Why the NHL salary cap is climbing faster than its own formula

For most of the 2020s the NHL's spending ceiling barely moved. The Upper Limit sat at $81.5 million from the 2020-21 season while general managers learned to treat every dollar of cap space as a scarce asset, and the ceiling had only reached $88 million by 2024-25. Then, on January 31, 2025, the league and the NHL Players' Association announced three straight rises that would take it to $113.5 million by 2027-28.

That looks like a change of policy. It is closer to the opposite: the end of an emergency arrangement and a return to the formula that has governed the cap since 2013, with one deliberate adjustment negotiated on top. Understanding why the cap stalled explains why it is now rising in bigger steps than the written formula would normally allow.

Half of hockey-related revenue, split by a formula

The cap is not a number the owners pick. It is derived from Hockey Related Revenue, the league-wide pool that covers ticketing, broadcasting, sponsorship and the rest, and since the 2013 agreement that pool has been split 50-50 between players and owners. When the two sides agreed a new extension in June 2025, the NHL's own report noted that the financial structure was left essentially unchanged, with the salary cap still set by that 50-50 split.

The mechanism works through a payroll range rather than a single figure. The 2020 memorandum of understanding set the 2020-21 range at an Upper Limit of $81.5 million, a Midpoint of $70.9 million and a Lower Limit of $60.2 million. The midpoint is the number that matches the players' projected half of revenue; the ceiling and the floor sit a fixed distance above and below it.

In December 2024, commissioner Gary Bettman gave a rare public look at the arithmetic. With the league projecting $6.6 billion in revenue for the season, he said that "the cap under the current guidelines in the Collective Bargaining Agreement would go up 5 percent", which put the 2025-26 figure at $92.4 million. Seven weeks later the announced number was $95.5 million.

Escrow, the players' guarantee of the fifty-fifty split

Contracts are paid in full on paper, but a percentage of every paycheck is withheld into an escrow account during the season. After the books close, final revenue is calculated. If total player compensation came in above 50 percent of Hockey Related Revenue, the overage goes to the owners out of escrow and the players get back whatever is left. If escrow is not large enough to cover the overage, the shortfall becomes what the 2020 memorandum calls an "Escrow Balance," a debt that carries forward into the next season's escrow rate.

That is what happened when the pandemic cut revenue in 2019-20 and 2020-21 while salaries stayed on their pre-pandemic contracts. The memorandum of understanding capped the withholding rate at 20 percent for 2020-21, between 14 and 18 percent for 2021-22 depending on how revenue recovered, 10 percent for 2022-23, and 6 percent for each of the three seasons from 2023-24 through 2025-26. Players also deferred 10 percent of their 2020-21 salaries, to be repaid in equal installments over three seasons starting in 2022-23.

The practical consequence is that the players spent several seasons paying down a debt to the owners, and a higher ceiling would only have made that debt larger.

Why the cap froze at $81.5 million

The 2020 memorandum spelled out the freeze in revenue thresholds. The Upper Limit was to remain at $81.5 million until Preliminary Hockey Related Revenue for the previous season surpassed $3.3 billion. For any season where revenue landed between $3.3 billion and $4.8 billion, the following year's ceiling could move only between $81.5 million and $82.5 million on a pro rata basis; the document's own example is that $4.05 billion in revenue would produce an $82 million cap. Once revenue passed $4.8 billion, the ceiling could rise by $1 million per year until the Escrow Balance was paid off.

Only after the debt was cleared did the memorandum allow the "Lag" formula to take over, and that formula is itself deliberately slow. It uses revenue from the season two years before rather than the immediately preceding one, drops the growth factor that used to inflate the midpoint, and caps the year-over-year increase at the lesser of 5 percent and the trailing two-year average revenue growth. There is also a minimum increase of 2.5 percent, with one exception written in for 2026-27.

That 5 percent ceiling is exactly the number Bettman quoted in December 2024. By then the cap had already climbed from the $81.5 million freeze to $88 million, and the formula on its own would have added $4.4 million more. The question for the two sides was whether to let the formula run or to agree to go past it.

The January 2025 agreement and the three published figures

They chose to go past it. On January 31, 2025, the league and the union announced team payroll ranges for three seasons: an Upper Limit of $95.5 million and a Lower Limit of $70.6 million for 2025-26, $104 million and $76.9 million for 2026-27, and $113.5 million and $83.9 million for 2027-28. The annual increases are $7.5 million, $8.5 million and $9.5 million. The 2025-26 figure is $3.1 million above what the 5 percent formula would have produced.

The memorandum contains a clause that makes this possible without rewriting the formula: for any upcoming season where the two sides anticipate a shortfall in the players' share, they may jointly raise the Upper Limit by up to an additional 5 percent, provided both agree by June 15. The January deal went further by publishing three years of numbers at once, which the union's release described as giving "increased predictability on core Salary Cap economics."

Two conditions were attached: the later increases depended on the collective bargaining agreement remaining in effect beyond 2025-26, and the 2026-27 and 2027-28 ranges were labelled projections that could see minor adjustments. The first condition was satisfied five months later.

What the 2026 agreement changes and what it leaves alone

On June 27, 2025, hours before the draft in Los Angeles, the league and the union agreed in principle to a four-year extension running from September 16, 2026 through September 15, 2030. The 50-50 revenue split and the cap derived from it stay as they are. What changed sits around the edges of the cap rather than inside it: an 84-game regular season from 2026-27 with the preseason cut to four games, maximum contract lengths reduced to seven years for a player re-signing with his club and six for a player joining a new one, and a minimum salary that rises from $775,000 to $850,000 in 2026-27 and reaches $1 million by 2029-30.

The most visible operational change arrived earlier than the rest. From the 2025-26 playoffs, teams must dress lineups within the cap: each club lists 18 skaters and two goalies for every playoff game, an "Averaged Club Salary" is calculated for that group, and it has to fit under the ceiling. The old arrangement let a player sit on long-term injured reserve all regular season, exempt from the cap, and then return for the playoffs. Deputy commissioner Bill Daly said on September 3, 2025 that "there will be changes to the LTIR this year", with the implementation details still being written at the time.

The useful habit for anyone following roster building is to read the floor alongside the ceiling. A Lower Limit of $83.9 million in 2027-28 is higher than the ceiling was for most of the decade, which forces low-payroll clubs to spend almost as much as the extra headroom frees the big spenders. The NBA takes the opposite approach, punishing overspending with roster restrictions rather than a hard wall, and its apron system is the clearest contrast to how hockey does it.

The other habit is to remember where the numbers come from. The cap is rising because revenue recovered and the escrow debt is gone, not because the formula was loosened, and the formula still lags revenue by two years. When a general manager talks about "cap space next year," he is talking about a figure that is far less uncertain than it sounds.