Frank Isola of the New York Daily News is reporting that the Knicks have emerged as favourites to sign the unrestricted free agent point guard.
As Isola states, there is a chance that the Knicks may be able to dangle Toney Douglas in a sign-and-trade for Felton, which would allow them to keep their $3 million mid-level exception as well.
As a former Knick, fans will remember Felton's first stint with New York fondly, as he and Amar'e Stoudemire developed some great chemistry in the first half of the 2010-11 season.
Since leaving New York, things haven't looked so good for either Felton or Stoudemire, with both failing to live up to the standards they set in that one season together.
Felton has had his personality questioned after not taking a back-up role particularly well in Denver, causing him to be traded to the Portland Trail Blazers.
There, things got even worse, as in 2011-12 Felton played some of the worst basketball of his career, which contributed greatly to the huge meltdown Portland had last season.
For Stoudemire, injuries and an inability to mesh with Carmelo Anthony have caused the bulk of his problems, but with Felton coming back, both players will have an opportunity to restart their careers.
The question becomes now whether or not current Knicks starter Jeremy Lin will be joining Felton in New York, as the Knicks may be hesitant to match a backloaded offer from the Rockets, who met with Lin yesterday.
If Lin returns, he'll likely be the starter going into next season, especially considering what head coach Mike Woodson has been saying about him.
That said, if Felton can reproduce the form he had back in 2010-11, he may just make Woodson think twice about that.
Having been a starter for the majority of his career, having Felton on the bench could turn out to be a luxury for the Knicks, but it all hinges on whether or not he'll come to training camp focused, in shape and ready to contribute to a team that wants to win it all.
If the Knicks can pull this off without using the mid-level exception, then it's a risk worth taking.