-sentient NBA fan (and absolutely every person betting on the games) knows exactly which teams are tanking; it can’t be that hard for the league to police this explicitly, whether the determinations are made through a Potter Stewart standard (“I know it when I see it”) or some sort of algorithm. All you really want is a deterrent: the expected value of making dubious, tank-tastic moves will be lessened if you might face real consequences for doing so.20
Player contracts
All players acquired through the ARC system must be offered guaranteed contracts, with salaries tied formulaically to the winning bid and the number of maximum bids.21
Teams retain NBA rights to players for 4 seasons once they’re chosen through the ARC process. The ARC spent on these players is deducted from a team’s account when the player is selected, whether or not the player ultimately signs a contract. Players may decline the initial contract and negotiate a higher salary after one year, subject to certain constraints.22 But they are not eligible to sign with teams who don’t have their ARC rights until the 4-year window expires. The rights to such players may be traded, however.
We’re getting into some of the less important mechanics, so I’ll be quicker here. A player selected during the auction must be offered a guaranteed contract. Currently, first-round picks get guaranteed contracts and second-round picks don’t, but about 20 of the 30 second-round picks wind up getting full-fledged NBA deals anyway. That implies that about 50 players will typically be selected in any given ARC auction. Teams can sign unselected players later, just like they can offer contracts to undrafted free agents now.
However, under current rules, teams sometimes do something else with their late picks: choose a “draft-and-stash” international player in the hopes of bringing him into the NBA after he’s picked up a couple more years of seasoning abroad. Rule #18 is intended as a replacement for that process, while also giving international players some leverage to negotiate for a higher rookie salary if their development goes well. It also plays a more subtle role in creating another sort of “asset class” that teams can move. Since there are no more second-round picks under ARC — essentially, the spare pennies under the current system — teams could trade the rights to draft-and-stash players if they want to “round up” their capital to have the right goods to make a trade.
Transition to the new system
Before the start of the first season under the ARC process, each team gets an additional ⏜10 above and beyond their standings-based allocation under Rule #1.
Expansion teams start with 100 ARC.
Teams may trade ARC in advance of the full transition to ARC provided they meet Rules #10 and #11. Alternatively, by mutual agreement with the Players’ Association, the league may seek to accelerate the transition to ARC by “cashing out” existing draft-pick trade obligations to their equivalent ARC values.
Rule #19 creates a bit more liquidity in the system, but I don’t think you need or want to have too much liquidity.23 Teams can already go into ARC debt, and there’s already going to be a lot of demand for winning teams to move their ⏜25 or ⏜30 allocation to losing teams so they’ll have the capital to make a max bid.
Expansion to Las Vegas and Seattle is probable but not quite inevitable. If you’re going to ask for $8 billion (!) for a franchise in mid-tier markets, I say go ahead and give them a full 100 ARC for their first auction.
And yes, one big critique you might make of ARC is that it’s hard to have a seamless transition when teams have already traded draft picks as far out as 2032 (!). But the current system isn’t working. The alternatives proposed by the league are uninspired and might create as many problems as they solve. It’s time to rethink things from the ground up.
The auction concept is certainly not entirely original: you can find auction proposals buried in the depths of NBA Twitter and NBA Reddit.
The NBA does not currently rank the champion and runner-up first and second, whereas the NFL and NHL do.
However, under the current system, the worst overall team is still rewarded somewhat since it will retain a higher draft position if it doesn’t get a lottery ball combo that lands it in the top 4. It also picks higher in the second round. Under ARC, the top three would be completely flat.
The latter years in the seven-year window are weighted more heavily in this calculation, since most rookies per se are terrible but their teams might not really care if they’re in a rebuilding phase.
I allowed the curve to take on values below zero for the last few picks rather than forcing it to remain above zero.
Under the current system, contracts for second-round picks are not guaranteed, but ~20 of the 30 second-round picks typically receive guaranteed deals anyway. Counting the first round, that’s 50 players on guaranteed contracts. But you should round that up because “draft-and-stash” international prospects make up some of the remaining second-round picks, something still permissible under Rule #18.
Though EPM, perhaps because it’s better/more discerning, tends to produce steeper curves, valuing the top picks more highly than earlier attempts based on other statistics like Win Shares did.
Currently, NBA teams have 5 minutes to make first-round picks and 4 minutes to make second-round picks. But ARC is a lot more involved, since every team can potentially bid on every nominated player. You might also want to build a few 10- or 15-minute breaks into the schedule.
If 4 teams make a max bid, your odds of winding up with the #1 player are 1 in 4; if 10 teams do, they’re 1 in 10.
In fantasy auctions, there’s a bigger benefit to nominating a player because if you make a $1 bid, every other team has to bid at least $2 for him. But under ARC, other teams could also bid $1.
One “expert” strategy in fantasy drafts is nominating a player you don’t want to essentially suck money out of the other owners; the first players nominated often fetch a premium. Another is to throw an off-speed pitch by nominating a cheap player and hoping to get him for a couple bucks when everyone is eager to bid on the big guns.
Technically, this could include winning two max bid auctions in the same year, though it’s unlikely that any team would ever go into the auction with the ⏜200 required to do this.
Because, under Rule #17, rookie-year salaries are tied to the winning ARC bid, teams would still have an incentive to bid less ARC on a player than their maximum available even if they’d lose any ARC remaining.
Taxes are rounded to the nearest whole unit. ARC savings up to ⏜4 are tax-free and a team pays its first “dollar” of tax at ⏜5. Some sample tax rates: there’s a ⏜2 tax on ⏜15 of rollover, a ⏜5 tax on ⏜25, a ⏜15 tax on ⏜50 and ⏜55 in tax on ⏜100. In practice, I’d imagine that teams would rarely want to exceed the 30 percent tax rate, so the max they’d typically roll over is around ⏜30 in pretax ARC, paying ⏜6 in tax to retain ⏜24.
The taxed amounts would just be redistributed evenly. If there was an uneven amount of ARC — ⏜75 in taxes was collected to distribute to ⏜30 teams — the outstanding ARC could just be redistributed at random, by reverse order of finish, or something else; I’m not sure that it matters much.
Although, it actually might be contending teams who want to hold onto their ARC, hoping to accumulate enough to select the equivalent of a mid-first-round pick every second or third year who could actually crack the team’s rotation.
Say a team wins the championship and starts the off-season with 25 ARC in 2027. They must spend at least 25 ARC between the 2027, 2028 and 2029 auctions. The most they can trade is ⏜50. That would set their current balance to -25 ARC. With a negative balance, they can’t bid on any players in 2027. If they win the championship again, they’ll have 0 ARC for 2028 and can’t make any bids either. But they are guaranteed to have ⏜25 ARC by 2029 to fulfill their obligation under Rule #11. In 2030, they could then restart the process again by trading 50 ARC.
I’d like to see this paired with a relaxation of the current cap rules that would give teams more wherewithal to exceed the cap to retain their own players, but that’s outside the scope of this project.
What if a team had ⏜100 or more, but was precluded from making a max bid under Rule #10? Well, probably, it’s best move would be to trade the ⏜100 to a team who could use it. But because there’s no way to trade present ARC for future ARC, it would necessarily have to acquire player talent instead. That’s behavior we want to encourage: pushing teams toward competitiveness.
Although I’d note that this is also the sort of thing that could be punished under current draft rules. Take away a few lottery-ball “combos” from repeated tankers like the Jazz, please.
Specifically, to get something resembling the current rookie scale, rookie salaries could be calculated as $1.2M + ($125K * ARC) + ($250K * MaxBids) where ARC is the winning bid and MaxBids is the number of ⏜100 bids on the player.
Not being a “capologist”, I haven’t tried to figure out how this would interact with the other cap rules. Maybe a team can offer a contract up to 150 percent of a player’s initial ARC-designated salary. If the player demands more than that, they’ll need to have cap space, but they could also trade the player to a team who has room.
I also thought about a rule that would allow the commissioner to make an ARC injection into the system subject to certain constraints, sort of like the Federal Reserve loosening monetary policy, but I think I’d want to see the new system play out for a few years first before creating a moral hazard for teams that had mismanaged their ARC budgets.
I know its not realistic, but a promotion/relegation system prevents all tanking and makes games at the bottom the most competitive of all.
I wish Nate hadn't glossed over the transition and provided some ideas for how you could get there. That will be a major, major sticking point to get enough owners on board. Teams that have tanked and stock piled picks won't like losing all those assets. Teams that didn't, wont like proposals that reward said teams, when their tanking is what necessitated the need for something like this.