The qualifying offer is projected to be worth $7.7 million.
Allen was acquired in January as part of the four-team deal that sent James Harden to the Brooklyn Nets. He showed tremendous promise for the Cavs after the move, averaging 13.2 points and 9.9 rebounds per game in 51 appearances.
Even though he was eligible to become a restricted free agent this offseason, the expectation since the trade happened is that Cleveland would do what it takes to keep the 23-year-old.
Terry Pluto of Cleveland.com reported in May that Allen is going to receive "$100 million or more" on an extension from the Cavaliers.
As a restricted free agent, the Cavs will have the ability to match any potential offer that the Texas product receives from another team.
Cleveland has a promising young core with Allen, Collin Sexton and Darius Garland. The roster around that trio is still a work in progress for general manager Koby Altman. He is going to have another high lottery pick to boost the team's depth and ceiling.
Allen should be a big part of Cleveland's future given his age and upside heading into his sixth season in the NBA. The team has given itself the ability to keep him around by extending him a qualifying offer.