Over the past 12 months, the roaring success that has been the NFT has shattered pretty much everyone’s expectations. However, that seems to have come at a cost, at least in the case of one major NFT marketplace. Dapper Labs, who run NBA TopShot, the official NFT marketplace of the NBA, are facing at least one serious lawsuit, if not several, which allege that they’ve been breaking serious and longstanding laws that could jeopardize the company’s future, if found guilty.
The lawsuit centers around the fact that selling the NFTs violates the Securities Act of 1933, which has to do with investments only being allowed to be made on concrete products. The issue here is that NFTs aren’t technically “concrete products/goods,” so there’s debate over whether their sale is legal. This could have serious ramifications if the lawsuit is successful, and not just for sports NFTs, but NFTs in general.
Another, possibly more serious, issue is that NBA TopShot customers have complained about being unable to withdraw funds for months on end. Obviously, this is a serious problem since it also violates the Securities Act. Withholding money from account holders is a pretty serious crime, and it’s actually more likely that Dapper Labs will receive penalties on this charge than the first one.
That said, if the charge about NFTs violating the Securities Act goes through, the consequences could be wide-ranging, and possibly, the NFT craze would die as quickly as it arose.