The LA Dodgers found a way to exploit a loophole in the current CBA agreement, which allows MLB teams to defer payments as much as they want. The franchise owes over a billion in terms of deferred salary.
A major chunk of that pie belongs to three-time MVP Shohei Ohtani, who's supposed to get paid around $68 million each year from 2034-43, as a part of his 10-year, $700 million deal signed in 2023.
MLB Commissioner Rob Manfred addressed the situation during an interview with Chris O'Gorman. Manfred said that they have strengthened the rules from to fund deferred compensation if a team runs into financial difficulties.
"Yeah, deferrals, but you know, deferrals at some point can become problematic," Manfred said (24:38 onwards). "Historically, we did have one franchise, Arizona, that got itself into financial difficulties as a result of excessive deferrals.
"We've strengthened our rules in terms of the funding of deferred compensation in order to avoid that kind of problem. But, you know, look, obviously the bigger the numbers get, the bigger the concern."
MLB has set up escrow accounts of teams so that players still get paid in the wake of financial crisis
To safeguard players' salaries in the event a franchise declares bankruptcy or gets into financial trouble, the escrow accounts of teams can be used to settle player compensations.
"That assures that the money is going to be there for the player to get paid. It doesn't solve all of the ownership side issues in terms of, you know, if you go to sell the club, you're selling a club with a big mortgage on its future," Manfred said.
MLB escrow accounts ensure stability and accountability, particularly in areas like player salaries, revenue sharing and luxury tax compliance. When teams exceed the Competitive Balance Tax threshold, they are required to deposit a percentage of their payroll into an escrow account to cover penalties or obligations.
Additionally, during certain periods — like the COVID-19 pandemic or as part of collective bargaining agreements — a portion of player salaries may be withheld in escrow to protect against revenue shortfalls and ensure the league can meet its financial commitments.
The use and structure of escrow accounts are typically defined within the CBA negotiated between MLB and the MLB Players Association. The ongoing CBA expires in December 2026, following which a change or a clause to avoid this loophole could be added.