Hoops Rumors Glossary: Ted Stepien Rule

While a rule like the Gilbert Arenas provision can flatter its namesake, the late Ted Stepien, former owner of the Cavaliers, may have preferred not to go down in history as the reference point for the Ted Stepien rule. Stepien owned the Cavs in the early 1980s, and made a number of trades that left the franchise without first-round picks for several years. As a result, the NBA eventually instituted a rule that prohibited teams from trading out of the first round for consecutive future seasons.

Because the Stepien rule applies only to future draft picks, teams are still permitted to trade their first-rounders each year if they so choose, but they can’t trade out of the first round for back-to-back future drafts.

For instance, since the Nuggets have traded their 2020 first-round pick to Oklahoma City, they aren’t currently permitted to trade their 2021 first-rounder. Following the 2020 draft, the Nuggets would regain the right to trade that 2021 first-round pick, since their ’20 first-rounder will no longer be considered a future pick.

The Stepien rule does allow a team to trade consecutive future first-round picks if the team has acquired a separate first-rounder from another team for either of those years. So if Denver were to trade for another team’s 2020 first-rounder, that would give the Nuggets the flexibility to move their 2021 pick without having to wait until after the 2020 draft.

Teams are permitted to include protection on draft picks. This can create complications related to the Stepien rule, which prevents teams from trading a first-round pick if there’s any chance at all that it will leave a team without a first-rounder for two straight years.

For example, the Jazz have traded a protected 2020 first-round pick to Memphis — it will only convey if it falls in the 8-14 range. That traded 2020 pick is protected all the way through 2024, and as long as there’s still a chance it won’t convey immediately, the Jazz are prevented from unconditionally trading any of their next few first-round picks.

Utah could trade a conditional 2022 first-round pick, but a team acquiring that pick would have to accept that it would be pushed back one year every time the pick Utah has traded to Memphis doesn’t convey.

[RELATED: Traded first round picks for 2020 NBA draft]

Teams will have to take the Stepien rule into account at this season’s trade deadline as they mull including draft picks in deals. Dallas, for instance, is one of the teams most significantly impacted by the rule at the moment. The Mavericks have committed their 2021 and 2023 first-round picks to New York, limiting their ability to move any other first-rounders up until at least 2025. Additionally, since the 2023 pick has protections, that 2025 first-rounder could only be traded conditionally.

Here are a few more rules related to trading draft picks:

  • The “Seven Year Rule” prohibits teams from trading draft picks more than seven years in advance. For instance, during the 2019/20 season, a 2026 draft pick can be traded, but a 2027 pick cannot be dealt.
  • The Seven Year Rule applies to protections on picks as well. If a team wants to trade a lottery-protected 2026 first-rounder at this year’s deadline, it can’t roll those protections over to 2027. For example, when the Rockets sent the Thunder a top-four protected 2026 first-round pick in the Russell Westbrook trade, they agreed that if the pick falls within that protected range, Oklahoma City would instead receive Houston’s ’26 second-round selection — picks in 2027 and beyond were off-limits.
  • A team can add protection to a pick it has acquired as long as there wasn’t already protection on the pick. For instance, the Knicks currently control the Mavericks‘ unprotected 2021 first-round pick. If New York wants to include that selection in a trade, the team could put, say, top-three protection on it.
  • For salary-matching purposes, a traded draft pick counts as $0 until the player signs a contract.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ was used in the creation of this post.

Earlier version of this post were published in 2012, 2018, and 2019 by Luke Adams.

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9 thoughts on “Hoops Rumors Glossary: Ted Stepien Rule

  1. david

    so if i am reading this right, every team can technically trade their 2020 first round pick this year. like the Mavericks even if they owe their 2021 draft pick to another team?

    • kingcong95

      Such a trade couldn’t be announced until draft night and wouldn’t become official until July.

    • gammaraze

      People do a terrible job of explaining things fully, because that’s EXACTLY what they’ve allowed people to wonder every time they make a Ted Stepien Rule post. The rule says you can’t “leave the Member without first-round picks in any two (2) consecutive future NBA Drafts.”

      The question is: When does the 2020 draft lose its “future” designation? If teams are allowed to trade their 1st round pick EVERY year, what does it matter if they trade it in February or 10 minutes before the draft?

      • Luke Adams

        The draft stops being a “future” draft once it actually happens.

        One example: The Jazz traded their 2019 first-rounder and their protected 2020 first-rounder in the Mike Conley deal last summer. This wouldn’t have been allowed if they’d completed the trade at last season’s deadline in February, when the 2019 draft was still a “future” draft. It was allowed because they completed the trade in July, after the 2019 draft had passed.

        It’s debatable how effective the rule is. I think the main goal is to prevent teams from just stacking a single trade offer with their next five first-rounders or something, but even that’s sort of still possible via pick swaps.

    • Luke Adams

      The Mavs can’t trade their 2020 first-rounder before the 2020 draft. But after they’ve made their 2020 pick in June, they could trade that player’s rights even though they’ve already traded their 2021 first-rounder.

  2. david

    yeah thats what i thought…. but in the 3rd paragraph when they talk about the nuggets really threw me off.

  3. Dodgethis

    The rule isn’t to stop teams from trading their first round pick every year. The rule is designed so teams can’t trade away all their future picks. What they want to avoid is a team trading all their picks and then being terrible for a decade with no hope.

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