Zohaib Zahir
Associate Editor
Loyola University Chicago School of Law, JD 2027
In the National Basketball Association (NBA), competition is fierce and success is often decided by razor-thin margins. NBA franchises are consistently looking for ways to gain a competitive edge, prioritizing player acquisitions to increase ticket sales, sponsorships, and franchise value to ultimately improve their chances of winning a championship. Most teams aim to build their roster through the annual NBA draft or the annual NBA free agency period. However, with growing competitive pressure, the line between strategic edge and rule circumvention becomes increasingly blurred. In September 2025, allegations surfaced that the Los Angeles Clippers circumvented the NBA salary cap when reporter Pablo Torre asserted that star player Kawhi Leonard received a $28 million no-show endorsement from Aspiration, a company with financial ties to Clippers owner Steve Ballmer. These allegations have led to the increased examination of current NBA policies and raised questions as to whether the NBA can take a more proactive approach to compliance.
The NBA’s regulatory framework: salary cap and the collective bargaining agreement
The NBA’s Collective Bargaining Agreement (CBA) is a contract between the NBA and the National Basketball Players Association (NBPA). The CBA governs the NBA’s labor and business operations, setting the rules for player salaries, free agency, revenue sharing, player benefits, and disciplinary procedures. As part of the CBA, the NBA implements a salary cap system that sets a limit on how much a team can collectively spend on players’ salaries. This limit is determined for each season based on a percentage of projected basketball-related revenue for the upcoming year. Unlike the National Football League (NFL) or the National Hockey League (NHL), the NBA uses a soft cap system, which allows a team to spend over the limit using different exceptions as outlined in the CBA. However, to control costs and encourage compliance with the salary cap, the NBA implements a tax system where teams are penalized at progressively higher rates the more they exceed the cap by. Beyond these financial penalties, the NBA enforces a variety of roster-building restrictions to discourage teams from going over the salary cap.
The allegations: Kawhi Leonard, Aspiration, and the Los Angeles Clippers
On September 3, 2025, Pablo Torre reported that the Clippers compensated Kawhi Leonard through the now bankrupt company, Aspiration, as a method to circumvent the NBA salary cap. According to Torre, Leonard, through his own LLC, agreed to a $28 million endorsement deal with Aspiration in April 2022, a deal that came to fruition nine months after Leonard signed a maximum contract to remain with the Clippers. According to Torre, a clause in one of the contract documents between Aspiration and Leonard stated that Leonard could decline to proceed with any action desired by the company, effectively making it a no-show clause.
On September 5, 2025, Steve Ballmer acknowledged that the Clippers had introduced Leonard to the Aspiration team, but argued that this was within the rules of the CBA, as the Clippers had no further involvement in the endorsement agreement. Torre has cited internal documents from Aspiration finding that Steve Ballmer funded Aspiration with a $50 million investment in September 2021 and secured a $300 million partnership between the Clippers and Aspiration. The Clippers and Leonard have denied any misconduct, with Leonard stating that Aspiration committed fraud and that the company still owes him compensation. Aspiration co-founder Joe Sanberg has since pleaded guilty to two counts of wire fraud for defrauding investors and lenders of more than $248 million. The Clippers continue to deny any wrongdoing and have expressed their willingness to cooperate with the NBA fully.
NBA’s response, compliance challenges, & enforcement mechanisms
Article XIII of the CBA outlines that no team or related party may enter into an agreement with a player that is designed to circumvent the salary cap. The NBA may infer a violation of the CBA if a sponsor or third party pays or agrees to pay compensation for basketball services or non-basketball services that are substantially more than the fair market value of those services. The NBA retains authority to scrutinize third-party deals if they appear to function as payments to get around the cap. However, NBA commissioner Adam Silver has indicated that the league needs clear evidence that the Clippers violated the CBA. Silver noted that NBA investigators will look at the totality of the evidence, and that he would be hesitant to act if there is any doubt. Under current CBA rules, the NBA may impose penalties, including a financial penalty of up to $7.5 million, draft pick forfeiture, suspension of team personnel for up to one year, and the voiding of contracts. Beyond these NBA-imposed penalties, any team found to circumvent the salary cap would have to deal with fan backlash alongside reputational damage and long-term harm to their brand.
While the NBA’s CBA clearly prohibits salary cap circumvention and allows the league authority to investigate any third-party arrangements, ensuring compliance with these rules remains a significant challenge. Players are well within the rules when they receive compensation from third-party business partners. However, when this compensation lacks a legitimate business purpose, it creates a gap that can be exploited to circumvent salary cap restrictions. Furthermore, the use of player LLCs can obscure financial arrangements, complicating the NBA’s ability to monitor and verify third-party agreements.
Historically, the NBA has taken a largely reactive approach to enforcing the CBA circumvention rules, addressing violations only after they have surfaced. To address some of the modern-day compliance challenges, the NBA can implement a variety of proactive measures. First, the NBA can establish a pre-approval system for any third-party agreements between businesses and teams or players. This pre-approval system would provide the NBA with an opportunity to proactively review any endorsement deals to assess market value and ensure legitimacy. Next, the NBA could implement a system of regular or randomized audits of teams and endorsement deals. Ideally, these audits would be conducted by independent third parties and would serve as an effective deterrent to any agreement that would violate the CBA.
Overall, the NBA can no longer afford to treat salary cap circumvention as a minor issue. If the NBA wants to preserve competitive balance and more importantly public trust, it needs to move beyond reactive enforcement and implement proactive mechanisms that make salary cap circumvention more difficult. The Kawhi Leonard case serves as a critical moment for the NBA to reassess its regulatory tools before salary cap circumvention becomes more widespread or normalized.