The LCK has announced that new financial regulations will be introduced, including player salary caps, in the 2024 season.
Ever since 2021, reports have been circulating that LCK teams have been pushing for salary caps to be implemented, despite LCK’s biggest team, T1, standing against it.
However on April 13, in a report by Inven, all ten LCK teams allegedly reached an agreement to implement a salary cap amid wage costs in the league spiraling out of control.
Some of LCK’s biggest orgs like T1 reported an operating loss of over $12.6 million USD according to an SK Telecom 2022 audit. And Gen.G’s CEO Arnold Hur recently expressed concerns over the league’s future if their financial situation wasn’t fixed.
Now as of July 19, LCK has officially announced its new policies on team spending which seek to regulate team salaries to an “appropriate level”.
As a part of the many measures to ensure the #LCK maintains sustainable growth, Sporting Financial Regulations (SFR) will be introduced starting in the 2023 offseason.The SFR seeks to allow the sustainable growth of teams, players and the league by regulating each team’s salary… pic.twitter.com/QCS5T1Ys8B
— LCK (@LCK) July 19, 2023
Named the Sporting Financial Regulations (SFR), it “is a system that sets an upper limit on the total annual salary paid to players by the team, and pays a certain amount when it is exceeded.”
The league explained its choice to make teams pay additional costs if the cap is exceeded, “rather than directly regulating teams that exceed the cap, the LCK established a system to continue investing in players and maintain competitiveness by paying the excess amount and distributing the amount to other teams.”
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As for how the SFR will work, there will be a spending cap and a recommended spending floor.
The spending cap was set with consideration to the earnings of the 10 LCK teams. The cap for each team will be determined from the combined total of the top five highest-paid players on a team, of which the reference point would be recalculated every two years. This means there is no salary cap for individual players.
The recommended spending floor is therefore a minimum amount of annual salary which a team will need to invest in players. It is set at 70% of the revenue currently distributed by the LCK to each team in 2022.
If a team goes above their upper limit, a tax will be applied. This paid tax will then be distributed among the LCK teams that pay player salaries just above the lower limit or below the upper limit.
However, there is a catch for players who have either won five or more LCK splits or have won three or more international competitions like the Mid-Season Invitational and Worlds. Only 50% of their annual salary will be counted towards their team’s total.
Additionally, players who have been with a team for three years or more will receive a 30% discount when calculating their team’s total cap amount.