Escrow in pro sports refers to the withholding of a percentage of player salaries, held in a third-party account, to ensure revenue-sharing balance between players and team owners.
It’s not a tax. It’s not a fine. It’s a league-mandated “just in case” financial buffer.
At the end of a season, withheld escrow money is either returned
(if league revenue meets projections) or partially kept by the ownership group.
It’s one of the most controversial parts of many league CBAs especially in leagues with strong player unions.
Escrow Ensures that the league, team owners and players are able to be paid their base salaries and sustain the growth of sports leagues.
At the end of the day all sports leagues are businesses so it will always be about their bottom line.
Escrow is a major part of contracts, CBA’s and a term to know.
How Escrow Applies In Different Leagues
🏈NFL
The NFL does not use a league-wide escrow system like other leagues.
Instead, teams are required to place guaranteed contract money into escrow if it extends beyond the current season.
Use Cases
- Prevents owners from offering large guarantees they can’t actually afford.
- Creates tension for small-market teams when trying to land stars.
Example
The Cincinnati Bengals were criticized for their hesitance to pay large guaranteed deals like Jamarr Chase’s, because all of the guaranteed money must go into escrow at signing. Even if you can afford it eventually you need to cut the check now. No questions asked.
🏀NBA
The NBA uses a league-wide escrow system to protect the owners’ share of revenue. Each season, 10% of every player’s salary is withheld.
Use Cases
- Ensures owners never pay more than 50% of Basketball Related Income.
- Adjusted post-season when total revenue is finalized.
Example
During COVID-shortened seasons, players lost over 20% of their salaries due to reduced revenue and increased escrow holds. Even stars like LeBron & Steph lost millions temporarily withheld.
⚾MLB
MLB does not have a formal escrow system like the NBA or NHL.
However, during lockouts, or under certain CBA negotiations, an escrow-style mechanism may be proposed to balance out spending among teams.
Use Cases
- Suggested in prior collective bargaining negotiations as a way to enforce soft caps or revenue distribution.
- Rejected repeatedly by MLBPA due to its effect on player earnings.
Example
In 2020, during pandemic negotiations, MLB proposed massive escrow holds if players returned for a shortened season. The union flat-out rejected it. Escrow is viewed as a non-starter by most MLB players.
🏒NHL
The NHL is infamous for its escrow system. Players routinely have 8–20% of their salary withheld, depending on league-wide revenue projections.
Use Cases
- NHL players split 50/50 revenue with owners under the CBA.
- If revenue projections fall short, escrow “fills the gap” for owners.
Example
Sidney Crosby once had nearly 15% of his pay withheld due to high escrow rates.
Over the course of a long contract, that can mean millions lost, never returned. NHLPA and players routinely fight to reduce the escrow rate during new CBA negotiations.
⚽MLS / International Soccer
Neither MLS nor International Soccer leagues use escrow.
In MLS, player salaries are paid out as stated, with no percentage being withheld by leagues or ownership. Instead, clubs use revenue adjustments via the CBA.
In International Soccer, player wages are fully guaranteed by clubs and no system exists that withholds salaries to reconcile financial gaps.
Instead, clubs use deferred wages and performance based bonuses and reductions.
🥊Combat Sports / Individuals
No formal escrow system exists in UFC, boxing, or golf.
Purse guarantees, fight-night insurance, and appearance fee clauses serve similar purposes.
Example
In boxing, promoters may place guaranteed purse amounts into escrow accounts ahead of mega fights to prove they can pay both fighters (Mayweather vs. Pacquiao).
It’s protection for both fighters and investors to ensure a profit and generating revenue way above the bottom line.
Why Escrow Matters
Escrow directly affects take-home pay for elite athletes. It can suppress earnings, even in guaranteed contracts. It’s used by leagues to protect against revenue risk.
From the player perspective, escrow feels like a forced loan to the league with no interest, no choice, and no guaranteed return.
From the league’s angle, it’s a necessary hedge to prevent overpayment in down years.
Fans see $40 million contracts. Players often only get $32M of that.
Escrow is the silent middleman.
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