No, I'm not crazy. Yes, by the end of this post I think you'll agree with me.
Let's start with Darnold's current situation.
For 2021, the Jets will be paying Darnold $4,774,685 in cash; he has a 10M cap hit but the difference is in his prorated signing bonus. They need to decide by May 3 whether they're going to exercise his 5th year option, which is currently slated to cost roughly $25M; it's highly unlikely the Jets will exercise it, as things stand (the salary isn't guaranteed for skill, but it's guaranteed for injury; if they exercise it, Darnold sucks and picks up an injury, they'll be on the hook for the whole amount).
In other words: Darnold has relatively little cash coming in this year (opportunity for the Jets) and a wide range of outcomes (opportunity for both). If the Jets end up starting him this year and he does well, he'll end up earning 25M or more per year on a long term deal. If they start him and he plays poorly, he'll be lucky to get a mid-sized backup QB contract on a 1 year deal, in the 3-5MAPY range. If they trade him, or bring in another QB and keep him as a backup, he's likely looking at something similar.
What might an extension look like?
OK, after this section I'll get into why a deal like this would make sense from the perspective of both parties, but to really understand that, you need to figure out what a deal could reasonably be expected to look like:
How about a 4-year, $84M extension, at 21M per year. For context, that would make Sam the 20th-highest paid QB in the NFL, this year, tied with Teddy Bridgewater. That's probably where he'll stay after all is said and done next year; Rivers, Brisset, and Jimmy G will likely come off that list, while Mayfield, Lamar Jackson and Josh Allen will likely get big-dollar extensions this offseason. Here's the key: while the new money kicks in for the 2022 season, you give Sam a 16M signing bonus and no guaranteed salary beyond that, and convert his current guaranteed roster bonus (roughly 3.5M) to guaranteed 2021 salary. So you have salaries of 17M/yr in 2022, 2023, 2024, 2025, and his cap hit goes up by only 3.2M in 2021. And you agree that his 2022 and 2023 salaries become fully guaranteed if he's on the team by a designated date in 2022 - say the day after the start of the league year.
Why does this work for Sam?
A deal like this might appeal to Darnold and his agent because it locks in a big-money payment right now that Sam may never otherwise get access to; if he signs this deal, starts, and is terrible, he gets 16M in cash for this year and then gets cut before his extension kicks in; if he turns it down and that happens, he'll never see anything like that kind of guaranteed money again. Meanwhile, the downside risk to Darnold on a deal like this is actually pretty minimal. The middle of the QB market right now - the No. 11-20 contracts ranges from 21M (Bridgewater) to 29.5M (Tannehill). Yes, markets inflate, but there's going to be some contraction with the Covid economics and a reasonable positive outcome for Darnold - what a "good year" might look like, meaning a jump to league average or slightly better next year - would probably net him a deal in the 25M/year range. So net-net, his downside is he gives up about 4M per year to lock in a 16M signing bonus right now - and it's a short enough deal that he can cash in again as a relatively young veteran in 4 years. (Of course, if Sam goes out of his mind and plays like an elite QB, he's giving up way more than that. But that's not a realistic probability he or his agent should be counting on). And with the subsequent guarantee, if he does well this year, he ends up with 2 years of fully guaranteed salary; if he doesn't, he's released early in the FA process. Bottom line, the upside (that signing bonus) seems worth the downside risk.
Does that mean this is a structure Sam would leap at, and definitely agree to? Of course not. But it would at least force him to make a decision; it's a reasonable offer he might (maybe should) take.
Why does this work for the Jets?
OK, but why should the Jets want to do this? Because it gives them the most important thing right now: options. Right now, the Jets have 3 or 4 possible futures at QB, depending on how you count them:
(1) Run it back with Sam, see what happens
(2) Trade for Deshaun Watson or Matt Stafford, trade Sam
(3/4) Draft a rookie QB, and either trade Sam or keep him as competition.
There isn't a scenario from those 4 where the Jets aren't meaningfully better off having extended Sam. Obviously, if they run it back with Sam, or keep him to compete with a rookie, the extension helps. If Sam develops, you have him signed long-term at a relative discount, congrats. If he doesn't, you cut him after 2021, and all it cost you was money and the 12.8M dead money hit in 2022. But with a rookie QB on a rookie deal, you can absorb that cap hit.
How about if they trade Sam? If they trade Sam, the extension increases his value to the acquiring team substantially. Now the acquiring team gets Sam for just the 4.7M in 2020 cash, and if Sam pans out for them, they have him on a team-friendly deal with cap hits at 17M/year for four years; if he doesn't, no harm, no foul, they can cut him at no loss. So whether it's after trading for a veteran or drafting a rookie, extending Sam probably brings the Jets back more in value than they'd get for him on his current contract, where the acquiring team will have to sign Sam to a big money deal if all goes well. And the only cost to the Jets is another 11.3M in extra dead cap from trading him (as currently structured, Sam counts 9.8M on the cap. With this deal, he would count 21M if traded - 16M in accelerated signing bonus from the extension, plus the 5M in signing bonus proration from his first deal).
Bottom line, the only thing an extension would cost the Jets is cap space, which they have enough of, and it would put them in a better strategic position moving forward. It's the right move