What Is The Rule 5 (or Rule V) Draft?

It's a question that's dogged Major League Baseball for years, because it's something that seemingly only 10% of baseball fans are even aware of, and only 1% actually understand. I should know, I was part of the 90% for a long time, and part of the 99% until just recently. But the Rule 5 Draft (sometimes called the Rule V Draft) is part of the game play in MLB Front Office Manager, so as I started to get more and more into my Nationals team, I did more and more research into the various quirks and rules of baseball.

The Rule 5 draft has existed 1959, though it's operated under the current rules (with minor tweaks) since 1965. It was designed in order to prevent teams from stockpiling talent in the minor leagues.

How Does It Work?

The Rule 5 draft takes place annually at baseball's winter meetings. The draft order is the same as in the amateur (or Rule 4) draft; that is, in reverse order of record from the previous season. Older players who aren't on a team's 40-man roster are available for other teams to draft at a price of $50,000, paid to the player's current team. These players have to be kept on the major league roster for the duration of the following season, or be offered back to their original team for half of the original price (so $25,000).

Eligibility Rules

Not all minor league players are eligible for the Rule 5 draft. First, players on a team's 40-man roster are not selectable in the draft. The 40-man roster includes a team's 25 active players, as well as 15 players designated by the organization.

Additionally, younger players are not eligible for the Rule 5 draft. Players who were 19 years or older when they signed with the team are protected from the Rule 5 draft for four years, whereas players who signed before age 19 are protected for five years.

Who Benefits?

There are two main beneficiaries of the Rule 5 draft. First, the small market team. These teams can't afford to sign premium free agents to fill out their starting lineups or have $5 million utility bench players, but they can acquire solid minor leaguers at league-minimum salaries to help with depth. The other beneficiaries are the minor league players themselves. The sooner a minor league player gets to the major leagues, the sooner he becomes eligible for arbitration, and eventually for free agency. The redistribution of talent helps to expedite that process.

But Does Anyone Ever Actually Work Out?

It's a fair question. If a player is left unprotected after 4+ years in the minor leagues, is there much of a chance that he's actually going to pan out? Usually not. There are between ten and thirty players drafted regularly in the Rule 5 draft, and most of them end up being no better than role players. Of the 21 players taken in the 2008 Rule 5 draft, 13 of them have been offered back to their original teams.

But, as I'm sure you know, there are always a few exceptions, or it wouldn't be worth me writing about. Fantasy owners of today may be surprised to find out that several relevant players were Rule 5 acquisitions, such as Joakim Soria, Shane Victorino, Josh Hamilton, and Dan Uggla. For those of you who were baseball fans in the 1980s and 1990s, you may be surprised to discover that John Wetteland, Kelly Gruber, George Bell, and Bobby Bonilla were all Rule 5-ers. Additionally, superstar pitcher Johan Santana was a Rule 5 acquisition by the Twins, who yanked him from the Astros (oops).

But unquestionably, the most famous Rule 5 draftee was outfielder Roberto Clemente. He was signed by the Brooklyn Dodgers, then left unprotected in the 1954 Rule 5 draft. A mere 3,000 hits, 12 All-Star Game appearances, 12 Gold Gloves, and 1966 MVP trophy later, he was elected to the Hall of Fame. Not too bad for a Rule 5-er.

Baseball has its parity issues. Payroll discrepancies are considerable, and the differences in payroll generally correlate with performance. But between the Rule 5 draft, compensation draft picks, and the amateur draft, there are plenty of opportunities for a small-market team to be successful. I'm sure you've already heard me say this a hundred times, but read Moneyball. It'll remind you that, while money talks, it can't sing and dance, and it can't walk.