A federal judge’s recent ruling in Manhattan that claims Dapper Labs’ NBA Top Shot NFTs may be unregistered securities shows U.S. government regulations could be coming to 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 U.S. and Europe to help build the framework that might be appropriate for the new category we are building,” Julia told Decrypt. “It’s very clear that it’s not a betting product, not a [daily fantasy sports] product. It’s a new category where you truly own your own items. There’s no notion of financial sacrifice. Hopefully something is going to 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 thereafter flew back to Paris, where Sorare launched in 2018.
The French company claims it has more than three million users worldwide through its fantasy NFT partnerships with 300+ sports organizations around the globe—including the NBA, MLB, MLS, and virtually every top European soccer league. The company most recently signed a four-year deal with the English Premier League in January.
“We’ve gotten support from the government in France that is pushing for a new framework that’s hopefully going to happen in the coming months. Hopefully the U.S. will follow,” Julia said Wednesday.
Sorare’s app lets users 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 performances. Fans who win Sorare’s contests can earn prizes such as jerseys, merchandise, match 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 Sept. 2021 that valued the startup at $4.3 billion 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 differs from Dapper Labs and its Flow blockchain that runs NBA Top Shot and its digital collectible marketplaces for the 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 its NFTs as securities. Dapper disputes the notion that it operates a private blockchain and has instead said Flow is gradually decentralizing with 68% of its nodes operated by external validators, according to claims made by Dapper Labs in October 2021.
Other European soccer leagues to offer NFT contests on Sorare include Germany’s Bundesliga, Spain’s LaLiga, France’s Ligue 1, and Italy’s Serie A. Sorare maintains headquarters in Paris and opened its first U.S. office in early 2022 in New York. The company staffs more than 150 employees and is currently hiring engineers, data scientists, designers, and legal team members for its New York City office.
“One of the key goals for us this year is to break into the U.S. market,” Julia said. “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 sport, having the NBA and MLB is absolutely critical,” he said.