NBA Top Shot settles lawsuit, but still faces major challenges

Top Shot did just $1.9 million in total sales in May, its lowest month since December 2020

Cover Image for NBA Top Shot settles lawsuit, but still faces major challenges
In a five-month stretch in 2021, Top Shot did an astounding $656 million in sales. (Credit: Dapper Labs)

A class action lawsuit against NBA Top Shot owner Dapper Labs and its CEO Roham Gharegozlou has been settled.

According to a filing in New York District Court on Monday, the plaintiffs revealed they were paid an aggregate settlement of $4 million. After being assured of changes, the plaintiffs agreed they would no longer refer to Top Shot moments as securities.

As is custom with a settlement, Top Shot does not accept any admission of liability.

"With new found legal clarity, the company will be able to pave the way for continued growth and innovation," Dapper Labs said in a release.

The court case was proceeding, with depositions due in two weeks, but the plaintiffs were dealt a blow eight months ago when the Securities and Exchange Commission (SEC) disclosed it had wrapped up an investigation into Dapper.

During the pandemic, Top Shot took the collectible world by storm.

From February through June of 2021, Top Shot did an astounding $656 million in sales, according to NFT tracking site, Cryptoslam. That incredible five-month surge led to an investment in Dapper that topped out at $7.6 billion in September 2021.

In the 32 months since the close of the round, Top Shot has done $442 million in sales.

This precipitous decline is, of course, not unique to Top Shot. All NFTs are down massively as crypto crashed. Despite the recent rise of Bitcoin, NFTs have not at all recovered.

Does Dapper's golden child have a chance?

Insiders certainly say they do. They cite numbers such as a 78 percent increase in weekly $1,000 spenders from Q4 of 2023 to Q1 of 2024. They also hang their hat on new 1 of 1's including a sale of a Victor Wembanyama ($145,000 in April) and a Chet Holmgren to come.

That optimism aside, Top Shot finished May with $1.9 million in total sales through its site, its lowest sales month since December 2020, according to Cryptoslam. At the height, Top Shot pulled in more revenue in a day ($2 million+) for 52 straight days than it did for the entire month of May 2024.

Mike Levy not only loved Top Shot initially, but the hype around the newest collectible led him to start Flowty, a NFT-backed loan and secondary marketplace business.

“(Top Shot) got around all the issues in collecting, like authenticity, fraud, grading and storage,” Levy said. “But what happened was it became such a get-rich-quick opportunity that it attracted drop shippers, sneaker flippers, DFS players and sports gamblers rather than NBA fans. In response, Dapper seemed to pivot its model to better meet this group’s expectations of quick profit potential via game mechanics and hype.”

On a single day, Feb. 22, 2021, $45 million worth of Top Shot Moments were transacted. Four days later, parent company Dapper dropped 11,000 packs at $99 each. There were 175,000 people in the waiting room hoping to have the rights to get them.

The result was a six-week period in February and March of 2022 when people could open a digital pack and immediately sell a Top Shot highlight for 50 times what they paid.

“Every group chat was talking about how to make money off Top Shot,” Levy said. “It was the easiest side hustle in the world. But as soon as the market showed any signs of weakness, they were out.”

Top Shot is built in the way where a credit card can be used to buy Moments, instead of almost all other NFT's which require a crypto wallet. It was seen as even less friction for a new adopter, but the differentiator hasn’t helped.

One early fan of Top Shot was the man called Pranksy, who many consider the OG of the NFT space, having started collecting in 2017, a full five years before they exploded. Once an owner of more than 30,000 Top Shots, Pranksy turned into the best flipper of them all. Records show he sold 11 Top Shot NFTs for more than $40,000 each.

Like many of the Top Shot originals, he told cllct he is now out of the game, and the 10,000 moments he still owns are mostly commons just sitting in his account.

It’s not uncommon for some of Top Shot’s early adopters to be sitting on thousands of dollars in their accounts that now lay dormant.

Perhaps no influencer talked about NBA Top Shot more than Jack Settleman.

On Jan. 19, 2021, Settleman set the record for biggest purchase on the NBA Top Shot marketplace, paying $47,500 for No. 23 of 59 minted LeBron James Kobe Bryant Tribute dunks with his ultimate goal of selling it to James himself for $1 million.

Things were looking up for a bit. Three days after Settleman's purchase, one of his friends purchased No. 1/59 for $71,455. A month later, there was one sold for $125,000. In March, there was a $179,000 sale. In April, Heritage Auctions sold a different numbered copy of the dunk for $387,600.

It is still the highest sale ever. Since then, things have steadily declined. In April, one of the Kobe Tribute Dunks sold for $9,999.

There are few who bought into that moment who have gotten out. One person who bought No. 35/59 for $80,000 in Feb. 2021 sold it in June 2023 for $10,000. But most, including Settleman, still have it in their wallets.

Settleman says Top Shot hasn’t provided much additional upside, which is why his account is dormant. He says he hasn’t logged on to Top Shot in 18 months.

“Is it worth the effort to go in there and sell off the pieces?” Settleman asked.

While Settleman said Top Shot had some utility, it didn't offer the ultimate utility: relevance and cache.

“Monkeys and Cryptopunks were expensive,” Settleman said. “But when you bought one, you became part of an exclusive club, and you’d be invited to be part of the founders club, so to speak. It was the equivalent of getting a check mark for content creators.”

Sources tell cllct that internal debate between collectibility and gamification was a frequent fight at Dapper, resulting in a rapidly shifting list of priorities and a revolving door of employees.

Despite transactions and sales being down, some believe Dapper still has a significant business on its hands.

"I think the platform itself is the best it has ever been," said Drew Austin founder of Red Beard Ventures, an early-stage venture firm specializing in Web3 and crypto investments.

Austin describes himself as a small investor in Dapper, but a bigger collector in Top Shot.

"If people get over the 12-month mania that happened between Series 2 and Series 3, they will find an incredible collectible platform that has figured out supply and demand and now has five years of NBA history," Austin said.

Top Shot executives explain the lackluster May by saying, indirectly, it was part of their strategy. Dapper sold Top Shot playoff packs only in April to control supply and also add a level of gamification. As the playoffs began, 6,300 packs were available for $149 each. With each successive round, if teams in the pack advanced, collectors would get to chose whether they want to keep the moment from the last round or take the new moment. But if they take the new moment, they "burn" the previous moment, then making it more scarce.

Some have called it smarter gamification, others have called it too confusing and a contributing factor to the decline of new users.

But maybe even gamification and utility are overrated for the market.

Sorare, the soccer NFT that firmly figured out gamification also just had its worst month since January 2020, doing only $5.8 million in sales in its marketplace.

And even some of the NFT's that were said to have the most utility, Bored Apes, only did $13.4 million in on-site transactions in May, its worst since its first month three years ago.

Darren Rovell is the founder of and one of the country's leading reporters on the collectible market. He previously worked for ESPN, CNBC and The Action Network.