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How MLS allocation money and the allocation order work

We'll do our best to explain some of the more complicated parts of MLS fandom.

Mike Ehrmann

Major League Soccer, as you may have heard, does not exactly work like every other soccer league around the world. While we won't bother explaining every little nuance, now that the World Cup is here you'll probably be hearing lots of rumors about various players heading to various teams. Some of those players will be from the United States national team. Those players generally enter the league through something called the "allocation order." You'll also hear about teams using a mysterious currency called "allocation money." It can all be a little confusing, so we've created this FAQ.

What is allocation money?

To put it in the simplest terms, it's a mechanism teams can use to buy down the salary cap number of a player. It can only be used once, just like real money, and can only be applied to players who are new to the league or signing new contracts. Think of it as the MLS equivalent of bitcoin: a currency whose value is determined by what you buy with it, but which makes for a really convenient punchline.

How does a team obtain more allocation money?

This is where it starts to get a little confusing. There are several mechanisms that allow teams to acquire this magical substance.

The mechanism you'll most hear about is from a trade with another team. A team can't trade less than $75,000 in allocation money, but you'll never get official confirmation of exact amounts because while the league acknowledges its existence, it does not like anyone to know how much of it is in circulation (fun, right?).

The other you'll most hear about is if a team transfers a player out of the league. Without bogging this down with details, just understand that a portion of the total transfer fee up to $650,000 can be given to teams in the form of allocation money. Anything the team gets above and beyond that figure is supposed to be spent elsewhere within the club, but can't be used to buy down salary cap numbers.

Teams can also acquire allocation money by qualifying for CONCACAF Champions League, missing the playoffs (yes, that seems counterintuitive, but this is a league built on preserving parity) or being an expansion team.

Can a team buy players without having enough allocation money to cover the transfer?

Sure, but it'll need to use good old-fashioned money to do it and that transfer fee will count against the player's salary cap figure. So, if a team spends $1 million on a transfer fee and signs that player to a $100,000 per year contract for three years, the actual salary cap figure would be more like $433,000.

What is the allocation order?

This is a list of teams that puts them in order of who has "dibs" on United States national team players or returning MLS players. Here's the current list. There are ways a player can skip this, though, which we can get into later.

No, I'd like to get into it now.

Geez, OK. For a long time, this was not really tested, but when Clint Dempsey returned to MLS last year and ended up with the Seattle Sounders, a lot of people noticed the Sounders weren't sitting atop the allocation ranking and didn't have to make a trade to get there. So, MLS issued a clarification of the rule that basically said certain high-profile players don't need to go through allocation.

Just like that, eh?

Yeah, pretty much.

So is MLS just making up rules as it goes along?

It definitely feels that way at times -- which hardly helps the league's reputation -- and MLS commissioner Don Garber has even said that a growing, ambitious league like MLS has to allow itself to be flexible, which kinda confirmed the "make it up" accusation. But there's also some value in that MLS is smart enough to know that players like Michael Bradley and Dempsey won't come back to MLS and simply play for whichever team happens to be at the top of the allocation order. If MLS wants to be able to attract these kinds of players, it needs to allow them to have some say in where they play.

What's the point of the allocation order, then?

At its core, MLS is a league built on parity. Unlike virtually every other league in the world, a team's payroll has very little correlation with how it performs. Mechanisms like the allocation order are one reason, as it ensures that even teams playing in an old stadium, in front of small crowds and nowhere near a proper beach can still have a shot at bringing in good players or at least being in position to make a trade.

How is the allocation order determined?

After MLS Cup, the order is reset based on the previous season's standings. But it gets jumbled up by trades and teams skipping their turns.

Teams can trade their spots in the allocation order?

Yeah, think of it like a draft, but instead of banking on a highly touted freshman declaring for the draft, you're banking on MLS to convince Alejandro Bedoya or Mix Diskerud to come home.

Anything else I should know?

There's not really any concrete way of determining when a player will go through allocation and when he won't. Bradley and Dempsey didn't because the league considered them to be such important players that they were exempt from these rules, and contributed to their transfer fees. So far, the rule has been that players don't have to go through allocation when the league is paying for them to come over, but they do when no league funds are involved. What would happen if someone like Tim Howard attempted to join MLS on a free transfer is anyone's guess.

Also, because MLS technically runs everything and allows people to buy operating rights to each team, unlike European clubs, it can veto deals, which it almost did when the Philadelphia Union agreed to pay (but not really) USMNT midfielder Maurice Edu $1.2 million after moving to the top of the allocation order to get him. Ultimately, MLS let the deal go through because no league funds were being used on him. In Edu's situation, the league was stuck between a rock and a hard place; nixing the deal would have been horrible PR and caused a minor riot among the league's "smaller clubs," but allowing the Union to sign a barely all-star level player for 400 percent more than Kyle Beckerman's salary is really going to screw up this winter's CBA negotiations.