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A federal judge recent ruling in Manhattan that claims Dapper Labs’ NBA Top Shot NFTs may be unregistered securities shows that US government regulations could hit the multi-billion dollar NFT market.
Nicolas Julia, CEO of fantasy sports NFT firm Sorare, believes his product should be listed under a new category outside of existing sports betting and daily fantasy sports regulations.
“We have been proactive with all regulators in the US and Europe to help build the framework that may be appropriate for the new category we are building,” said Julia Decrypt. “It’s very clear that it’s not a gaming product, not one [daily fantasy sports] product. It’s a new category where you truly own your own items. There is no notion of financial sacrifice. Hopefully something will be built in the future.”
Julia and other Sorare executives met with invited media during Wednesday’s Knicks-Nets NBA game at Madison Square Garden. Julia shortly afterwards flew back to Paris, where Sorare was launched in 2018.
The French company claims to have more than three million users worldwide through its fantasy NFT partnerships with 300+ sports organizations worldwide – including the NBA, MLB, MLS and virtually every European soccer league. The company recently signed a four-year agreement with English Premier League in January.
“We’ve had the support of the government in France pushing for a new framework that will hopefully happen in the coming months. Hopefully the US will follow suit,” Julia said on Wednesday.
Sorare’s app allows users to buy, sell and trade licensed digital player cards and insert those players into their lineups to join free-to-play fantasy contests against others, as their lineups earn points based on an athlete’s real game performance. Fans who win Sorare’s contests can earn prizes such as jerseys, merchandise, game tickets and VIP tickets to meet their favorite teams and players in real life.
Japanese investment firm SoftBank led Sorare’s $680 million funding round in September 2021 that valued the startup to 4.3 billion dollars at the time. Other investors in Sorare include LionTree, tennis icon Serena Williams, and soccer stars Lionel Messi and Kylian Mbappé.
Sorare’s NFT games rely on the Ethereum blockchain, which is distinct from Dapper Labs and its Flow blockchain that powers NBA Top Shot and its digital collector marketplaces for NFL, UFC, among others.
In last month’s ruling, judge Victor Marrero said Dapper’s reliance on a private blockchain was “fundamental” to the court’s decision to view the NFTs as securities. Dapper disputes the notion that it runs a private blockchain and has instead said that Flow is gradual decentralization with 68% of nodes powered by external validators, as claimed by Dapper Labs in October 2021.
Other European soccer leagues offering NFT competitions on Sorare include Germany’s Bundesliga, Spain’s LaLiga, France’s Ligue 1 and Italy’s Serie A. Sorare is headquartered in Paris and opened its first US office in early 2022 in New York. The company has more than 150 employees and is hiring now engineers, computer scientists, designers and legal team members for the New York City office.
“One of the main goals for us this year is to break into the US market,” said Julia. “We started with soccer, which is probably the biggest sport in the world. But if you have the ambition that we have to build the biggest brand in the world of sports, having the NBA and the MLB is absolutely essential,” he said.
