Qualifying Offer
Definition
The qualifying offer is a competitive balance measure that was implemented as part of the 2012-16 Collective Bargaining Agreement and restructured under the 2017-21 Collective Bargaining Agreement.
In the qualifying offer system, clubs wishing to receive a compensatory Draft pick for the loss of a free agent can make a one-year “qualifying offer,” worth the mean salary of MLB’s 125 highest-paid players, to their impending free agents prior to the onset of free agency if and only if:
1. That player has never received a qualifying offer previously in his career.2. That player spent the entire season in that organization (in-season acquisitions are ineligible).
A player can accept or decline the qualifying offer, during which time he can negotiate with other teams to survey his market value. Should a player decide to accept the qualifying offer, he is signed for the following year at that predetermined rate (i.e., the mean salary of the league’s 125 highest-paid players). If a player rejects the qualifying offer, he is free to further explore the free-agent market. The qualifying offer value for 2026 was set at $22.025 million.
(Note: Teams became subject to the above parameters beginning between the 2017 and 2018 seasons.)
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COMPENSATION FOR LOSING QUALIFIED FREE AGENT
If a team gives a qualifying offer to a player who then signs elsewhere, the club that lost the player is eligible for Draft pick compensation in the next year’s MLB Draft.
• Competitive Balance Tax payors: Receive compensation pick after the fourth round has been completed. The value of the player’s contract doesn’t matter in this case.
• Revenue-sharing recipients: Receive compensation pick between the first round and Competitive Balance Round A if the lost player signs for at least $50 million. If the player signs for less than $50 million, the compensation pick comes after Competitive Balance Round B.
• All other teams: Receive compensation pick after Competitive Balance Round B. The value of the player’s contract doesn’t matter in this case.
(Note: Like standard Draft picks, compensatory picks in a given tier are ordered in accordance with the previous season’s standings. If a team with MLB’s worst record and a team with a .500 record both lose a free agent that signs for more than $50 million, the team with the worse record would receive the higher of the two compensatory picks.)
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PENALTIES FOR SIGNING QUALIFIED FREE AGENT
Any team that signs a player who has rejected a qualifying offer is subject to the loss of one or more Draft picks, though a team’s highest first-round pick is exempt from forfeiture. (Players who are unsigned after the start of the MLB Draft in the year that follows the rejection of their qualifying offer are no longer tied to Draft pick compensation and can be signed without their new club needing to forfeit a Draft pick.)
Three tiers of Draft pick forfeiture – based on the financial status of the signing team – are in place to serve as a penalty for signing a player who rejected a qualifying offer:
• Competitive Balance Tax payors: Lose their second- and fifth-highest selections, as well as $1 million from their international bonus pool for the upcoming signing period. If such a team signs multiple qualified free agents, it will forfeit its third- and sixth-highest picks as well.
• Revenue-sharing recipients: Lose their third-highest selection. If one of these teams signs two qualified free agents, it will also forfeit its fourth-highest pick.
• All other teams: Lose their second-highest selection, as well as $500,000 from their international bonus pool for the upcoming signing period. If one of these teams signs two qualified free agents, it will also forfeit its third-highest pick.
(Note: Each pick in the first 10 rounds of the Draft has an assigned value, and the total for each of a club’s selections equals what it can spend on signing bonuses for players selected in those rounds without incurring a penalty. When a team forfeits a Draft pick, it also surrenders the accompanying bonus pool money associated with that pick, independent from any money forfeited from its international bonus pool per the rules below.)
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TEAM CLASSIFICATIONS FOR 2025-26 OFFSEASON
Here are the preliminary team classifications for the purpose of compensation and penalties associated with qualified free agents during the 2025-26 offseason. (Note: These classifications will not be finalized until payrolls are final on Dec. 2, 2025.)
• Competitive Balance Tax payors: Boston Red Sox, Houston Astros, Los Angeles Dodgers, New York Mets, New York Yankees, Philadelphia Phillies, San Diego Padres, Texas Rangers, Toronto Blue Jays
• Revenue-sharing recipients: Arizona Diamondbacks, Athletics, Baltimore Orioles, Cincinnati Reds, Cleveland Guardians, Colorado Rockies, Detroit Tigers, Kansas City Royals, Miami Marlins, Milwaukee Brewers, Minnesota Twins, Pittsburgh Pirates, Seattle Mariners, St. Louis Cardinals, Tampa Bay Rays
• All other teams: Atlanta Braves, Chicago Cubs, Chicago White Sox, Los Angeles Angels, San Francisco Giants, Washington Nationals