By: Joey Speshock
In Arizona and Florida, hope springs eternal for thirty MLB teams competing on the field as Spring Training kicks off for the 2026 MLB season. Off the field, that hope appears to be in short supply.[1] The Collective Bargaining Agreement (CBA) governs the employment relationship between the owners of the thirty MLB franchises and the players, through the MLB Players Association (MLBPA). The current CBA is set to expire on December 1,2026, at 11:59 P.M. ET.[2] As the 2026 season unfolds on the field, the owners and the MLBPA remain sharply divided over the potential of a salary cap. With neither side showing any willingness to compromise, the potential for a lockout at the expiration of the current CBA casts a shadow over the aspirations of teams, players, and fans this season.
The MLB is the only major sports league in the United States that does not have a salary cap.[3] The MLB has used a Competitive Balance Tax (CBT), colloquially known as the “luxury tax” since the 1996 season, as a compromise between owners and players following the 1994 strike.[4] The CBT is designed to increase the competitive balance across the league by providing a progressive “tax” on teams whose player payrolls exceeds a predefined amount for a given year.[5] Under the current CBA, a team whose payroll (based on average annual contract for each player on the 40-man roster) exceeds $244 million in 2026 will be charged the CBT at a 20% rate increasing for to 50% if they have been over the limit for three consecutive years.[6] There are also surcharges for teams who significantly exceed the threshold.[7] The money collecting from the CBT is distributed into three different pools: (1) funding of player benefits, (2) player retirement accounts, and (3) revenue sharing distribution from the MLB to the teams.[8]
In recent years, the CBT has faced increasing scrutiny, as critics argue that “big market” teams can easily absorb the penalties and continue building talent-laden rosters with little consequence. For example, following the 2025 season the Dodgers paid a record $169.4 million luxury tax and have been over the CBT threshold for five consecutive seasons.[9] The Dodgers were not deterred by that payment as they added Kyle Tucker to a 4-year $240 million deal this offseason leading to an estimated tax payroll of $413.4 million.[10] Their expected luxury tax bill for the 2026 season is $161.8 million, more than the entire payroll of twelve MLB teams.[11] As a result, many of the owners, led by MLB commissioner Rob Manfred, appear poised to make a push for a true salary cap throughout the CBA negotiations.[12]
The MLBPA has consistently resisted calls for a salary cap and has shown no indication of a willingness to alter its stance in upcoming negotiations for a new CBA.[13] The MLBPA argues that the owners call for a cap is collusion designed to limit the players share in revenue and creates a system that pits one player contract negotiations against another.[14] Additionally, the MLBPA maintains that a salary cap alone would do little to promote competitive balance absent a corresponding salary floor, leaving smaller market teams able to underinvest while constraining player salaries and leaving a greater share of revenues for owners.[15]
The stakes are high for the CBA negotiations this year. In 2025, the MLB experienced a third straight year of viewership and game attendance growth across the league.[16] If the two sides cannot reach an agreement before the start of Spring Training in 2027, a lockout of players from team facilities would occur. In 2022, a 99-day lockout occurred ending on March 10, 2022, which ensured a full 162-game regular season.[17] Over the intervening four years, the landscape of baseball has shifted, raising fears of a season-threatening work stoppage akin to the 1994 player strikes. The 1994 dispute was resolved only through a court-ordered injunction issued by then-U.S. District Judge Sonia Sotomayor and left lasting negative consequences for the MLB.[18] Ironically, a salary cap was a large issue in those negotiations, and the CBT was the indirect result of the 1994 player strike.[19]
The 2026 MLB season will play a distinctive role in shaping negotiations for the CBA and the future of baseball. As players battle through the dog days of summer, tensions continue to rise off the field between the parties negotiating the new CBA. Fans should hope that cooler heads will prevail and baseball will continue for many summers to come.
[1]Alden Gonzalez et al., What you need to know about MLB’s looming labor battle, ESPN (Dec. 1, 2025, 07:00 ET), https://www.espn.com/ [https://perma.cc/Q9TV-VFNJ].
[2] Major League Baseball Payers, Basic Agreement 2022-2026 169 (2022), https://mlbplayers.com/ [https://perma.cc/9CRD-H9NS].
[3] Fanager Janae, Salary Caps Across the Top Leagues, Fanteractive (June 10, 2025), https://www.fanteractive.com/ [https://perma.cc/BN62-M64S].
[4] Nathaniel Grow, MLB’s Evolving Luxury Tax, Fangraphs (May 1, 2015),https://blogs.fangraphs.com/ [https://perma.cc/6MJF-TN2R].
[5] Id.
[6] MLB Competitive Balance Tax, MLB , https://www.mlb.com/ [https://perma.cc/YM65-PZ6A].
[7] Id.
[8] Anthony Franco, Nine Teams Exceeded Luxury Tax Threshold In 2025, MLB Trade Rumors (Dec. 19, 2025, 23:54 CDT), https://www.mlbtraderumors.com/ [https://perma.cc/7YZG-J2AH].
[9] Dodgers hit with record $169M luxury tax after 2nd straight title,ESPN (Dec. 19, 2025, 05:50 ET), https://www.espn.com/ [https://perma.cc/H2ZZ-55AM].
[10]Andrew Peters, Dodgers’ Luxury Tax Bill is More Than 12 MLB Teams’ Total Payrolls, How Much Does LAD Owe?, Bleacherreport (Jan. 15, 2026), https://bleacherreport.com/ [https://perma.cc/L6DZ-BDUE].
[11] Id.
[12] Dayn Perry, MLB’s state of labor: What to know about 2026 CBA, including odds of salary cap, international draft, and lockout,CBS Sports (Mar. 10, 2025, 10:00 ET), https://www.cbssports.com/ [https://perma.cc/D9N6-NFR5].
[13] Id.
[14] Jorge Castillo, MLBPA opposed to installing salary cap after CBA ends in ’26,ESPN (July 15, 2025, 13:44 ET), https://www.mlb.com/press-release/ [https://perma.cc/TP4F-U84W].
[15] Perry, supra note 12.
[16] MLB attendance reaches 71.4 million; three straight years of growth for first time since 2007, MLB (Sep. 29, 2025), https://www.mlb.com/ [https://perma.cc/T5JY-Q3KW].
[17] Perry, supra note 12.
[18] Cliff Corcoran, The Strike: Who was right, who was wrong and how it helped baseball,Sports Illustrated (Aug. 12, 2014), https://www.si.com/ [https://perma.cc/X3YD-SEH4].
[19] Id.
