Penalties for each team signing a qualifying offer – rejecting a free agent
Since we’ve only looked at what draft compensation teams would receive if they lost a free agent who declined a qualifying offer, it’s time to explore what each team would have to give up in order to sign a free agent who declined a QO.
To review the mechanics: If a free agent has played the entire 2024 season with a team and he has never received a qualifying offer in the past, he is eligible for QO within five days of the World Series. The qualifying offer is a one-year contract worth the average salary of the top 125 highest-paid players in the major leagues, which this winter, QO is worth $22.025MM. An eligible free agent can simply accept a QO and thus avoid free agency entirely, but if he declines a QO, the free agent’s former team will now receive some draft compensation if he signs elsewhere. This only concerns other teams’ eligible free agents, as clubs can re-sign their own eligible free agents without any penalty.
Here’s a rundown of the (mostly established) pieces each team would have to give up if they signed an eligible free agent.
income share recipient: Diamondbacks, Rockies, Reds, Brewers, Pirates, Marlins, Athletics, Mariners, Tigers, Royals, Twins, Guardians, Orioles, Rays
If one of the clubs signed an eligible free agent, they would have to give up the third overall pick in the 2026 draft. Since most of the teams in these smaller markets are part of the competitive balance bonus round of the draft, their third-highest pick may not mean their third-round pick, and the situation could be further complicated if any teams trade away from their CBR picks. Competitive balance picks are the only ones eligible for trade — a total of five picks in the two CBR rounds in the 2025 draft were made by teams that acquired those picks via trades before draft day.
Typically, these lower-spending teams don’t typically splurge on big-name free agents, but last offseason, the Diamondbacks signed corbin burnsand the athletics(!) logo Luis Severino. The Tigers also struggled to hit the ground. Alex Bregmanand Detroit may feel more pressure to make a splashy move this winter, as Tarik Skubal Only one year left before free agency. The Orioles or Reds will likely spend more than usual, with Cincinnati trying to build on its postseason run and Baltimore trying to bounce back from a disappointing 2025. Seattle could also explore eligible free agents, but the M’s are more likely to focus first on trying to re-sign one of their own players in 2025. Josh Naylorwho are not eligible for QO.
Teams that did not receive revenue sharing funds and did not pay the competitive balance tax: Giants, Cardinals, Cubs, Braves, Nationals, Rangers, Angels, White Sox
In order to sign an eligible free agent, these teams must give up the second-highest pick in the 2026 draft and take $500,000 from the bonus pool during the next international signing period.
The rebuilding Cardinals and White Sox won’t be spending big money in free agency. The same is likely to be the case with the Nationals, whose rebuilding period is likely to be extended as new president of baseball operations Paul Toboni takes time to evaluate (and overhaul) the organization. Texas plans to either keep spending the same or reduce wages.
Under Alex Anthopoulos, the Warriors have generally preferred to build their roster through trades or their own farm system rather than long-term free agency, but Atlanta could change tack after a losing season in 2025. The Angels have been active in free agency, even if spending more money on eligible free agents might not necessarily get noticed. San Francisco signs eligible free agents Willie Adams Last winter, we again expected at least a number of major free agent names to be signed. Cubs extension doesn’t seem promising Kyle Tuckerbut they can deal with Tucker’s departure with some other important signings.
Part of the equation for these clubs, and the next two categories of clubs, may be the other draft picks they receive this winter to balance out their draft capital. For example, if Tucker turns down QO and signs elsewhere, the Cubs would receive a compensatory pick before the third round of the draft begins. While this selection is lower than Chicago’s second-highest pick, acquiring another pick and then losing one to sign an eligible free agent is a wash for the Cubs.
Team in trouble:Astros
As mentioned in the previous article, it won’t be known until December (when the league officially calculates the luxury tax number) whether the Astros manage to crack the $241MM tax threshold. RosterResource has Houston just below the threshold, while Cot’s Baseball Contracts has the Astros just above it. Given that difference and the narrow margins involved, we’ll keep the Astros in their own special bracket until the league releases official competitive balance tax numbers in December.
Since Houston becomes a taxpayer in 2024, the Astros may reset their CBT status if they do manage to stay under the $241MM line. Being a two-time taxpayer means rising tax rates, and if the Astros exceed the $244MM threshold again in 2026, the tax bill will continue to rise. NOTE: The collective bargaining agreement expires after the 2026 season, so it’s likely the qualified offer system or luxury tax system will be tweaked or even significantly changed in the new CBA, so duplicate tax status may no longer be a concern for the Astros or other teams.
Staying below the 2025 tax line also means the Astros may be more willing to explore signing eligible free agents, although their taxpayer status last winter didn’t prevent the team from signing Christian Walker.
As mentioned in a previous article, the Rangers could end up being taxpayers, while the Red Sox could duck below the tax line, depending on the league’s final calculations. For now, we’ll stick with both teams’ current categories, as Cot’s and RosterResource keep Texas barely below the tax line and the Red Sox slightly above it.
Competitive Balanced Taxpayer: Padres, Dodgers, Mets, Phillies, Red Sox, Yankees, Blue Jays
As one would expect, these teams face the harshest penalties. To sign a QO-rejecting free agent, these clubs would have to give up $1MM in international bonus pool money, as well as two draft picks — their second- and fifth-highest selections in the 2026 draft.
All seven of these clubs are clearly in a win-win mode, so in most cases higher penalties shouldn’t be a barrier to pursuing eligible free agents. (The Padres may be an exception, as their salary margins are smaller.) Since each team would like to retain its draft picks if they can, taxpayers may be targeting ineligible free agents who have nothing to do with draft compensation. For example, while the Dodgers are expected to at least check the market for Tucker, Los Angeles could consider any number of other free agents before targeting the outfielder, which would cost the most in terms of contract size and additional draft penalties.
Since there are no penalties for re-signing free agents who reject their QO, this may make some of these clubs more inclined to retain their own impending free agents rather than seek out new talent. Bregman and the Red Sox have a mutual interest in a reunion, and the Phillies have publicly expressed their desire to retain Kyle Schwarberthe Blue Jays will no doubt be watching closely Beau Bichette.
If the club signs more than one eligible free agent, they will additionally have to give up their next top draft pick. In order to sign two free agents who declined QOs, the revenue-sharing group would have had to give up the third and fourth-highest picks in the 2026 draft. Teams that don’t exceed the CBT or receive revenue-sharing funds will have to give up their second- and third-highest draft picks, as well as $500,000 of the international bonus pool. Luxury tax taxpayers will face an even steeper penalty, losing four draft picks — their second, third, fifth and sixth-highest picks.
