NBA TOP SHOT – FAD OR THE FUTURE?
The internet has been abuzz this week with talk of NBA Top Shot, a virtual trading card platform supported by blockchain. Though the NBA, the NBPA, and Dapper Labs reached an agreement in 2019, the trading cards were not released until this fall, and only began to pick up steam in early February.1 But in a world where there seems to be a new tech-fueled internet craze every week or two, users might be wondering – is this just a fad, or is Top Shot here to stay?
To understand the potential longevity of Top Shot, one must first understand what it is. NBA Top Shot is a digital marketplace where sports fans and memorabilia aficionados can purchase “moments.”2 Moments are digital collectibles that feature an NBA player and contain a highlight clip, an action shot, and game statistics.3 Moments can purchased either in a “pack” from the NBA Top Shot platform, or individually via re-sale from other users.4 Packs vary in price, ranging from $9 to $230, but resales for valuable moments have gone for as much as $208,000.5
In many ways, moments are very similar to traditional trading cards – the difference lies in the technology. The digital memorabilia is built on blockchain.6 These digital assets are considered non-fungible tokens (NFTs).7 This simply means that the crypto is unique and therefore non-interchangeable.8 Here, moments are marked with their own serial numbers.9 The advantage of blockchain is that the users can easily establish the authenticity of the NFT.10 Further, the blockchain technology provides users with transparency in the production of moments which helps users to assess a moment’s value.11
Supporters of Top Shot argue that digital assets are the future of sports memorabilia collection. Digital memorabilia circumvents some of the traditional collectables pitfalls – namely, authenticity and quality.12 The blockchain ensures that users can very authenticity, and quality is not an issue as digital assets are not subject to the same ware and tare that traditional sports memorabilia might be.13 While Top Shot circumvents some traditional collector problems, the intangible memorabilia presents some longevity problems of its own. First, the NBA and Dapper Labs have not released the terms or extent of their licensing agreement.14 This may call the value – or even the existence – of moments into question at some point. What happens to moments if the partnership dissolves? Do the moments still exist? Where would they be accessed? What would happen to their value? This issue becomes further complicated by the lack of a regulatory body. As NFTs, moments don’t fit squarely into the definition or a security, and thus they escape the purview of the SEC.15 However, NFTs also elude the definition of a commodity, and are therefore beyond the reach of the CFTC.16 In the absence of a regulatory body, it is unclear how or if users could recoup the value of their Moments, even those who has invested substantial capital into Top Shot.
All and all, it is hard to say whether or not Top Shot will be around indefinitely in the form that it currently exists. But this writer feels confident in the proclaiming that virtual trading cards are the future of sports collection, and Top Shot is leading the charge.
See Chris Bumbaca, What is NBA Top Shot and Why is a LeBron Highlight Worth $208k? ‘This is a real market,’ Mark Cuban Says, USA Today (Feb. 26, 2021, 10:31 AM), https://www.usatoday.com/story/sports/nba/2021/02/26/what-is-nba-top-shot-stocks-lebron-james-highlight/6825173002/ [https://perma.cc/N3NX-N7CD].↩
See What is a Moment? How do I get one?, Top Shot, https://support.nbatopshot.com/hc/en-us/articles/1500002619921-What-is-a-Moment-How-do-I-get-one- (last visited Feb. 26, 2021) [https://perma.cc/TBG4-G8E9].↩
See Analysis: Dapper Lab’s NBA Top Shot Tops $100 Million Blockchain Collectible Sales, Ledger Insights, https://www.ledgerinsights.com/analysis-dapper-labs-nba-top-shot-tops-100-million-blockchain-collectible-sales-nft/ (last visited Feb. 26, 2021) [https://perma.cc/G6XJ-KP99].↩
See Diana Qiao, Note, This Is Not a Game: Blockchain Regulation and its Application to Video Games, 40 N. Ill. U. L. Rev. 176, 185-86 (2020).↩
See What is a Moment? How do I get one?, supra note 6.↩
See Sean Highkin, Inside ‘NBA Top Shot,’ the Digital Highlights Marketplace Worth Millions, Bleacher Rep. (Feb. 19, 2021) https://bleacherreport.com/articles/2930587-inside-nba-top-shot-the-digital-highlights-marketplace-worth-millions [https://perma.cc/8HLV-QEWE].↩
See Bumbaca, supra note 1.↩
See Ledger Insights, supra note 7.↩
See Qiao, Note, supra note 8.↩
See id. at 220.↩