Last week, the first blockbuster trade of the 2024-2025 NBA season went down, headlined by the New York Knicks acquiring Karl Anthony Towns (KAT) from the Minnesota Timberwolves in exchange for Julius Randle and Donte DiVincenzo. While fans from both sides will debate who won the trade, the key to understanding this deal goes beyond just the big names involved. This trade was largely driven by the financial restrictions and penalties imposed by the league's latest collective bargaining agreement (CBA).

The CBA went into effect on July 1, 2023, but some of the restrictions only became consequential this off-season, effectively forcing this move by the T-Wolves. In the process, the Knicks discovered a loophole in the CBA that allowed them to acquire their newest star while evading some of these restrictions. Don’t worry, I am here to break down these provisions and complexities in the CBA that allowed this trade.

First, here is a full breakdown of the trade:

Knicks receive:

●      Karl-Anthony Towns (via Timberwolves)

●      Draft rights to James Nnaji (via Hornets)

Timberwolves receive:

●      Julius Randle (via Knicks)

●      Donte DiVincenzo (via Knicks)

●      Keita Bates-Diop (via Knicks)

●      Future first-round pick (from Knicks via Pistons)

Hornets receive:

●      Charlie Brown (via Knicks)

●      DaQuan Jeffries (via Knicks)

●      Duane Washington Jr. (via Knicks)

●      2 future second-round picks (via Knicks)

●      2025 second-round pick (via Timberwolves)

●      Cash considerations

Looking at this trade breakdown, you might wonder how the Knicks managed to exchange six players for just two. While this would be impossible in NBA 2K due to its outdated franchise mode, the Knicks cleverly navigated the CBA rules to make it work.

First, a very, very basic rundown of how the salary cap works in the NBA. The NBA has what is called a “soft” salary cap, meaning teams can spend above the salary cap limit with the exceptions available. For example, a common exception called “Bird Rights,” allows teams to go above the salary cap to re-sign players that have been on their team. However, if a team’s use of exceptions exceeds the next threshold called the Luxury Tax, then the team will be fined based on how much over the Luxury Tax they are.

This is where the new CBA comes in because now there are two additional thresholds past the Luxury Tax, which are the First Apron, and a newly added Second Apron. These aprons were created to harshen penalties on teams willing to millions in Luxury Tax fees for having a huge team salary, cough Clippers cough. For those interested, the “Operation of Apron Levels” can be found in Article VII, Section 2(e), on page 186 of the NBA’s CBA. Below are the salary thresholds, and some of the restrictions imposed by the aprons.

2024-2025 Salary Thresholds

●      Salary Cap: $140,600,000

●      Luxury Tax: $170,814,000

●      First Apron: $178,132,000

●      Second Apron: $188,931,000

If a team performs a transaction that encompasses one of the above restrictions, they trigger a Hard Cap for whichever apron that restriction corresponds with. A Hard Cap means that there is now a set salary limit that team cannot go over. Any team can trigger a Hard Cap, not just teams that are above the First or Second Apron. For example, the Dallas Mavericks are below the First Apron threshold. When Dallas acquired Klay Thompson via a sign-and-trade with Golden State, they triggered a Hard Cap of the First Apron. This means next season under no circumstances; Dallas’s salary can exceed the First Apron of $178,132,000.

The Knicks were above the First Apron, meaning they had the First Apron restrictions for transactions. They could not bring in a salary bigger than what they were sending out. KAT is set to make $49.2 million next season, meaning the Knicks had to trade away $49.2 million worth of contracts. Randle, DiVincenzo, and Bates-Diop made up about $43 million. The Knicks had to find a way to trade away an additional $6 million without losing another contributing player. So, the Knicks had to get creative by signing the cheapest players they could to make up the $6 million to include in the trade, called a sign-and-trade. It seems easy, except NBA trade rules do not allow a team to aggregate minimum contracts to make trades go through (CBA Section 8 (d)(ii)).

This is where the Knicks performed a masterclass of close technical reading. They said we will not sign Jefferies, Washington, and OKC legend Charlie Brown to minimum deals then, we will sign them to minimum deals plus $1. One extra dollar per player allowed the Knicks to aggregate these three contracts to make up the remaining $6 million and prevent triggering a First Apron Hard Cap, which would have destroyed this trade because the Knicks would have been already over that First Apron Hard Cap. It is important to note all three players played for the Knicks last season, giving the Knicks rights to sign and trade them.

These three players were sent to the Hornets who had extra salary cap room. The Hornets, in a rebuilding stage, happily accepted three draft picks and cash to facilitate this trade. The Hornets will waive all three players, use the cash to cover their salaries for this season, and still have cash left over.

Lastly, turning to why the T-Wolves likely felt they needed to make this trade. With KAT on their roster, they were the second most expensive team in the league behind the Phoenix Suns. Brian Windhorst reported that the Timberwolves were facing "losing more than $100 million this season because of a whopper of a luxury-tax bill coming due with new contracts." In the short term, the Wolves will save about $6 million this season. But the big win is their long-term flexibility.

KAT still had four years left on his deal, meaning Minnesota's salary situation would only get more restrictive with Anthony Edwards, Rudy Gobert, and Jaden McDaniels taking up $109 million of cap space alone. Next season both Randle and Gobert have one-year player options, which assuming they take the player option, sets the Wolves to clear cap space in the 2026-2027 off-season to continue building around Anthony Edwards.

Depending on the outcome of this season, fans will likely conclude whether this trade was good or bad for each team. Some already concluded that a T-Wolves team that made the conference finals last season took a step back. There are many ways to gauge the success or failure of a trade, however, the long-term implications of this trade may require a little more patience to fairly judge. Regardless, this trade acts as a case study of how the new CBA will start to shape the NBA landscape in their quest for league parity.

Andrew Gagnon is a 3L at the University of Kansas School of Law where he is a representative in the Student Bar Association and President of the Sports Law Society. He can be found on Twitter @A_Gagnon34 and LinkedIn as Andrew Gagnon.