A $765 million deal—when you hear a number like this, you might think of a CEO of a Fortune 500 company, a high-ranking government official, or one of those Wall Street boys. However, you’d be mistaken if you had any of those in mind. This groundbreaking deal was awarded to Major League Baseball player Juan Soto, who recently shattered the record for the largest contract in sports history with the New York Mets, surpassing fellow MLB superstar Shohei Ohtani’s record after just one year.
The United States is home to some of the world’s most lucrative, popular, and influential sports leagues, including the National Football League (NFL), National Basketball Association (NBA), MLB, National Hockey League (NHL), and Major League Soccer (MLS). These leagues attract elite athletes from across the globe, offering fierce competition, more effective resources, and substantial rewards. The National Football League is by far the most popular and massive among them all. Between 2022 and 2023, the NFL brought in around a whopping $18.7 billion, absolutely ahead of other leagues such as the NBA and MLB, which brought in over $20 billion combined in that same span. But even with all that, the MLB leads in the highest-valued contracts, which is surprising considering the average person and an interested fan would think the NFL would have the highest-valued contracts when, in reality, it’s nowhere even close.
The MLB’s ability to offer higher-value contracts stems from the way its payroll system is set up. Unlike other leagues, MLB does not enforce a salary cap—a strict limit on how much teams can spend on player salaries designed to level the playing field. Instead, the MLB uses a “luxury tax” system, also called the Competitive Balance Tax. This approach allows teams to spend freely but penalizes those whose payrolls exceed a set limit. Teams that overspend are taxed on every dollar they go over the limit. Essentially, wealthier and larger market teams can afford to splurge on top talent, provided they’re willing to pay the tax that comes along with it. This creates a disadvantage for smaller teams that can’t compete with those contracts, which is why a lot of the best talent often goes to the same team year after year.
Additionally, MLB contracts are fully guaranteed, making sure that players receive the total amount of their deals as long as they remain signed to the organization. This contrasts with other leagues, where significant portions of contracts can be non-guaranteed. These factors combine to make MLB a haven for record-breaking contracts like Juan Soto’s and Shohei Ohtani’s.
This doesn’t stop in the professional leagues; it goes down to even college sports. With the addition of NIL deals and endorsements, we have seen a bunch of teams making record-breaking deals with potential recruits to sway them into joining their program. And just like how we see it in professional sports, the larger, more marketable teams get the most valuable players due to their large media deals, endorsements, donations from alumni, and more, leaving the smaller market teams with leftovers
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