Waiters played only three games for the Heat following three suspensions this season, including one for taking cannabis-infused gummies on the team plane and needing emergency medical attention when that flight landed in Los Angeles.
Memphis will owe Waiters $4.2 million over the next three seasons. If they don't elect to use the stretch provision, the Grizzlies will have a $12.1 million cap hit this season and a $12.65 million hit next season, according to ESPN's Bobby Marks.
Waiters, 28, averages 13.2 points on 41 percent shooting from the field for his career.
The Associated Press contributed to this report.