Monday December 4, 2023
Law

NBA Top Shot Lawsuit Calls for NFT Regulations

  • Complaint filed in New York alleges NBA Top Shot "Moments" are unregulated securities.
  • Lawsuit seeks class-action status and unspecified damages.
Sergio Estrada-USA TODAY Sports/Design: Alex Brooks
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The company behind NBA Top Shot is facing its first notable legal challenge in a U.S. court. 

Vancouver-based Dapper Labs and its CEO, Roham Gharegozlou, were listed as defendants in a lawsuit that alleges NBA Top Shot “Moments” — short highlights that are sold as NFTs — violate securities law.

The NBA Top Shot marketplace has been open to the public since October and has netted nearly $600 million in sales. Dapper Labs was valued at $2.6 billion after closing a $305 million funding round in March.

The legal complaint was filed in a New York state court on May 12 on behalf of Virginia resident Jeeun Friel. The lawsuit seeks class-action status, unspecified monetary damages, and a jury trial.

Attorneys from The Rosen Law Firm argue in the complaint that NBA Top Shot Moments should be regulated like traditional investments since Dapper Labs controls the new release of NFTs.

A blockchain-backed LeBron James dunk highlight sold for $208,000 on NBA Top Shot in February, and another James “Moment” sold for $179,000 in March.

“NBA Top Shot Moments are securities because they constitute an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” the complaint alleged.

Dan Lust, a sports law attorney at Geragos & Geragos, told FOS that Dapper Labs would likely seek dismissal of the lawsuit since the terms of service for NBA Top Shot state legal disputes must be handled via arbitration.

Citing company policy, a spokesperson for Dapper Labs declined to comment on the lawsuit when reached by Front Office Sports.

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