How Gerrit Cole's contract move may significantly impact Yankees' Juan Soto pursuit

Gerrit Cole reportedly opted out of his contract with the New York Yankees on Saturday. The Yankees can void the opt-out by adding an extra year and $36 million onto the four years and $144 million Cole's contract already has remaining, per Kiley McDaniel of ESPN. Regardless of whether or not the Yankees decide to void the opt-out, Cole's decision could have a big impact on New York's pursuit of Juan Soto in MLB free agency . The Yankees have until Monday at 5 PM EST to make a final decision on Cole's contract, per Jeff Passan of ESPN.

Soto, who played well in his first season with the Yankees, is going to be the most popular free agent this offseason. At just 26 years old, Soto is already among the best hitters in baseball. He offers elite plate discipline to go along with power and contact ability.

The Yankees are surely interested in re-signing Soto . However, New York's payroll is among the highest in baseball, even with some players set to enter free agency. The Yankees are still paying stars such as Aaron Judge and Giancarlo Stanton lucrative amounts of money. Players like Carlos Rodon, Marcus Stroman, and DJ LeMahieu are all going to make $15 million or more in 2025.

So how exactly does Cole's decision potentially impact the Yankees?

If Yankees void Gerrit Cole 's contract opt-out...

The Yankees had the second highest payroll to begin the 2024 season. New York finished third for the luxury tax with their payroll, trailing only the New York Mets and Los Angeles Dodgers. The 2024 tax threshold was right around $237 million, and the Yankees had more than $300 million in their payroll.

MLB does not feature a salary cap. The Yankees can technically add the extra money and year onto Cole's contract and still pursue Soto. However, it will cost them in the luxury tax. Any team that surpasses the competitive balance tax threshold can receive increasing tax rates , per MLB.com. The amount of consecutive times a team has surpassed the threshold factors into the tax rate.

The Yankees would love to not have to worry about it, but the tax threshold will be something to consider given their high payroll in 2024. Surpassing the threshold again in 2025 will lead to increasing tax rates. Adding another $36 million for Cole to go along with a potential Soto pursuit would be expensive to say the least.

If New York does not void Cole's contract opt-out...

Will the Yankees void the opt-out? Probably, as Cole is arguably the best pitcher in baseball. New York will not want to risk losing Cole in free agency. In the event that the Yankees do not void the opt-out, though, will the team benefit financially?

Well, the Yankees would still probably try to re-sign him in free agency. They would attempt to agree to terms on a new contract, and the deal could be even more lucrative than what the Yankees owe him right now. This would certainly factor into their plans for a Soto pursuit.

Negotiating extremely lucrative contracts with two of the best players in all of MLB would be difficult. The Yankees may even shift their focus toward Soto since he is only 26 years old, while Cole is 34.

Again, the Yankees will probably void Cole's opt-out but nothing has been made official as of this story's writing.