Potential Karlsson Trade Could Make Salary Cap History

If the San Jose Sharks trade Erik Karlsson this summer, it will probably be a trade unlike any other in NHL history.

It’s that challenging of a deal, because of his contract.

Signed in Jun. 2019, Karlsson’s eight-year, $92 million pact made him the highest-paid defenseman in the NHL. Indicative of how massive it still is, and of course, a global pandemic has something to do with that too, four years later, Karlsson is still the highest-paid defenseman in the league.

To move a contract with an $11.5 million AAV is no small feat, especially since the salary cap hasn’t risen significantly since 2019, in large part because of the pandemic. Since the 2019-20 season, the cap has only gone up $2 million, up to $83.5 million.

It’s hard to justify spending 13.8 percent of your salary cap on one player, especially a 33-year-old like Karlsson who had a spectacular 2022-23 campaign but hasn’t been consistent or healthy otherwise since his big payday.

For what it’s worth, it is projected that the cap will go up dramatically for the 2024-25 and 2025-26 seasons.

The San Jose Sharks will likely have to retain a lot of Karlsson’s remaining contract to make a trade happen.

“I chatted with sources from a couple of front offices who felt Karlsson had to become something in the range of an $8 million to $8.5 million player to make it all work,” Pierre LeBrun wrote today.

That could put the Sharks on the hook for $3-$3.5 million AAV in each of the next four years.

It’s also possible for San Jose to retain more, up to 50 percent of Karlsson’s contract. That would be $5.75 million a year, to pay someone to play for another team, until 2026-27.

Of course, that’s something that Sharks GM Mike Grier (or owner Hasso Plattner) might be loath to do.

But it seems inevitable that the San Jose Sharks will have to retain on Karlsson’s remaining contract, the only question is how much?

Here’s where history might be made: Up to now, the longest period of a time that a team has retained on a contract appears to be the Toronto Maple Leafs in Jul. 2015, when they traded Phil Kessel, seven years left on his deal, to the Pittsburgh Penguins.

The Maple Leafs were responsible for just $1.2 million a season for the last seven years of the winger’s contract.

Seven years is obviously the exception, but even retaining on four or more years is unusual.

Per Puckpedia, here’s a recent list of retainments of more than a year since 2019:

Since 2019, only trade retentions of more than 1 season:

Burns $2.64M * 3 years
Carter $2.64M * 1 + partial year
Murray $1.56M * 2
Backes $1.5M * 1 + partial year
Panik $1.38M * 2
Ekman-Larsson $990K * 6
Maatta $750K * 2
Lucic $750K * 4https://t.co/nM0EApQk5I

— PuckPedia (@PuckPedia) February 13, 2023

This is of 96 retentions. We can also add Ivan Provorov to this tweet, as the Los Angeles Kings are retaining $2.025 million of his contract in each of the next two seasons.

But there are only two retentions of four or more years, Oliver Ekman-Larsson and Milan Lucic, both under a $1 million AAV.

So here’s the “History Will Be Made” portion of a prospective Karlsson deal.

Let’s say San Jose retains $3 million (or more) for each of the next four seasons in a trade.

As we’ve seen, it’s unusual for a team to retain more than two years of a contract. And not for that kind of money.

There have been just 15 examples, per CapFriendly, since the introduction of salary retainment during 2013, of a team retaining $3 million or more, but they’ve all been on expiring contracts. So while these teams got tagged with the cap hit, they paid pro-rated salaries.

But that’s the kind of ignominious history that the rebuilding San Jose Sharks will be making: They appear set to pay a record amount, at least in the salary cap era, for their best player to not play for them.

And this is all just on the San Jose Sharks’ side.

There aren’t a lot of teams with aspirations of contention that can roll the dice on a 33-year-old player with an $8-8.5 million cap hit.

We’ll get to a few of those teams shortly.