Arbitration is a legal process used in sports, primarily Major League Baseball, to resolve salary disputes between a player and a team.
It’s most common when a player has too much experience for pre-set rookie pay but isn’t yet eligible for full free agency.
It acts as a middle ground and offers players a chance to argue their value, while teams maintain some control before they hit the open market.
Both sides submit their preferred salary figure, and a neutral third-party arbitrator decides which side is more appropriate based on performance, market, comps, and context.
Once arbitration rights kick in, contracts become real negotiations.
How Arbitration Applies In Different Leagues
⚾MLB
MLB is the home plate of arbitration.
It’s part of the sport’s labor structure and CBA, and a major negotiation battleground between players and front offices.
Use Cases
- Players with 3-6 years of service time are arbitration-eligible.
- Teams control rights to the player but must negotiate salary annually.
- If no agreement is reached, both sides submit a number, and a hearing decides the winner.
Key strategy
Most teams try to avoid going to hearings because they’re contentious.
Organizations want to pay the least amount possible to a player in arbitration while making them feel its the best deal they will get, even if they reach the point of third-party negotiations.
Teams are forced to downplay the player’s value so that they are not in a position to overpay players on their roster that they know would likely receive a higher market value and offer elsewhere.
While Arbitration is part of the sport and is intertwined into every players financial journey in baseball, it can be also be seen as top talent being underpaid for those first 6-years.
It allows smaller market teams who drafted the young star to keep them around for a minimum of 6 seasons to try and win it all.
Similar to how NFL teams attempt to go all in when they have a star QB still on his rookie contract.
Example
In 2023, Corbin Burnes (Brewers) lost his arbitration hearing and publicly stated the team “destroyed the relationship” by tearing down his value in court.
He received over a $740,000 difference than what he believed he should make for the 2023 MLB season.
It’s an example of how arbitration can damage player-team dynamics.
Possibly why Shohei Ohtani and Juan Soto took the first bus outside the Angels and Yankees stadiums when they had 6-years service time.
Both headed right across their town in order to collect new fortunes and likely didn’t bat an eye of loyalty. Business is Business.
The MLB Is a Business.
🎓NCAA
Arbitration does not exist in the NCAA as a salary or contract mechanism, as these do not exist in collegiate sports.
College athletes are not employees, do not negotiate salaries, and are not covered by a collective bargaining agreement. Meaning, there is no formal arbitration process like MLB or NHL salary arbitration.
Where arbitration does appear inside the world of college sports is on the business side, not through the NCAA itself. Collegiate athletes earn money, if any, from NIL, not direct contracts with universities.
With the rise of NIL, endorsement and sponsorship deals may include private arbitration or mediation clauses. These disputes are typically between the athlete and a brand, collective, or agent, not the university they attend or NCAA itself.
Common NIL-related arbitration disputes include:
- Unpaid NIL compensation
- Breach of endorsement contracts
- Image or likeness misuse
NCAA discipline and eligibility rulings are handled internally through appeals committees, not neutral arbitrators. In some cases, NCAA rulings may even see judicial hearings and have even been brought to the Supreme Court.
Arbitration is not part of athlete compensation in college sports, but it is becoming more common in NIL business disputes surrounding the NCAA ecosystem as a whole.
🏈NFL /🏀NBA /🏒NHL
Arbitration is not common in these leagues in the same way as MLB.
However, there are restricted free agency and grievance procedures per their respective CBA’s that operate in a similar legal gray area.
🏈NFL
- Has grievance arbitration for contract disputes, suspensions, and conduct clauses.
- Most contract terms are not subject to arbitration, as rookie scale and CBA rules dictate payment.
Example
Le’Veon Bell filed grievances against the Steelers over franchise tag wording and usage.
A rare case of arbitration-style conflict in the NFL.
🏀NBA
- No formal salary arbitration.
- Players in RFA status can be matched by their current team, but there’s no hearing process.
Example
Restricted Free Agents (RFA) like Austin Reaves (2023), are offered deals and their current team (Lakers) either matches the others teams offer sheet or lets them walk making arbitration unnecessary.
🏒NHL
- NHL has formal salary arbitration, but it’s less dramatic than MLB.
- Available to RFAs with requisite experience.
- The team or player can file, and it often leads to compromise contracts before the hearing.
Example
Filip Gustavsson (Wild), went through salary arbitration in 2023, landing a 3-year, $11.25 million deal. A deal both sides were happy with the outcome of.
⚽MLS / International Soccer
Unlike MLB and NHL, soccer does not use arbitration as a salary-setting mechanism tied to service time or years played. Instead, “arbitration” in soccer refers to:
- Contract disputes
- Transfer disagreements
- Unpaid wages or bonuses
- Image rights conflicts
- Training compensation/solidarity payments
- Breach of contract rulings
These disputes go through governing bodies, not league panels.
MLS Arbitration
In MLS, arbitration is rare but exists in a legal (not salary) context:
- The MLSPA can file grievances on behalf of players.
- Disputes can go through neutral arbitrators under the CBA.
- Most cases involve wrongful termination, bonuses owed, contract interpretation, or disciplinary appeals.
- It does not determine a player’s salary like in MLB.
Essentially, MLS players do not go through salary arbitration. They only use arbitration for disputes or grievance resolution.
International Soccer Arbitration
Globally, arbitration is a major part of soccer, just not for salaries.
Most arbitration flows through
- FIFA’s Football Tribunal
- CAS (Court of Arbitration)
- European labor courts (for employment disputes)
Common arbitration triggers
- Transfer disagreements
- Clubs failing to pay wages
- Early contract termination
- Image rights disputes
- Agents suing clubs
- Players fighting bans or sanctions
Because soccer contracts are guaranteed and globally regulated, almost all disputes end up in arbitration instead of league-controlled processes.
Example
A top-tier player in Europe terminates his contract with their club due to unpaid wages.
They file a case with FIFA’s Football Tribunal, wins, becomes a free agent, and the former club owes damages. This is the most common type of “arbitration” in soccer.
🥊UFC /⛳Golf /🏎️F1
These sports are individual-based and don’t use arbitration structurally.
- Fighters and drivers negotiate directly with promotions or teams.
- Disputes often handled through legal channels or public negotiation, not formal arbitration hearings.
- Golfers and tennis players are independent contractors, meaning that all of their negotiations are sponsor-based.
Example
No official arbitration, but Nate Diaz spent over a year in public dispute with the UFC over contractual obligations.
Why Arbitration Matters
Arbitration is where the illusion of team loyalty often collides with the reality of financial value.
Players want to get paid based on market comps. Teams want to control costs and delay big payouts. Arbitration is the chessboard in between them.
It affects
- Team relationships
- Contract extension timing
- Player morale
- Public image
- Future negotiations
When done right, it’s a tool. When done wrong, it often times becomes a PR nightmare and often, the beginning of the end to the relationship between a player and the team.
📊Graphic
| Year | 3rd-Year Service Time: (~3.000–4.000) | 4th-Year Service Time: (~4.000–5.000) | 5th-Year Service Time: (~5.000–6.000) |
|---|---|---|---|
| 2021 | ~$2.5 million | ~$4.0 million | ~$6.0 million |
| 2022 | ~$3.0 million | ~$4.5 million | ~$6.5 million |
| 2023 | ~$3.5 million | ~$5.0 million | ~$7.0 million |
| 2024 | ~$4.0 million | ~$5.5 million | ~$7.5 million |
| 2025 | ~$4.5 million | ~$6.0 million | ~$8.0 million |
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Here is a chart summarizing the average Major League Baseball (MLB) arbitration salaries by service time from 2021 through 2025.
Due to the lack of publicly available comprehensive data broken down by exact service time for each year, the figures below are approximations based on available information and notable arbitration cases.
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