Bloomberg Law
Feb. 22, 2023, 8:32 PM

NBA Top Shot Moments NFTs Appear to Be Securities, Judge Says

Chris Dolmetsch
Chris Dolmetsch
Bloomberg News

The creator of the National Basketball Association’s Top Shot NFTs must face a lawsuit accusing it of selling unregistered securities, marking a new development in a broader fight over how to classify cryptoassets like nonfungible tokens.

In the suit, filed in 2021, purchasers of Top Shot Moments — digital video clips of highlights from NBA games — allege that Dapper Labs violated US securities law by offering the items without registering them with regulators and that Dapper improperly used its control over the popular collectibles.

US District Judge Victor Marrero on Wednesday denied a request by Dapper to throw out the suit before trial, finding that the plaintiffs had adequately alleged that Moments are securities for the case to go forward. Marrero said that the trading of Moments is limited to the company’s Flow blockchain and that purchasers therefore rely on Dapper’s expertise and management “as well as its continued existence.”

NBA Top Shot Collectibles
Source: NBA Top Shot

“Hypothetically, if Upper Deck or Topps, two longtime producers of physical sports trading cards, were to go out of business, the value of the cards they sold would be wholly unaffected, and may even increase, much like posthumously discovered art,” the judge wrote.

Read the decision here

He continued: “That is not true here, where plaintiffs allege that the pooling of capital generated from the sale of Moments propped up the Flow Blockchain and where the value of Moments is intertwined with the success of that blockchain and Dapper Labs.”

An Apparent First

The decision appears to be the first addressing whether NFTs are securities, Marrero said, cautioning that it doesn’t mean all of them are. The case is part of a wider legal and regulatory battle over whether digital assets, such as NFTs and crypto tokens, are securities and must be registered with the US Securities and Exchange Commission. A nonfungible token is a unique identifier that can be used to prove ownership of an asset such as a piece of digital art.

Read More: Fight to Regulate Crypto at Crossroads as Ripple Ruling Looms

Dapper said the case is far from over.

The judge “did not conclude the plaintiffs were right, and it is not a final ruling on the merits of the case,” spokesperson Stephanie Martin said in a statement. “Courts have repeatedly found that consumer goods – including art and collectibles like basketball cards – are not securities under federal law. We are confident the same holds true for Moments and other collectibles, digital or otherwise, and look forward to vigorously defending our position in court as the case continues.”

Overnight Success

Top Shot was launched in 2020 and became an overnight success. The collection, created by Dapper with the NBA and the National Basketball Players Association, has enjoyed $982 million in trading volume, according to tracker DappRadar.

Since its debut, Top Shot has been far surpassed by sales of other NFTs, such as those of the game Axie Infinity, a collection of digital people and creatures called CryptoPunks and the Bored Ape Yacht Club, but it’s still one of the most recognized names in NFTs.

Read More: Bored-Ape Creator Faces SEC Probe Over Unregistered Sales

The market itself has been battered. NFT sales plunged last year, before beginning to rebound in recent months. Price floors — the value of the cheapest token in each collection — for some of the most popular collections have been fairly stable over the past 24 hours. The floor for Bored Ape fell 7.7%, with CryptoPunks and Meebits up by 0.41% and 3.24% respectively, according to data from NFT Price Floor.

The case is Friel v. Dapper Labs, 21-cv-5837, US District Court, Southern District of New York (Manhattan).

Read More: SEC Scrutinizes NFT Market Over Illegal Crypto Token Offerings

--With assistance from David Pan and stacy-marie ishmael.

To contact the reporters on this story:
Chris Dolmetsch in Federal Court in Manhattan at;
Olga Kharif in Portland at

To contact the editors responsible for this story:
Anthony Lin at

Peter Jeffrey

© 2023 Bloomberg L.P. All rights reserved. Used with permission.

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