Adrian Wojnarowski of ESPN reported the update Saturday.
Lyles has failed to make much of an impact since the Utah Jazz selected him with the 12th overall pick in the 2015 draft. He was traded to Denver in June 2017.
The 23-year-old University of Kentucky product averaged 8.5 points, 3.8 rebounds and 1.4 assists across 64 appearances (two starts) for the Nuggets during the 2018-19 season.
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He made just nine appearances after the All-Star break because of a hamstring injury and then fell to the fringe of Denver's rotation.
The front office must have saw enough to at least maintain its right to match any offer he receives on the open market this summer. He could generate some interest as a former lottery pick, but it's unlikely there will be any big-money offers given his lack of production.
Lyles biggest key to earning more minutes moving forward is probably becoming a more consistent three-point shooter. He's connected on just 33.1 percent of his attempts from beyond the arc throughout his career, including 25.5 percent this past season.
The stretch 4 role has never been more prominent in the NBA, so working his way into that niche could help the Canada native carve out a more consistent rotation spot in Denver or elsewhere.