Sources close to the situation said Wednesday that the organization has become increasingly frustrated with Smith's on- and off-the-court transgressions and may feel that a fresh start would be best for all parties.
Smith was fined $50,000 by the NBA on Wednesday for "recurring instances of unsportsmanlike conduct" following his shoelace stunts in the Knicks' past two games.
Wednesday's fine didn't necessarily push the Knicks over the top, but one source with knowledge of the team's thinking said the organization has become "fed up" with Smith's erratic behavior.
Coach Mike Woodson hinted at that frustration Wednesday when he called Smith's conduct "unacceptable" in an interview with ESPN New York 98.7 FM's "The Stephen A. Smith and Ryan Ruocco Show."
"I'm not happy about this, because he was warned, he comes back and he makes the same mistake, and it's not right," Woodson said. "It's just got to stop. I keep saying this every time something pops up, but it's got to stop."
The coach later added that Smith has been "unprofessional about how he's approached this whole thing. Something's gotta be done. It has to stop. I'll address it tomorrow when I see him, and then we'll go from there."
Smith took to Twitter on Wednesday, posting an apology:
Huge apologies to my team, to the league an most of all you the fans! #JRSmithSigningOff
— JR Smith (@TheRealJRSmith) January 8, 2014
Smith can't be traded until Jan. 15 because the Knicks are over the salary cap and Smith signed for more than 120 percent of his previous salary. The Knicks, furthermore, privately acknowledge that it will be difficult in the current climate to trade Smith, who has two seasons left after this one on a three-year, $18 million contract.
The 28-year-old underwent arthroscopic surgery on his left knee in the offseason. Smith then missed training camp after surgery, with Woodson saying recently that the guard is still dealing with soreness in his knee.
Smith's scoring is down markedly from last season. He is shooting just 32.3 percent from the field and has averaged 11.3 points in 29 games. Last season, Smith won the NBA's Sixth Man Award after averaging 18.1 points and 5.3 rebounds in 80 games.
The reality, though, is that Smith's transgressions -- combined with his declining production -- figure to complicate any efforts to move him.
In addition to Wednesday's fine, Smith was suspended the first five games of the regular season without pay for violating the league's anti-drug policy. And in November, Smith was fined $25,000 for sending what the NBA deemed a "hostile" tweet to Detroit's Brandon Jennings after Jennings had questioned the credentials of Smith's brother, Chris, a former Knicks guard.