They are beyond the point of sitting him, at least in the truest sense. He cannot go on any reserve list since he has practiced.
It is playing sparingly or being inactive. "Sitting" completely him would be tough to do.
A year into his rookie contract is about the max a team is willing to invest most of the time after a damaged player is picked without some sort of contribution.
Marcus Lattimore is a comparison. Great attitude, everyone loved him and was rooting for him. He lasted a year on NFI, then retired officially the following November after being drafted.
Not that Smith is going to end up that way, but sitting a player for two years, cold, is not something that is done very much, if at all.