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That was my first thought as well, but I'm thinking now it is being done in hopes of dumping his salary. If another team claims him then that new team absorbs the remainder of his contract.This doesn't seem to make sense. Why cut him? With the style Tebow plays you would have to think there is significant risk of injury.
The only other thing that could possibly make sense is that Orton was a divisive force in the locker room, with some players wanting him to start and others wanting Tebow to start.