Knicks to likely pass on Jeremy Lin after acquiring Raymond Felton

"Linsanity" could be close to ending its run in New York – and no one might be more stunned than Jeremy Lin himself.

Jeremy Lin signed a three-year, $25 million offer sheet with the Rockets. (AP)After the New York Knicks reached agreement Saturday on a sign-and-trade deal with the Portland Trail Blazers to acquire point guard Raymond Felton, Lin's future with the Knicks now appears uncertain at best. New York had been widely expected to match the three-year, $25 million offer sheet Lin signed with the Houston Rockets, but now already has three point guards under contract: veteran Jason Kidd, Felton and Argentine guard Pablo Prigioni. One league source said it's now "highly doubtful" the Knicks match Lin's offer sheet.

"He did not see this happening," Peter Diepenbrock, Lin's coach at Palo Alto High School, told Yahoo! Sports. "He sounded surprised."

The Knicks officially have until 11:59 p.m. ET Tuesday to match the Rockets' offer sheet. Sources close to the Rockets and Lin said Saturday night they had yet to be told of the Knicks' decision. But with Kidd recently signing a three-year, $9 million contract and Felton receiving a three-year, $10 million deal, the Knicks already have made a substantial investment at the point guard position. Matching the offer sheet for Lin also would cause New York to incur substantial luxury-tax penalties; the contract is structured to pay Lin about $5 million in each of the first two years and $15 million in the third year – the same season that the Knicks owe Carmelo Anthony $24 million, Amar'e Stoudemire $23 million and Tyson Chandler $14.5 million. Because of a loophole in the league's rules, Lin would count a little more than $8 million each season on the Rockets' salary cap, but the Knicks have to take the full $15 million hit in the third year.

That's a sizeable amount to digest, even for one of the NBA's top revenue-generating teams. Possibly as a result, the Knicks agreed to a sign-and-trade deal with the Trail Blazers that gives them Felton and forward Kurt Thomas in exchange for center Dan Gadzuric, forward Jared Jefferies, a 2016 second-round pick and the draft rights to two international players, sources said.

The Rockets cut Lin one day before the start of last season only to watch him find international stardom with the Knicks. After injuries to other players elevated Lin to the Knicks' starting point guard job, his explosive scoring ability helped New York win seven straight games. From scoring 38 points against the Los Angeles Lakers to making the winning 3-pointer in the closing seconds against the Toronto Raptors, Lin seemed to deliver a bigger moment each night. He averaged 14.6 points and 6.2 assists in 35 games with the Knicks before a knee injury ended his season.

[Also: Phil Jackson reportedly rejected Portland's head coach offer]

Lin's rapid rise quickly became a global story. He twice made the cover of Sports Illustrated, earned praise from President Obama and his jersey became one of the NBA’s hottest sellers. Lin was expected to stay with the Knicks, even after agreeing to the Rockets' offer sheet, and spent the past two weeks working out with Knicks assistant coach Kenny Atkinson, Diepenbrock said.

"He loves the New York fans," Diepenbrock said. "To have the experience that he had for the two months and for that to be over with, that’s quite a shock to the system. I think he really believed the Knicks would match whatever offer he got."

Lin would give the Rockets their first marketable star since Yao Ming retired last year. The Rockets are still having conversations with the Orlando Magic about acquiring All-Star center Dwight Howard, a league source told Yahoo! Sports. Lin wouldn't be in the deal because he can't be traded until Jan. 15 after signing the offer sheet.

Most of Lin's success came under former coach Mike D’Antoni, who resigned March 14. Current Knicks head coach Mike Woodson, who succeeded D'Antoni, hasn't shown the same level of confidence in Lin.

The Rockets' roster is in a state of flux with team officials working to acquire assets and cap space for a possible Howard trade. Houston has also reached agreement with Chicago Bulls restricted free-agent center Omer Asik on a three-year, $25.1 million offer sheet. Point guards Goran Dragic and Kyle Lowry are both gone, seemingly leaving the job to Lin.

"This is a crazy, crazy world," Diepenbrock said. "I can't see him as a Rocket."

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