What's All the Fuss About NBA Top Shot?

Welcome to a world where millions of dollars change hands over virtual trading cards—where shutdowns are common, money is hard to withdraw and a potential for evil-doing complicates everything

Most days, Daniel Hurtado puts his youngest down for a nap at 1 p.m. Then the 38-year-old father of four will go to his computer. He’ll put his device away in the afternoon, but after readying his daughter for bed at night he’ll return to his laptop again to do one thing: trade on NBA Top Shot.

NBA Top Shot—a partnership between the NBA and Dapper Labs, a blockchain company with a history of highly trafficked marketplaces—is, in its simplest explanation, an online forum for trading virtual basketball cards. Fans can buy and sell video clips of their favorite players, called “moments,” from recent seasons. These moments exist on the blockchain—essentially, a digital record book kept using cryptography—which makes them unique, impossible to counterfeit and immediately authenticated. And they can be procured from one of two places: directly from Top Shot, in the form of limited-edition packs that sell for anywhere from $9 (for a pack of common cards) to $999 (for one that could contain some of the rarest in the game); or in the marketplace, where moments opened in the aforementioned packs can be swapped between users for cash. If this all sounds novel, know this: It’s not the first such partnership with a professional sports league. It is, however, easily the biggest.

What started late last year as a new trading forum with a few thousand users has, in the last few weeks, exploded onto Twitter feeds as certain moments sell for eye-popping prices. A scan through CryptoSlam—a third-party tracking source that monitors marketplace transactions—will show 83 unique trades of at least $40,000, with six moments breaking six figures, the most expensive being the sale for $208,000 of a Cosmic edition Series 1 LeBron James dunk from a game against the Kings on Nov. 15, 2019.

Illustration by Davide Barco

On Feb. 4, 2021, CryptoSlam showed just over $49 million in transactions all-time, with $46.4 million of that total coming in the previous 30 days. By Feb. 22, the marketplace had grown to the point that the previous 24 hours alone logged more than $47 million in sales. Today, more than $370 million has exchanged hands between users on the marketplace to date, and millions more have been spent on packs. The result is a massive, highly competitive marketplace of users buying moments, hoping to flip the virtual cards for enormous profits.

Hurtado stumbled onto Top Shot by accident. He had always been a big basketball fan—when he worked as a middle school math teacher near his home of Atwater, Calif., he coached his school’s basketball team, and he would often talk hoops with his students. As a kid himself he collected cards; now it would be fun, he thought, to share that love with his kin. So he started looking for a card featuring his son’s favorite player, LaMelo Ball.

He asked a collector friend what to look for and was told to check out Top Shot instead of traditional trading-card marketplaces. From there, Hurtado’s world changed. During his first week, he spent around $150 on packs, buying up whatever he could. Since then, he’s invested around $2,000. By Feb. 17, that investment had grown in value to $27,000. Five days later, it was worth around $130,000.

“One of my kids, I've been telling him, ‘I’m going to get a hot rod, so we can share it,’ ” Hurtado says. “I was joking around. I said, ‘Hey, I’m going into [Top Shot]. Maybe it'll pay for our hot rod.’ … Could you imagine if I actually cashed out 130 grand?”

He can’t withdraw his money right now, and neither can all but a few thousand other Top Shot traders, but Hurtado’s story is a common one in a landscape that’s growing faster than even some of Top Shot’s architects could have anticipated. A number of the platform’s users interviewed for this story told of similar arcs; they initially invested a few thousand dollars, only to see the value of their accounts balloon by factors greater than 10, almost overnight. The promise of soaring earnings—even offset against the fear, among some, of a bubble in the making—has kept a steady stream of new users joining. The digital collectible market is exploding, and it appears the perfect microcosm of life online today: booms and busts, earnestness and potential for fraud, absurdity and cold calculations.

A moment of this LeBron James dunk, a tribute to Kobe Bryant, sold for $179,000 :: John W. McDonough/Sports Illustrated

In the beginning, availability was never in question. Buying packs was easy, and buying single moments, even those featuring star players, was relatively affordable. In the first week of February, before the boom, common cards, like a T.J. McConnell assist or a Jerami Grant dunk, moved for $3 or $4. Higher profile—but still common—moments, like a Donovan Mitchell assist (one of the moments awarded to some early users for free), were being traded for $70.

Over the next few weeks, though, more and more users signed up for Top Shot, drawn in by the prospect of big-money paydays. Packs became scarce and money flooded the marketplace. Even the least-desirable moments suddenly spiked in value. By Feb. 22, when NBA Top Shot reached its peak, McConnell’s $3 moment was selling for roughly $100. Mitchell’s was moving for about $1,000. An even rarer card, a Giannis Antetokounmpo dunk, sold for $1,300 on the evening of Feb. 21 and was listed for three times as much the next morning.

Users like Hurtado began listing and delisting moments rapidly, trying to chase the market’s movement and predict the next surge. List too low and he could miss out on thousands of dollars in potential profits; list too high and his moment could have gone unclaimed. He was chasing theoretical cash gains, but he was also looking for a rush. The instant gratification gained from buying a moment for one price and selling it for more, just seconds later, can be intoxicating, the immediacy of the victory akin to a dealer busting in blackjack or the overwhelming paydays some found during the GameStop stock surge in January.

“The ease of collecting and the ease of resale, I think, addicted people,” says Franklin Fitch, the head of marketing at Blockparty, a nonfungible token (NFT) marketplace, and a longtime NFT collector and investor. “When you see how quickly you can buy an NFT and have it appreciate in value … it's dynamic in a way that physical goods are not.”

Think of NFTs like pieces of digital memorabilia. Unlike cryptocurrency, tokens can’t be purchased in fractions—it’s all or nothing. Their appeal is simple: Like anything on the blockchain, their history (how much they’ve sold for, when and to whom) is public. Forgeries are nonexistent in the digital art or NFT world; there are no counterfeits. They can be traded instantaneously, bypassing the logistical nightmares that mar material-world collecting—no packaging or shipping, no authenticators or graders or auctioneers. And because digital marketplaces like Nifty Gateway, SuperRare and MakersPlace are so heavily trafficked, artists and collectors can put their wares in front of more potential buyers than they ever could through conventional methods. No longer is a seller reliant on who might show up at a gallery on a given day, or at, say, the Cherry Hill Mall collectibles show.

Geoff Wilson, founder of SportsCardInvestor.com, sees similarities in the growth of the physical card market and the rapid boom around NBA Top Shot. The influx in both Top Shot users and dollars spent on moments, he thinks, can be attributed to two factors that are also prevalent in the physical card market: the proliferation of flippers, who try to sell cards for profit and can now do so instantaneously without having to deal with authenticators like PSA or Beckett, which determine a physical card’s condition and market value; and the ego associated with owning a big-ticket moment.

Top Shot’s origins can be traced to another marketplace that bloomed as a result of these kinds of frictionless transactions. In the beginning, it was all about cats—just like the rest of the internet. In 2017, Dapper Labs launched a similar project called CryptoKitties, where users, rather than gathering NBA plays, would collect digital cats. After that venture rapidly grew into a $29 million economy, nearly every major sports league reached out, including the NBA. As Dapper began looking into the league as a potential partner, the NBA was doing the same. The resulting product has been 481 times bigger than MLB’s 2018 blockchain launch. (The NFLPA attempted to roll out a similar product, also in 2018, with a company called Hashletes. It never got off the ground.)

Top Shot opened to the public in October 2020, and today CryptoSlam counts more than 100,000 users who own at least one moment, with a total so far of 2.3 million trades—1.4 million of which have happened in the last 30 days. On the heels of that success, Dapper announced it was raising $250 million in its latest round of fundraising, at a $2 billion valuation. In February, Dapper announced the UFC would be joining its in-house blockchain, Flow, for a similar digital collectible that will be released later this year. A WNBA Top Shot is on the way, as well.

Mike McCoy, an adjunct professor of emerging technology at Thomas Jefferson University, sees the shock that skeptics experience when a Top Shot moment sells for six figures. He says it has to do with the NFT market’s newness as much as anything else. “Ten thousand dollars used to buy a used car—that makes sense to us because we've seen it being bought over time by hundreds of millions of people,” he says. “We haven't had as many examples of people paying for digital collectibles and digital cards or digital representations of physical things. And so the value of that really is just in the eyes of people who are on digital platforms.”

NFT marketplaces have long raised eyebrows with their steep sales prices. But Dapper’s partnership with the NBA gives Top Shot an advantage over other exchanges: credibility. The league’s officially licensing moments was, in some traders’ eyes, a sign that Top Shot could stick around for a while, and it encouraged them to invest more heavily than they might have otherwise.

A recent influx of new cards from pack releases has flooded the marketplace and lowered the cost of entry for new users, and sporadic trading shutdowns as a result of a burgeoning user base have slowed the amount of money moved to less than a fourth of what was traded at its peak in late February. Still, Top Shot evangelists are betting the best is yet to come, and that the values of the moments they own will continue to rise, netting them a hefty profit along the way.

A moment of this Ja Morant slam against the Suns, from December 2019, sold for $100,000 :: Barry Gossage/NBAE/Getty Images

NBA Top Shot is just the latest entrant in a wider NFT marketplace to move massive sums. By one estimation, not including Top Shot, nearly $500 million has been exchanged for NFTs. Art and collectibles, once solely swapped in the physical world, have led the charge.

Victor Valentine, an 18-year-old digital artist who goes by the name FEWOCiOUS, is just one of a number of people reaping the benefits of this ever-growing landscape. In six previous years selling his work, he says he earned, at most, $90 on an individual sale. He’d occasionally get commissions, but never with real frequency, and never for enough money to grab much attention.

In March 2020, though, a buyer recommended that Valentine shift his focus toward NFTs. The advantages were clear: He could sell his artwork to a wider network than he’d found on his website, and he was spared the burdens that came with selling physical art.

On Jan. 1, Valentine put his digital painting up for sale at Nifty Gateway. It sold for $35,000. Two weeks later, a drawing he posted on the website SuperRare received an offer around $10,000 before a bidding war shot the price up to $80,000. In January and February alone, Valentine estimates he’s made some $1.5 million selling his digital art.

Valentine’s story has become increasingly common in the NFT marketplace, as typified by the coverage in recent weeks of the artist Beeple, whose digital artwork sold for $69 million at a Christie’s auction on March 11, making it the third most expensive piece by a living artist ever sold at auction. As everyone from cryptocurrency evangelists to physical art collectors begin diving into the space, artists and buyers alike have seen the value of NFTs grow at both the top and bottom of the market. But why would anyone spend hundreds of thousands, if not millions, of dollars on art they cannot physically hold?

It starts with a different understanding of ownership. Fitch explains it like this: If you went to Google Images and searched for the Mona Lisa, you’d find millions of versions of the famous painting at varying image qualities. You could then right-click and save your favorite one to your desktop, and if you felt like it, you could print it out, hang it on your wall. You’d have the Mona Lisa. But you wouldn’t own it. The original would still sit in Paris, the same as always.

To appreciate an NFT, though, is to question the inherent value of an object. “Is it just that I can appreciate it visually?” Fitch asks. “I can go print an image of a Honus Wagner card. But if I went to try to sell that to anyone in the world, they’d be like, This isn't the Honus Wagner card. With the digital world, this becomes complicated for people, because in the digital world, ubiquity is standard.”

Eric Young, another digital art and NFT collector who recently spent the equivalent of $150,000 on Valentine’s artwork, says the ideas of public ownership and indisputable authenticity also factor into digital sales and help drive prices.

“There's only going to be one original, and the same thing goes with digital art,” Young says. “Because you can put it on a blockchain, which is basically a giant public ledger that says that you own it, you're basically telling the world: Hey, this is what everybody agrees is the record of your ownership.”

This all can be a little tricky to stomach when dealing with something like an NBA Top Shot moment, which highlights footage pulled directly from game feeds, and otherwise exist on YouTube, Twitter, the NBA’s own website, game replays, ESPN and, depending on the impressiveness of the highlight or the player involved, any platform where sharing video occurs. . Why would something found easily elsewhere ever be valued at hundreds of thousands of dollars? Some of this, Fitch says, is predicated on a gamble that, like the rest of the NFT world, the value of NBA Top Shot moments will continue to soar.

“I think a $100,000 Zion [Williamson] card is speculative, for sure,” Fitch says. “Do I think it's an appropriate amount? Over time, yeah, I do.”

👑ALL HAIL THE KING👑@YoDough scooped up this Legendary LeBron James Moment from our Cosmic Series 1 set for $208,000‼️ This Moment is from our first Legendary set ever minted 💯

The top acquisition for any NBA Top Shot Moment ... so far.

Congrats on the nice pickup! 👑 pic.twitter.com/rFLMzbwXN7

— NBA Top Shot (@NBATopShot) February 22, 2021

But the collectibles boom that’s helping drive this rapid growth isn’t limited to the online marketplace. Over the past year, the physical trading card market has experienced a renaissance. A pair of 1986 Fleer Michael Jordan rookie cards graded PSA 10—the highest possible standard awarded—sold in December 2020 and January ’21 for $217,200 and $211,560, respectively. Less than a month later, Goldin Auctions oversaw the auction of another Jordan PSA 10 rookie card for $738,000. Younger cards have seen massive surges in pricing as well. A LeBron James Topps Chrome 2003 PSA 10 rookie card sold for $2,300 in early January … and an identical card sold for $37,556 a month later. On March 5, an autographed 2000 Playoff Contenders Championship Ticket card Tom Brady rookie card sold for $1.32 million. Overall, according to Sports Card Investor’s Market Movers—software that tracks changes in trading card valuation over time—the average card has increased in value by 67% since November 2020.

As Wilson sees it, trading cards offer a different kind of investment opportunity when traditional markets may not be as appealing. Sure, they’re more fun; but also: Interest rates are lower than in the past, which can impede investors hoping for strong returns on bonds, money market funds or CDs.

“They're fleeing for these lifeboats of investment, which typically include things like art and sports collectibles. And now we have these global digital marketplaces that can offer those exact same things,” Collin Woodward, legal counsel at NFT42, a blockchain company, says. “I think it's only natural that people are moving into these digital marketplaces with equal force and trying to find value there—a place to store their money.”

Store and earn. Even at the lower levels, investments are paying dividends. Collectors who spend tens of thousands of dollars on lesser-known cards and artists aren’t just paying for a memento or to support someone they believe in. They buy in because, like a seed investor, they can reap stunning profits as that product’s or artist’s profile rises.

The driving force behind the NFT boom and the rise of Top Shot may have been the joy of collecting, and for some, that vision remains true. But, by and large, those days are over. As Young puts it, “People don't just buy stuff because it looks cool. Not the amount of money that's being put into these markets.”

A moment of this Zion Williamson block from January 2020 sold for $55,000 :: Sean Gardner/Getty Images

Competition among Top Shot collectors is fierce, and these days packs are scarce, which has led to the rise of secondary acquisition methods. Just like in the real world, where collectors can open packs with friends, a Top Shot user can pay for a spot in an online live break (or opening), where they’re guaranteed a pack. One outfit, SteadyBreaks, (cofounded by a longtime Dapper aficionado who goes by Steady), offers a few different kinds of breaks, the most popular called Pick or Pass. Here, five users are slotted into a randomly generated order; whoever picks first is typically guaranteed at least one moment of value—the player who lands fifth gets the scraps. Throughout, a moderator reads off the names of players as packs are opened, and users who’ve spent hundreds of real-world dollars for the chance at a theoretical profit unmute themselves to declare that they’ll either take the opened pack or pass it down to the next person in line.

When SteadyBreaks started, the cost of entry matched the price of the pack being opened. Steady was an early adopter of NBA Top Shot, and he says he purchased somewhere between 1,000 and 2,000 packs, each between $9 and $12, when he joined. He’s slowly released those via SteadyBreaks, raising prices as access to packs dwindled. The week of March 2, SteadyBreaks listed three tiers of packs: $250 per head, $500 and, for a Series 1 pack, $2,500. (The costs, Steady says, are calculated based on the expected value of the cards inside, plus a premium based on the guaranteed access.)

And while Steady cites the burgeoning community around the live breaks as the main factor in providing this service—SteadyBreaks is investing thousands of dollars in an online virtual community that is scheduled to be unveiled soon—the financial windfall has been immense. By sacrificing the potential profit earned from eventually selling individual moments that buyers end up unwrapping, SteadyBreaks is able to net immediate, off-market, real-world profit, without the hassle of withdrawing funds from Top Shot into a personal account—something that the vast majority of users currently cannot do. And the return has been sizable. In the fourth week of February alone, SteadyBreaks banked $50,000.

At the very top of it all, profits from NBA Top Shot come from pack sales, where 100% of all money spent is revenue, and from the marketplace, where a 5% fee is taken from each exchange. If you sell a moment for $1,000, you pocket $950 while the other $50 goes to Dapper and its partners. In the end, an undisclosed percentage of all profits go to Dapper, another chunk to the NBA, another to the NBPA and the rest to outside investors. It’s a system Dapper CEO Roham Gharegozlou says ensures that both his company and the NBA are incentivized to maintain a long-term secondary market.

Five active players—Andre Iguodala, Spencer Dinwiddie, Aaron Gordon, JaVale McGee and Garrett Temple—have invested in the project, and all but Temple tweet about it frequently. But enthusiasm among players extends beyond those who profit from its success. Hours after asking his followers to explain how he could purchase moments, Orlando Magic wingman Terrence Ross said he was hooked. Pelicans guard Josh Hart was gifted his own moment from a fan and then immediately listed it for sale. (Hart sold that card for $2,500, and since joining, his account has grown to be worth roughly $65,000.) And shortly after learning about Top Shot, Hornets guard Terry Rozier proclaimed that anyone bold (and rich) enough to purchase a moment of his that listed for $100,000 would get floor seats at an upcoming game, a signed jersey and a chance to hang out with him and his teammates. The end result of all these players’ excitement: they’re driving users, and cash, into the marketplace.

Given this collective enthusiasm, it’s hard to say how much profit NBA Top Shot could generate over time—total revenues from pack sales aren’t public, and marketplace figures fluctuate daily. But projecting out a daily marketplace sales total of $47 million (the high-water mark to date) would generate for NBA Top Shot some $17 billion in transactions over one year. For the benefactors, 5% of that would come out to just over $850 million.

With that level of revenue, it’s safe to assume the league and the players association would take home sizable portions, potentially pushing nine figures. And while both the NBA and the NBPA declined to comment on whether such revenue would affect the salary cap or be taken into account in the next collective bargaining agreement, it’s not hard to imagine such profits impacting league business.

Even beyond Top Shot’s immediate effect on the NBA’s bottom line, more than ever, blockchain figures into the future of professional basketball. Before All-Star weekend, the league announced the rosters for the Rising Stars Challenge on Top Shot, paired with a companion pack. NBA owners, meanwhile, have created a task force for blockchain, headlined by the Mavericks’ Mark Cuban and the Nets’ Joe Tsai. Cuban told Sportico the committee’s formation had “very little to do with NBA Top Shot,” but even if the league’s next blockchain endeavor isn’t remotely similar, Top Shot will have affected how the league views its financial future.

A moment of this Luka Dončić slam from March 2020 sold for $75,000 :: Glenn James/NBAE/Getty Images

Despite the undeniable success of NBA Top Shot, a handful of red flags have persisted. In the days following the Feb. 22 marketplace spike, trading was halted for hours at a time, leading to a sharp drop in the prices of moments. Some users, flummoxed by the inability to sell their cards and get out, and watching the value of their accounts plummet, compared Top Shot to Robinhood—the stock-trading platform that came under fire for prohibiting users from buying GameStop stock in January, sending the price of their shares, and profits, crashing.

Those shutdowns, Gharegozlou says, resulted from a massive influx of users onto the system. People are trading more moments than Top Shot’s architects ever could have anticipated—especially cheaper moments—and that has left servers overloaded.

“A single moment gets listed—let's say [every similar card] is listed for $100, this one's listed for $80. And then you have a thousand people trying to buy it at the exact same time,” says Gharegozlou. “That just makes everything go haywire.”

For now, Dapper’s solution is to impose a temporary cooldown on transactions. Once a user purchases a moment, they can’t buy another for 30 minutes, slowing the amount of cash moving through the marketplace. In addition, Dapper has limited the number of accounts that can be created each week, chilling the platform’s momentum and plateauing the rapid marketplace growth.

Meanwhile, users looking to acquire new packs have found themselves stuck in lines that grow with each release, from a queue of at least 74,000 on Feb. 22 to 96,000 on Feb. 23 to the 200,000-plus who lined up for a chance at a few thousand packs on Feb. 26. That release, featuring a limited edition premium pack, was pushed back at least twice due to rampant bot activity.

Packs are scarce enough when only human users queue up for a chance to buy them, but bots (computer programs usually controlled by one person, who could theoretically buy multiple packs and funnel them back to one account) narrow the odds of acquisition even further. Dapper claims to have attempted combatting such bot activity, tracking such accounts as they try to consolidate moments back to one main user and even placing a temporary moratorium on gifting moments. And Dapper has recently experimented with releasing packs to a preorder line, hoping to quell the frustrations of users who’ve waited repeatedly, only to come up empty-handed.

And those lucky enough to acquire packs for $9, or even $99? They have effectively hit a jackpot: The moments within are always valued magnitudes higher than the pack itself. As it stands, the cheapest common moment is selling for $6. The cheapest rare is upwards of $397.

Users who successfully buy these packs flaunt their success on Twitter and in the NBA Top Shot Discord server, where users discuss, among other things, where they think the product is going, cards they’re trying to buy and sell, and which live breaks they’re trying to join. Even users who came up short during pack releases post their screengrabs, lamenting their bad luck, like so many do after a failed bid on a pair of Nikes on SNKRS. Their failure isn’t final. They’ll be back for the next release. The fear of missing out is too great, and missing out on a pack just makes the eventual catharsis from actually getting one that much sweeter. And even though buying packs can be frustrating, users keep trying, because snagging one is a guaranteed profit. The problem is, for the overwhelming majority of users, those earnings are only theoretical.

As of publishing, only 17,175 of Top Shot’s 270,000-plus users who own moments could withdraw money, leaving millions of dollars in hypothetical earnings trapped on the platform. Withdrawals are possible only after a user has completed an identity check, and that process can only be initiated by Dapper, typically after an account has reached a certain level of activity. Even after that review process begins, clearance can take up to 30 days. Until then, anyone hoping to cash out is stuck waiting.

These delays, Dapper says, are tied to a manual check-and-withdrawal approval process that, thanks to the recent spike, has left the company playing catch up. The company estimates that most accounts will be able to withdraw funds in the next two months, and the coming addition of an automated clearing house (ACH) for withdrawals to U.S. banks should eventually help users pull funds more quickly. But for now, most users will have to wait weeks to see their earnings realized.

Ultimately, this slowness all comes down to government compliance—in order to meet KYC (know your customer) guidelines. Because NBA Top Shot is not a money service business or a virtual-asset service provider (any platform that allows users to transfer Fiat currency into crypto, or vice versa), like say, Coinbase, Dapper isn’t subject to federal guidelines of the Bank Secrecy Act, which requires, among other things, KYC checks to identify users (ensuring that the platform isn't used for money laundering or to finance terrorism). But, says Ari Redbord, head of legal and governmental affairs at TRM Labs and a former senior adviser to the undersecretary for terrorism and financial intelligence at the U.S. Treasury, "if they were trying to be their best self, that would be essentially what they [did].”

Just over a month ago, the company had only one staffer handling that withdrawal process. Now, Gharegozlou says, Dapper works with Circle—a money service provider—to review every deposit and withdrawal that occurs and complete the compliance process of any regulated entity, and has staffed a full compliance team. Still, experts point to some potential vulnerabilities on the platform.

In the material world, buying art has long been a preferred medium for money launderers. As Jesse Spiro, chief governmental affairs officer at Chainalysis, puts it, the intangibles surrounding art make a sweet target for those looking to launder money through legitimate purchases. Unlike, say, a screwdriver or an orange, or even a diamond, where a standard value is universally accepted, art remains subjective. A $100 painting in the eyes of one buyer is a $5,000 masterpiece in the eyes of another. The same is true of digital art, maybe even moreso. Which creates a prime target for fraud.

“If somebody came and said, ‘Hey, something's fishy here,’ I could say, ‘This buyer loves my work. That's what they offered me for it.’ ” Spiro explains. “For bad actors looking to abuse a financial ecosystem, [they want] to move value from one place to another in different ways. And they're looking to escape a source of illicit funds.”

How would that work on NBA Top Shot? Redbord, lays out the following scenario:

An arms dealer moves “dirty” cryptocurrency from a less-regulated exchange into Coinbase, a popular digital currency exchange that Dapper uses to move cryptocurrencies (Bitcoin, Ethereum, etc.) into NBA Top Shot. This dealer wouldn’t want to move a massive amount—in a marketplace where only a handful of users are throwing around six-figure sums, that would raise suspicions. The dealer instead transfers, say, $10,000, into NBA Top Shot and they spend it on a handful of moments. Nothing too flashy, and nothing too far above a card’s average asking price. Maybe they add some legitimate funds, another $5,000 in clean bills. Then the dealer waits, so as not to sound alarms about immediately cashing out a sizable investment. After a week or two, they sell a few of their moments and cash out a small portion of their portfolio at a time, pulling out only a few thousand dollars, mirroring how a legitimate user might behave. Their money, now clean, can be returned into Coinbase, moved into a secondary exchange, and either used as cryptocurrency or cashed out, back into the material world.

There is another way Top Shot could be used nefariously. Each moment on the marketplace has a public record of its most recent sales, as well as the highest-priced transfers a moment has sold for. On most cards, there are massive discrepancies between a moment’s sale price and the most expensive transaction that occurs on the same day. Often, these differences can be justified by the more expensive card having a lower serial number. Others escape easy explanation.

Take the Series 2 Daniel Theis dunk against the Grizzlies on Dec. 30, a common moment. Most days, it’s one of the cheapest purchases available on the marketplace. Exactly 15,000 identical moments, only differentiated by serial number, were released, and on Feb. 27, nearly 1,500 of them were available for sale. Most of the sales of that card on the 27th were for either $16 or $17. Despite this, a Theis moment with a high serial number (no. 7,359; generally, the higher the serial number, the lower the value) sold for $1,244 at 9:33 a.m., just 12 minutes after it moved for $16. A quick scan of the marketplace will find other cards with similarly curious sales, such as a Series 2 JaMychal Green dunk, a common, that sold for $6,000 on Feb. 23, despite identical models with lower serial numbers selling for as little as $15 the same day. Spiro and Redbord reviewed a few such situations, and agreed the sales raised some red flags.

“There doesn't seem to be particular logic around those jumps,” Spiro says, and “from a compliance perspective, something like that would probably trigger an escalation. … In the traditional trading-card world you can say, Well, that's a PSA 10 [and thus more valuable]. But if you can't do it here, then that is something, that would potentially be flagged and escalated.”

Adds Redbord: “Any time something is sold inexplicably for significantly more than its market value, it's something as an investigator that you want to consider. … As a former prosecutor, your Spidey sense is tingling when you see that value transfer in the VR world or on the blockchain.”

Gharegozlou offers one explanation for these confounding trades: most of the time, he says, one user will have conversed with another outside of Top Shot, negotiating the swap of a handful of moments for a set price, then using one moment to move a lump sum while the other user gifts the buyer the remaining moments for free.

“But a portion of the time,” he concedes, it all comes down to “a bot with 200 accounts and 200 stolen credit cards trying to buy stuff … at a high dollar amount and then cash out.”

Because Top Shot is a multimillion-dollar economy, not a multibillion-dollar one, potential money laundering on the platform would have to occur in smaller amounts than is typically found in real estate or art sales. In a marketplace where only a handful of users have made trades reaching six figures, any mega high-priced deal for a moment raises questions. One way a typical financial agency would fight against potential money laundering or fraud would be with the use of a suspicious activity report, or SAR. Typically triggered when someone attempts to withdraw large sums of money from a bank account, a SAR involves an investigation into the funds being moved, and the people trying to move them.

As Spiro puts it, these choke points serve as a check on the on- and off-ramps between Fiat currencies and cryptocurrencies, and vice versa. This is where bad actors are caught. Gharegozlou says most Top Shot users initially are allowed to withdraw a maximum $1,000, and as they’re deemed trustworthy, over time, that amount increases. He does not recall having filed any SARs. Still, Spiro and Redbord point to a practice known as smurfing, which could allow potential bad actors to get around extra scrutiny. On Top Shot, that could unfold something like this: A user recruits a web of co-conspirators to purchase moments, like the Theis or Green cards, for more than their market value, using dirty money deposited onto the platform via cryptocurrency. Then they each cash out smaller amounts, below the threshold that would trigger further review. If the users are withdrawing into countries with weaker fraud protections, they might not face the same kind of scrutiny. At that point, the web can consolidate its withdrawals, having successfully laundered funds.

At Dapper, though, this is all perceived as beside the point. “We're not building a product for day traders or a product for people that want to cash in, cash out. We’re building a long-term business,” says Gharegozlou (who points to a Dapper compliance team that reviews each transaction and conducts anti-money laundering checks).“Everybody's skeptical [of cryptocurrencies], and everybody’s trying to find an excuse to say, Hey, these guys were trying to bypass regulation. And we’re saying: No, we just want to have an app that people can enjoy. We're trying to do it by the book.”

A moment of this LeBron James dunk against the Kings from November 2019 sold for over $200,000 :: Kevork Djansezian/Getty Images

When Daniel Hurtado started seeing the value of his account balloon, he made himself a promise: After he’d made $50,000, he’d sell his assets and cash out. But the thrill was too magnetic. He sat back and watched his winnings climb far past his self-set cap.

“I noticed that I'd sell a moment for $200. The next day it would be $400,” Hurtado says. “Last night, about seven or eight o’clock, I sold $9,000 worth of moments. Some of those doubled by the time I looked at my computer at 11.”

Like so many of his peers, Hurtado has felt like he’s finally hit the jackpot. He missed the wave on GameStop and WallStreetBets, just like he’d missed his chance on every other boom. He was always an hour late to the deal. Now, things are different. He’s acquired somewhere around 450 moments and decided he’ll begin withdrawing small sums of money from his account over time, once he’s allowed to.

On the whole, his routine is still the same as it was when he started. He hunts for values and trades what he can. Only one thing has changed.

“The excitement of the collectibles was there in the beginning. I was doing it more for the moments. I didn't even care about the money,” Hurtado says. “Now the price is just going crazy. Even if I want to go after my favorite players, there's no way I'm going to rebuy an $800 card.

“It seems like I turned into part collector, part money chaser.”

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