In the world of blockchain-based collecting, NBA Top Shot Moments have become one of the hottest commodities, where digital basketball cards, which feature limited-edition NBA highlight clips, have attracted the attention of sports fans and collectors alike.

But a recent lawsuit filed by Jeeun Friel against Dapper Labs, the Vancouver-based blockchain company behind NBA Top Shot, is raising questions about whether Moments are securities.

Friel alleges that Moments are being marketed and sold as unregistered securities, in violation of the Securities Act of 1933.

According to Friel, Moments operate like stocks, bonds, and mutual funds, and entail an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.

If Moments are indeed securities, Dapper Labs would be subject to strict regulations regarding their marketing and sale, and would be required to provide investors with risk analysis and disclosure materials.

Dapper Labs, however, maintains that Moments are not securities, but rather like trading cards, coins, and other collectibles.

In a memorandum filed in the Southern District of New York, the company argues that Moments are a type of collectible that offers digital alternatives to physical sports cards, and a clip of a LeBron James dunk shouldn’t be subject to the same registration and disclosure requirements as a share of Apple.

While the case is before Judge Victor Marrero, the SEC is also keeping a close eye on the litigation.

The agency’s “Framework for ‘Investment Contract’ Analysis of Digital Assets” offers guidance on whether the sale of a digital asset should be classified as a security transaction.

One relevant factor, the SEC notes, is scarcity – a point that could be relevant to Moments, as their numbers are capped.

As the case moves forward, it could have significant implications for the nascent marketplace for non-fungible tokens in sports.

NBA Top Shot Moments played a key role in popularising blockchain-based collecting in early 2021, and the platform recently crossed $1 billion in total transactions. Dapper Labs has also signed deals with other sports leagues, including LaLiga, the NFL, and UFC.

The company has a long-term goal of getting “a crypto wallet in everybody’s pocket,” and the outcome of this case could help determine whether that goal is achievable.