Despite the current standoff between Peyton Watson and the Denver Nuggets, the team likely already knows what the outcome should be: an extension for the rising star.
Of course, it's understandable if the Nuggets are apprehensive about shelling out an annual salary north of $20 million to keep Watson in the fold. Such a move would result in a hefty tax bill.
On the other hand, there could be a workaround to that potential problem — one that the Nuggets are all too familiar with. They can always make a salary-dump trade to get under the punitive luxury tax, similar to when they shipped Michael Porter Jr. last summer and Hunter Tyson at the trade deadline, when things go south during the regular season.
Things will be significantly different, though
As many Nuggets fans remember, the franchise sent Porter Jr. to the Brooklyn Nets for Cameron Johnson around this time last year. The jury's out on which of the forwards is the better player. But it's worth noting that Denver had to attach an unprotected first-round pick, indicating that MPJ's contract (and impending contract extension) was deemed less team-friendly.
The organization then completed another deal with the Nets, sending them Tyson and exchanging second-round picks.
The pair of moves allowed the Nuggets to duck the luxury tax. It saved them around $20 million.
However, because they were over the luxury tax line in the previous three years, they would still be considered a repeater if they go over the threshold by the end of the 2026-27 campaign. The difference is that the bill could exceed $170 million if Watson signs an extension that would pay him $25 million this year.
Should the Nuggets just bite the bullet and give Watson what the market believes he is worth? If the objective is to provide Nikola Jokic with the best possible supporting cast, bringing the swingman back is a no-brainer.
And if things fall apart, the front office already has experience in the salary-dumping department. It would probably be able to find takers for the likes of Aaron Gordon and Johnson. The ideal trade candidate would be Christian Braun, but his value in the market is volatile at this point.
How do the Nuggets view P-Wat
A dangerous route for Denver is to hold its ground and start the 2026-27 regular season with Watson playing on his qualifying offer (valued at $6.5 million and with a cap hold of $13.1 million).
That would certainly help the team financially. And it can realistically happen. None of the reported suitors has enough cap space to pry Watson away from the Mile High City. And Denver could match any offer sheet anyway. If they hope to acquire him via sign-and-trade, the Nuggets would have to agree to the return package.
Evidently, the Nuggets have the leverage. But if they view P-Wat as a key building block for the future, they should lock him to a long-term deal as early as this offseason and prevent the possibility of him leaving next summer as an unrestricted free agent.
As for the financial crunch that could stem from it, the Nuggets can just deal with it later on.
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