Butler is seen as an ideal fit for Houston both defensively and offensively, according to Smith.
As it stands, the Rockets are well over the cap and cannot simply sign Butler to a max contract. The 29-year-old wing is expected to decline his $19.8-million player option with the Philadelphia 76ers in order to land a max deal in free agency.
In order to add the eight-year veteran, the Rockets would likely need to trade away some of their more expensive contracts while taking on little salary. Eric Gordon, Clint Capela, James Harden, and Chris Paul are the only players on Houston's roster making over $10 million next season, according to Spotrac; Paul and Harden will earn $38.5 and 38.1 million, respectively.
It's unclear if Butler's link to the Rockets is related to the saga surrounding Paul. It was reported Tuesday that the All-Star point guard asked to be traded after a breakdown in his relationship with Harden, but Paul and general manager Daryl Morey both publicly denied the claim.
Butler split last season between the Minnesota Timberwolves and 76ers after he was traded 13 games into the season. He averaged 18.2 points, 5.3 rebounds, four assists, and 1.8 steals in 55 games with Philadelphia, helping the young squad reach the Eastern Conference semifinals.