DENVER, CO – MARCH 22: Peyton Watson #8 of the Denver Nuggets looks on during the first quarter against the Portland Trail Blazers at Ball Arena on March 22, 2026 in Denver, Colorado. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement. The Nuggets defeated the Trail Blazers 128-112. (Photo by Justin Edmonds/Getty Images)
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Earlier this offseason, both the Oklahoma City Thunder and Boston Celtics made financially driven moves that were difficult to justify from a basketball perspective. The Thunder were motivated to get out of the NBA’s second apron, which carries with it severe team-building restrictions, while the Celtics were wary about building around two players who were each earning 35% of the salary cap.
On Wednesday, the Denver Nuggets became the latest victim of the second-apron era.
According to ESPN’s Shams Charania, the Nuggets agreed to send restricted free agent to the Cleveland Cavaliers in a five-team trade in exchange for an unprotected 2031 Cavaliers first-round pick and a 2032 Sacramento Kings second-round pick. The immediate reactions to the deal were not favorable for Denver.
ESPN’s Zach Kram gave the Nuggets a D for the trade, writing, “Letting [Watson] walk is a bitter pill to swallow for a Denver team that needed his youth and upside.” CBS Sports’ Sam Quinn gave them a D- and said, “At this point, I’m not even sure it’s even fair to consider the Nuggets fringe contenders.”
Watson is fresh off averaging a career-high 14.6 points, 4.9 rebounds, 2.1 assists and 1.5 threes per game while shooting 49.1% overall and 41.1% from three-point range. He suffered a hamstring injury in early February that sidelined him for all but five games over the rest of the season, and the Nuggets badly missed him in their first-round playoff loss to the Minnesota Timberwolves.
Losing Watson is likely to make the Nuggets worse next season. But much like the Thunder and Celtics earlier this offseason, the Nuggets didn’t make this trade for basketball reasons. The second apron was to blame.
The Second Apron Strikes Again
For now, the Nuggets are the only team above the $221.7 million second apron. Even after letting Watson go and taking back no salary in return, they’re roughly $2.0 million over it with only 13 players on standard contracts. Had they re-signed Watson, they would have been more than $20 million above it, which would have resulted in a massive luxury-tax bill as well.
The Nuggets already began cutting costs earlier this offseason when they waived Jonas ValanÄiÅ«nas, who had only $2 million of his $10 million salary guaranteed. They also signed a pair of first-year players in 2026 second-round pick Trevon Brazile and Euroleague Defensive Player of the Year Alpha Diallo, both of whom are earning only $1.3 million this season since it’s their first year in the league.
Veterans with two or more years of experience can earn no less than $2.4 million this year. Signing Brazile and Diallo instead of more established veterans helped trim another $2.2 million from the Nuggets’ payroll.
In late July, Tony Jones of The Athletic reported that the Nuggets had offered Watson a five-year, $70 million deal. A few weeks earlier, Marc Stein and Jake Fischer reported Watson was “said to be seeking a deal north of the $25 million in average annual value that Christian Braun secured from Denver in October.” As it turns out, that gulf was too wide to overcome given the Nuggets’ financial restrictions.
Denver is already paying three-time MVP Nikola Jokić more than 35% of the salary cap, while Jamal Murray is earning slightly more than $50 million. Add in fairly hefty deals for Aaron Gordon ($32.0 million), Cameron Johnson ($23.0 million) and Braun ($21.6 million), and it wasn’t feasible for the Nuggets to sign another $20-plus million player.
Granted, since the Nuggets are currently over the second apron, they're already subject to all of the associated team-building restrictions. They technically could have re-signed Watson, even if it meant swallowing a massive tax bill. Johnson is an unrestricted free agent after this season, so they easily could dip back below the second apron in 2027-28.
The fact that they weren’t willing to keep Watson despite that—and despite having a three-time MVP at the tail end of his prime—suggests that the second apron is accomplishing its intended goal of better distributing talent throughout the league.
How The Watson Trade Impacts Jokić’s Future
As Quinn noted, perhaps the biggest concern about the Watson trade is what it might mean for Jokić’s future in Denver. He could become an unrestricted free agent next summer if he declines his $62.8 million player option for the 2027-28 season.
In July, Jokić told reporters that his “idea and desire is to stay in Denver,” but he didn’t plan to re-sign until next summer. The Nuggets “were aware Jokić planned to address his contract situation and understand Jokić’s delayed timeline to be financially motivated,” a team source told ESPN’s Dave McMenamin at the time.
Jokić is currently eligible to sign a four-year extension with the Nuggets worth a projected $272.8 million (based on the projected $174 million salary cap for the 2027-28 season). If he declines his player option and becomes a free agent in 2027, he’ll be eligible for a five-year, $353.2 million deal.
“All signs thus far have indicated that [Jokić] plans to stay in Denver,” Quinn wrote. However, “making the team worse by trading an important player without getting one back is a way to make him reconsider those plans.”
The Nuggets do have to fill at least one of their two open roster spots in the next few months. According to NBA insider Chris Haynes, they have their eyes on one notable veteran for one of those spots.
However, the Nuggets could only offer DeRozan a one-year, $2.4 million veteran-minimum contract, and they couldn’t promise him a starting role unless they’re willing to bench either Braun or Johnson. Will that be enough to outbid other suitors?
Even if they do land DeRozan, the 37-year-old is on the downswing of his career, while Watson is just beginning his ascent. DeRozan at $2.4 million might be a better value than Watson at a $22 million average annual value this coming season, but DeRozan would be a short-term stopgap at best, not a long-term solution.
If Jokić does lose faith in the Nuggets’ direction given their financial restrictions, that would be a DEFCON 1-level crisis. The Nuggets have the next 10-and-a-half months to prove to him that they’re still on the right track despite losing Watson for a pair of distant draft picks.
Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac and salary-cap information via RealGM. All odds via FanDuel Sportsbook.
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