SEC Closes Investigation into Dapper Labs, Parent Company of NBA Top Shot and Crypto Kitties

The Securities & Exchange Commission (SEC) closed an investigation into Dapper Labs, the company behind Flow (FLOW) cryptocurrency and popular NFT projects like NBA Top Shot and Crypto Kitties. The investigation's reasons, start date, and closure remain undisclosed in an internal document obtained by Fortune. Despite Dapper Labs' spokesperson expressing unawareness of the investigation, the company previously faced legal challenges over whether NBA Top Shot NFTs constituted unregistered securities.

SEC Concludes Investigation into Dapper Labs, Parent Company of NBA Top Shot and Crypto Kitties

Washington, D.C. – The Securities and Exchange Commission (SEC) has closed an investigation into Dapper Labs, the company behind the popular non-fungible token (NFT) platforms NBA Top Shot and Crypto Kitties, according to a document obtained by Fortune magazine.

No Disclosed Reasons for Investigation

The document, titled "Case Closing Report," does not specify the reasons for the investigation or the basis for its closure. The SEC declined to comment on the matter. A Dapper Labs spokesperson stated that the company was unaware of the investigation and had not been contacted by the SEC.

Dapper Labs' Challenges

Dapper Labs emerged as a prominent player in the NFT market with the launch of Crypto Kitties in 2017. The company's subsequent platform, NBA Top Shot, gained significant traction in 2021, fueling the NFT craze and driving the popularity of FLOW, the cryptocurrency used in its ecosystem.

However, Dapper Labs has faced challenges in recent times, with sales declining significantly since the crypto market crash of 2022. The company has also been embroiled in a lawsuit filed by investors who alleged that NBA Top Shot NFTs are securities that were unlawfully sold without proper registration.

Ongoing Lawsuit

In February 2023, a federal judge denied Dapper Labs' motion to dismiss the lawsuit. The court held that the investors' claims that NBA Top Shot NFTs were securities had merit and allowed the case to proceed.

Implications for NFT Market

The SEC's investigation and subsequent closure raise questions about the regulation of NFTs and the potential for the agency to take enforcement action against companies in the space. The outcome of the NBA Top Shot lawsuit could also have implications for the classification of NFTs and the regulatory framework surrounding them.

Market Response

FLOW prices remained largely flat on Monday following the news. However, analysts note that the investigation and ongoing lawsuit could weigh on investor sentiment in the long term.

Conclusion

The SEC's investigation and closure of its probe into Dapper Labs highlight the agency's ongoing efforts to oversee the evolving NFT market. The outcome of the NBA Top Shot lawsuit will be closely watched by industry participants and regulators alike, as it could provide further clarity on the legal status of NFTs and the regulatory landscape for the digital asset ecosystem.