What is a salary cap and why do some leagues use one?
A salary cap is a limit on how much a club may spend on player wages. The purpose is competitive balance: without one, the richest clubs can simply buy the best players indefinitely, and outcomes become predictable.
There are two main forms.
A hard cap cannot be exceeded under any circumstances. The NFL operates one, and it is the main reason the league has such turnover at the top — teams cannot retain every good player they develop.
A soft cap allows exceptions. The NBA permits teams to exceed it in defined situations, notably to re-sign their own players, but charges a luxury tax on the excess, escalating steeply. Spending is possible but expensive.
Caps usually come packaged with other mechanisms: a draft giving the weakest teams first pick of incoming players, a salary floor requiring a minimum spend so owners cannot simply pocket the difference, and revenue sharing between clubs.
European football has historically not used caps, partly because promotion and relegation and open transfer markets make them harder to design, and partly because clubs compete across different national leagues with different rules. Instead it uses Financial Fair Play and successor regulations, which limit spending relative to a club's own revenue rather than to a league-wide figure.
That difference matters: a cap equalises, whereas a revenue-linked rule permits big clubs to spend more, and is designed to prevent insolvency rather than to level competition.
The criticism of caps is that they suppress wages and transfer value from players to owners. The criticism of revenue-linked rules is that they entrench whoever is already large.
Rugby union and Australian football also use caps.