NBA Top Shot NFT Case: Judge Says May Have To Register With Regulators

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The Defiant | Samuel Haig | Feb 23, 2023

Pexels Markus Winkler NFT - NBA Top Shot NFT Case: Judge Says May Have to Register with Regulators

Image: Pexels/Markus Winkler

Judge Says It’s ‘Plausible’ NBA Top Shot Moments NFTs May Have to Be Registered With Regulators

On Wednesday, U.S. District Judge Victor Marrero ruled a lawsuit against Dapper Labs may move forward and rejected the company’s request to dismiss the action after concluding it is “plausible” that its tokenized collectibles may prove to be securities.
The plaintiffs are a group of collectors of NBA Top Shot Moments, videos of professional basketball stars making famous plays. The videos are made unique by effectively watermarking them with NFT technology. The plaintiffs have accused Dapper Labs, NBA Top Shot’s creator, of earning hundreds of millions of dollars by selling unregistered securities.
- They claim Dapper also abused its position by propping up the market for Moments and restricting users from withdrawing their money from the platform.
- While Top Shot opened its doors to the public in October 2020, it did not start allowing users to withdraw funds from the platform until May 2021. The plaintiffs say that Dapper Labs frequently flaunted high-priced Moment sales at users while they were unable to remove their funds from the platform in a bid to entice further trading activity.

See: Landmark Legal NFT Decision Favours Intellectual Property Owners

Investors will closely watch this case as the SEC continues to press cryptocurrency issuers to register their tokens. This month, the regulator defined staking-as-a-service as a registrable security in a settlement with Kraken, the No. 3 cryptocurrency exchange. The SEC also broadened its definition of cryptocurrencies as securities in a lawsuit filed against Do Kwon and Terraform Labs last week for alleged fraud.
Dapper’s lawyers refuted the suggestion Top Shot NFTs are securities.
- “Basketball cards are not securities,” they said. “Pokémon cards are not securities. Baseball cards are not securities. Common sense says so. The law says so. And, courts say so.”
- Dapper’s lawyers argue that securities must be linked to capital fundraising efforts, and cannot be “formed products” like the Top Shot Moments the company sold. “This was not a capital investment drive, not an appeal to passive investors, but the sale of cards to collectors,” they said.
Judge Marrero also said that the case should not be seen as establishing a precedent for NFT litigation broadly. “Not all NFTs offered or sold by any company will constitute a security, and each scheme must be assessed on a case-by-case basis,” he said.

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