If Dru Smith returns to the Heat, it won’t be on a two-way contract. Here’s why
While the Miami Heat’s roster for next season is nearly full, there’s uncertainty surrounding one of the Heat’s two-way contract spots.
With the Heat already filling two of its three two-way contract slots by signing center Vlad Goldin and forward Myron Gardner to such deals, the thinking was that the third and final two-way contract would be used to bring back guard Dru Smith.
The problem is that Smith is no longer eligible to sign a two-way contract with Miami because of an NBA rule, according to league sources.
While Smith is eligible to sign a two-way contract with any other team in the league because he has fewer than four years of NBA experience, he’s not eligible to sign another two-way deal with the Heat because he has already been on a two-way contract with Miami during three different salary cap years. According to the latest collective-bargaining agreement, “no team may sign or convert a player to a two-way contract, or acquire a two-way contract by means of assignment, if, as a result, the player would or could be under a two-way contract for any part of more than three (3) salary cap years with the same NBA team.”
Smith signed two separate two-way contracts with the Heat during the 2022-23 salary cap year, signed a two-way deal with the Heat on July 1, 2023 before being converted to a standard contract on Oct. 21, 2023 during the 2023-24 salary cap year, and also spent last season on a two-way deal with the Heat during the 2024-25 salary cap year.
Two-way contracts, which pay half the NBA rookie minimum and do not count toward the salary cap or luxury tax, allow for players to be on their NBA team’s active list for as many as 50 regular-season games with other game action having to come in the G League. Two-way deals can be swapped at any time and do not come with playoff eligibility.
Even while on a two-way contract, Smith made himself an important part of the Heat’s bench rotation last season before suffering a non-contract Achilles injury in late December.
Smith logged double-digit minutes in eight straight games before the injury, establishing himself as a reliable and solid offensive option while also turning into a standout point-of-attack perimeter defender. In addition, he played the entire fourth quarter in five of the seven games leading up to his injury.
Smith, 27, averaged 6.2 points, 2.6 rebounds, 1.6 assists and 1.5 steals per appearance while shooting 50.8 percent from the field and 53.3 percent from three-point range in 14 games (one start) for the Heat last season before being sidelined with a season-ending Achilles injury.
Smith has been a part of the Heat’s developmental program since he went undrafted out of Missouri in 2021. He has spent at least part of his first three NBA seasons with the Heat.
“The way that this organization has taken care of me and things like that, I can never thank them enough,” Smith said in February of the Heat’s commitment to him over the last four years. “I’m just really appreciative to be here and be a part of this organization. Hopefully things will progress in the right way and we’ll see how things shake out.”
Even though Smith is not eligible to sign another two-way deal with the Heat, Miami does have room to bring him back on a standard contract. With 14 players currently signed to standard contracts, the Heat has one open roster spot since 15 players on standard contracts is the regular-season limit.
The issue with committing a standard contract — with guaranteed money — to Smith is it would push the Heat further into luxury tax territory. The Heat is currently about $1.3 million above the luxury-tax threshold and signing Smith to a standard minimum contract would add about $2.3 million to bring the Heat around $3.6 million above the luxury tax line.
After finishing as a luxury tax team in each of the last two seasons, the Heat intends to escape the luxury tax for this upcoming season in order to avoid the onerous repeater tax that’s triggered when a team crosses the luxury tax threshold in four straight seasons or four times during a five-season period. The Heat has until the end of the upcoming regular season to dip below the tax, as luxury tax bills are determined based on a team’s salary situation at the end of each regular season.
Smith remains a restricted free agent, which allows the Heat to match outside offers in free agency to retain him. He has continued to rehab from his Achilles injury with the Heat this offseason.
The Heat’s preseason roster currently includes 16 players signed to contracts (including two-way contracts and Exhibit 10 deals).
The 14 players signed by the Heat to standard contracts for next season are Bam Adebayo, Tyler Herro, Andrew Wiggins, Terry Rozier, Norman Powell, Davion Mitchell, Simone Fontecchio, Haywood Highsmith, Nikola Jovic, Kel’el Ware, Jaime Jaquez Jr., Kasparas Jakucionis, Pelle Larsson and Keshad Johnson.
The two two-way contract players are Gardner and Goldin, with the third two-way slot open to sign another developmental prospect.
The Heat currently doesn’t have any players signed to an Exhibit 10 deal, which is essentially an invite to training camp. But the Heat’s plan is to eventually sign guard Gabe Madsen, a skilled three-point shooter who went undrafted this year out of Utah, to an Exhibit 10 contract to make him the 17th player on its preseason roster.
While 18 players (15 on standard contracts and three on two-way contracts) is the regular-season limit, NBA teams are allowed to carry up to 21 players during the offseason and preseason (including up to three two-way contract players).
The Heat is scheduled to hold its annual media day on Sept. 29 before opening training camp on Sept. 30 to kick off the 2025-26 season.
