The decision comes a year after the Lightning used a compliance buyout on veteran forward Vincent Lecavalier, and it's the final compliance buyout for the franchise allowed by the NHL's Collective Bargaining Agreement.
The Lightning will pay two-thirds of the remaining $2.5 million over two years on Malone's current seven-year, $31.5 million deal. The decision saves the Lightning a $4.5 million cap hit and creates more financial freedom with the unrestricted free-agency period set to open July 1.
Malone, 34, will become an unrestricted free agent with the move.
The choice to buy out Malone comes as little surprise. He had just five goals and 10 assists in 57 games last season, the worst production of his 10-year career. He also faced off-the-ice trouble with a DUI charge and a charge of cocaine possession from an arrest in Tampa in April. He has pleaded not guilty to both charges, and he's scheduled to appear in court again in July.
Malone was acquired from the Pittsburgh Penguins on June 28, 2008. In six seasons with the Lightning, he had 92 goals with 201 points in 342 games. He began in the NHL with the Penguins in the 2003-04 campaign, and he has 179 goals and 370 points in 641 games throughout his career.
He has appeared in 43 Stanley Cup playoff games, earning nine goals and 22 points.