The Denver Nuggets have been facing salary cap issues all offseason. However, while there were expectations that the Nuggets would eventually find a solution to these problems, their passive approach hasn’t been too reassuring. Now, the Nuggets find themselves in even deeper waters after signing former Lakers guard Lonnie Walker IV to a $3.3 million deal.
With Denver officially going over the second apron with Walker’s addition, reports indicate that the franchise’s luxury tax bill will also increase from $68.6 million to $85.1 million. More importantly, all of this is before the Nuggets have agreed on new contract terms with Peyton Watson.
Needless to say, the Nuggets have a complex problem on their hands. But what can they do to resolve it? Sadly, the answer may not be very palatable, especially for the franchise, as the Nuggets may be forced to part with Peyton Watson.
Over the course of the 2025-26 season, Watson strongly asserted himself as a talented young player with considerable upside. With phenomenal two-way abilities, along with averages of 14.6 points, 4.9 rebounds, 2.1 assists, 0.9 steals, and 1.1 blocks per game, the 23-year-old earned the favor of Denver’s front office and ownership. Unfortunately, their financial condition presented enough challenges in retaining him.
Although Denver has shown every inclination to re-sign the forward, talks with his camp have been less than fruitful. Thus, in light of the team’s current payroll, a sign-and-trade deal involving Watson may be one of the first steps to helping Denver get below the second apron.
It is worth noting that as a team above the second apron, the Nuggets cannot receive any salaries in a trade. Hence, if Denver chooses to trade Peyton Watson, they would likely only receive draft compensation for the forward. This would be a major loss for the franchise considering the 23-year-old’s actual value.
While trading Watson would address one problem, it doesn’t necessarily bring them below the second apron. Hence, in a follow-up move, there is speculation that Denver might dump Zeke Nnaji’s $7.4 million contract. This would give them enough space to make another vet minimum signing, bringing their active roster up to 14 players while remaining below the second apron.
Moving Nnaji could be a wise move at this stage. Although the forward appeared in 52 games last season, he averaged only 3.7 points and 2.6 rebounds per game while shooting 47.0% from the field and 25.9% from three-point range.
In theory, his contract value would make him a solid addition in trade talks to match salaries. But given the current circumstances, dumping this contract may give Denver the breathing room it needs to continue building its roster.
Is There A Way For The Nuggets To Retain Watson?
As mentioned above, trading Peyton Watson and Zeke Nnaji may be the only viable move for the Nuggets. While offloading Nnaji certainly makes sense, it is truly difficult to comprehend letting Watson go for virtually nothing in return.
On that note, rumors were indicating that Denver had made players like Aaron Gordon, Christian Braun, and Cam Johnson available in trade talks. Given that each of these players is earning above $20 million each season, with Gordon coming in at a whopping $31.9 million this season, parting with either of these contracts would give the Nuggets the cap flexibility they need to re-sign Watson.
Although all of these moves would have allowed the Nuggets to shed salary while they were still below the second apron, any attempt to pull the trigger now would incur heavier losses. Hence, trading Watson may truly be the only alternative.
Reports have indicated that Watson is currently receiving trade interest from the Clippers and the Cavaliers, with the Hawks also being floated as suitors for the 23-year-old. But by virtue of being above the second apron at the moment, the Denver Nuggets cannot aggregate players in a trade. Therefore, any deal involving Watson and Nnaji would have to involve a third party to absorb either one of these contracts.
Had the Nuggets agreed to a deal earlier, Denver may have been able to structure its roster differently. Now, the process appears to be significantly more complicated.
It is also worth noting that Watson could still accept his $6.5 million qualifying offer to play out the season with the Nuggets. Along with the serious ramifications this could have on Denver’s payroll, it would also reduce the value the Nuggets would receive in return for Watson if they trade him. Overall, this is a very unfavorable situation for the Nuggets.
