The NBA’s 3-2-1 lottery system is here. How will it impact future drafts?

The NBA board of governors voted decisively 29-1 to approve the new anti-tanking lottery system called “the 3-2-1 Lottery.” Starting in the 2027 draft, the lottery will expand from 14 to 16 teams and flatten the odds.

In summary, this is what lottery reform includes:

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• All 16 teams will be drawn, rather than just the top four teams as it’s been since 2019

• Teams can’t receive the No. 1 pick in two consecutive years or a top-five pick in three consecutive years

• Teams can’t protect picks top-12 through top-15 in trades

• Teams that finish with one of the three worst records can’t receive a pick lower than 12th

• The first 16 picks of the second round will be inverse of the lottery order

• This lottery system will sunset after the 2029 draft and a vote will be required to continue it or transition to a new system

• The NBA will have an added ability to reduce teams’ lottery odds, modify teams’ draft positions and impose significant fines

That’s a lot to ingest. Let’s go through it one by one with things I’ve heard about these changes in conversations with sources around the NBA:

Lottery odds

Here is how lottery balls will be distributed in tiers with the odds at the top pick:

The two losers of the 7-seed vs. 8-seed matchup will receive one ball (2.7% odds). The four 9-seed vs. 10-seed teams will each receive two balls (5.4% odds). Most interestingly, the three worst records in the league will enter what the NBA is calling “draft relegation” and lose one of their lottery balls. Those teams will have lower odds (5.4%) than the seven other teams that miss the playoffs and play-in (8.1%).

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Here are how those odds look by pick:

All 16 picks will be selected in the lottery, which will increase randomness. The NBA hopes this change will deter teams from bottoming out. But in the event that happens, the draft relegation mechanism is being put in place to deter teams from racing to the bottom and forcing them to try to win their way out of the bottom in order to improve their odds.

Draft relegation

If the relegation zone were in place this year, the Wizards, Pacers, and Nets would have been fighting like hell to get out of the top three. The Jazz, Kings, and Grizzlies all would have been trying hard to avoid it. For the league’s worst teams, winning would mean the same thing it’s always meant to fans of every other team: it would be good.

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There are a few exceptions. For example, let’s pretend it’s late March. Team A has the third-worst record in the NBA, and Team B has the fourth-worst record. Team A previously traded away their own first-round pick, but owns Team B’s first-round pick unprotected. Team A would be incentivized to stay in the draft relegation zone to keep their own first-round draft pick odds low, which would also help keep Team B out of the draft relegation zone.

Considering 40-plus unprotected first-round draft picks have already been traded, there is a possibility that a scenario like it or similar does arise in the coming years.

The play-in loophole

The best place to be in the 3-2-1 Lottery is clearly out of the play-in while avoiding the bottom three. Here is how odds will be distributed by range:

There is a cliff between each tier. If you’re a 9th or 10th seed, you might rather be one of the seven non play-in teams for greater odds: 24% at the top three instead of 16%.

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If you’re the 7th or 8th seed, you might rather be in the 9th or 10th slot for double the odds: 16% for the top three instead of 8%.

If you’re the 5th or 6th seed, you might rather fall into the play-in since you’d actually end up receiving some odds instead of none at all.

The latter step is what seems to concern teams around the league the most. The winners of those play-in games get the 7th seed and a zero percent chance in the lottery. The loser gets a chance to still make the playoffs and a 2.7% chance at the top pick, an 8% chance at the top three, a 15% chance at the top five, a 35% chance at the top 10, and a 100% chance at the top 16. Those are pretty good odds! So much so that it could be a significantly better outcome to end up as the 8th seed as a result of losing the 7th versus 8th play-in game, rather than winning that game and grabbing the 7th seed with no lottery odds.

On the bottom side of the play-in: Would a team that is the 11th seed, a few games back from the 10th seed, really want to move up a spot? It would mean 8% worse odds for the top three, 11% worse odds for the top five, and 14% worse odds for the top 10? The NBA may not have created a race to the bottom, but they may have created a race to the middle that can still involve teams trying to lose.

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Changes to the second round

Draft lottery reform will reverse the order of the 1 to 16 teams at the start of the second round. The team that finishes with the 16th pick in the first round would receive the first pick in the second round, or the 31st pick in the total draft. So even if a team ends up last in the lottery, they’ll be first in the second round.

Additionally, the remaining 14 picks in the second round will be in inverse order of record.

So, would a team rather have the 16th and 31st pick or the 17th and 47th pick? The answer to that question is clearly quite obvious.

There’s a chance that the 3-2-1 lottery system will kill the incentive to get into the play-in, given the stronger odds for missing it. But the odds differential between each tier is narrow enough that the league hopes that no front office is going to instruct its coach to start dropping games in March in pursuit of it.

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And plus, the NBA has more power to punish teams that are suspected of tanking.

Punishment

The NBA now has expanded disciplinary authority with the ability to reduce a team’s lottery odds, move its pick outright, impose significant fines up to $10 million, or suspend team officials.

A franchise visibly losing its way into the play-in, or visibly losing its way out of the play-in, is the exact scenario the league has in mind. The threat is the deterrent.

We’ll see though. Teams with the intentions of tanking games will always find a way. There is so much grey area.

Just look at what happened earlier this year: In April, the Kings had a one-point lead with 3:15 left on the clock when head coach Doug Christie ordered an intentional foul on Seth Curry — an 86% career shooter from the line — despite there being far worse shooters on the floor. The NBA investigated this as a choice to tank, but found out that it was simply a strategic blunder since he overlooked the fact that Sacramento was already in the penalty. Christie claims he wanted to use a timeout before he automatically lost it when the clock hit three minutes.

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Maybe that’s true. Maybe Christie is just a bad coach. Or maybe Christie is a good coach who made a bad mistake. It happens. But how is the NBA supposed to determine what is and isn’t tanking? How can the league say whether a key player sitting out of games is really due to genuine concern of re-injury or due to an objective to intentionally lose games? Teams are going to push right up against that line, which will test Adam Silver’s judgement. Inevitably, we’ll find out if he’s going to punish teams and to what severity.

The top-pick streak rules

No team will be allowed to win the top pick in back-to-back years, and no team will be allowed to win three consecutive top-five picks.

League sources say that multiple teams expressed to the NBA how they want to prevent another situation like San Antonio received between 2023 and 2025. The Spurs drafted Victor Wembanyama first in 2023 and Stephon Castle fourth in 2024, and Dylan Harper second in 2025. Under this rule, San Antonio would not have been allowed to select Harper second in 2025. If their pick had been drawn, it would automatically be moved to the next eligible slot, sixth in this case. Some league sources have referred to the top-five streak rule as “the Spurs rule.”

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The first-pick streak is retroactive to the 2026 draft, meaning the Wizards can’t select first again in 2027. League sources say this choice was made because there would be a “degree of anger” if tanking goes unpunished given the severity of tanking in recent years. Teams want those penalties in place immediately.

But skeptics around the league point to the fact that the pick streak rules don’t actually rule out the possibility of teams picking in those slots in consecutive years. How’s that? Streaks will be triggered by the original team, not the team holding the pick. So Washington’s own pick can’t end up first in 2027. But the Wizards could trade for another first, and that team’s pick could still land first.

The lone vote against reform

There is a controversy involving the one team that voted against lottery reform. The top-five pick rule will date back to 2025. The Utah Jazz picked fifth in 2025 and second in 2026. Under the new rule, they can’t land in the top five in 2027. But the Jazz traded that pick to the Memphis Grizzlies in February for Jaren Jackson Jr., which means Memphis won’t be able to receive it.

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Last week, I broke the news of this quirk in the lottery system here on Yahoo Sports and argued about how unfair it is to Memphis. The Grizzlies traded a franchise player to a conference rival and that 2027 pick was the best draft asset in the deal. Then three months later, the league retroactively and arbitrarily slapped a top-five protection on it. It is easy to understand why any Grizzlies fan would be outraged, and why Memphis would vote against reform given this decision directly hurts them.

Forty Eight Minutes columnist Chris Crouse conducted a straw poll of 12 NBA evaluators, who heavily project Utah to make at least the play-in tournament since the Jazz have zero incentive to tank a pick they no longer own. Crouse argues that the expected value of that pick for Memphis is actually higher than it was under the prior rules. From a strictly probabilistic perspective, the Jazz are likely to be competitive so that newly implemented restrictions may never trigger. But the real, undeniable damage to Memphis is that the pick’s premium upside was erased.

For a Grizzlies front office that completed the Jackson trade under a completely different regulatory framework, the league’s retroactive decision sets a precedent for future asset valuation. Some front office executives around the league have expressed concern to me over trading any picks after 2029, given the uncertainty surrounding how the value of those picks could change seemingly overnight.

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As a reminder, the NBA installed a sunset provision into lottery reform. After three years of this system, the league will vote on whether to continue it, revise or, or install something completely new. That is why some teams might choose to sit on their picks in the years 2030 and beyond until there’s clarity on a permanent system.

Where is the draft going?

The one concept the league has taken the most liking to is a “draft credit” system. Variations of it have been proposed by multiple front offices, per league sources. And while the exact mechanics differ from pitch to pitch, the underlying philosophy remains the same: transforming the draft from a game of probability into a strategic, market-based economy.

At its core, a credit system would involve detaching a team’s regular-season record from its draft position. Teams would instead use league-allocated currency (credits) to bid on draft slots. This would fundamentally offer the way team-building works in the NBA. Teams could hoard credits over multiple years to stockpile value for a generational prospect. Or they could choose to spend aggressively to secure multiple first-round picks for immediate depth.

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A draft credit system would empower front offices to dictate how they build rather than being at the mercy of lottery variance. These credits would also inject a liquid currency into the NBA trade market. Instead of teams haggling over pick protections and pick swaps, teams could simply attach a specific amount of draft capital to sweeten a deal.

Silver has openly called himself an “incrementalist” when it comes to rule changes, and there is a widespread belief in front offices that the league could ultimately pivot to a draft credit model when the 3-2-1 system sunsets after 2029. Starting next season, we’ll begin to find out if it’s less of a destination and more of a detour.