Inside 'NBA Top Shot,' the Digital Highlights Marketplace Worth Millions

Sean Highkin@highkinFeatured ColumnistFebruary 19, 2021

Photo by Andrew D. Bernstein/NBAE via Getty Images

In the third quarter of a regular-season game against the Houston Rockets last February, LeBron James broke away for a two-handed reverse windmill dunk off a steal and pass from Avery Bradley.

Keen-eyed Lakers fans quickly realized the dunk was nearly identical to a 2001 slam on the very same Staples Center basket from Kobe Bryant, who had tragically died in a helicopter accident less than two weeks before. A side-by-side video of the two dunks quickly went viral, and James later admitted it was an intentional homage, a way of paying his respects to an NBA icon.

It isn't hard to find this clip online. Searching "lebron kobe tribute dunk 2020" on YouTube will pull up over a dozen uploads of the play, which you can watch for free as many times as you want.

Jack Settleman, the 24-year-old creator of a popular Snapchat feed called "Snapback Sports," paid $47,500 for a copy of James' dunk on NBA Top Shot in January.

If you're an extremely online NBA fan, you're going to be hearing about Top Shot soon if you haven't already. It's hard to explain the concept in a way that makes sense to most people, but here's an attempt: Developed by Vancouver-based Dapper Labs, the company behind the popular CryptoKitties game, Top Shot "moments" like Settleman's James dunk are essentially virtual sports cards, folding short highlight clips into a package with 3D animations and player stats. They utilize blockchain technology, which is the backbone of the cryptocurrency world, to ensure transparency in production and verify the authenticity of these digital collectibles, known as NFTs (non-fungible tokens).

Copies of a specific Top Shot moment are given a serial number to indicate how many are produced. Lower serial numbers are considered more valuable, along with serials that match the player's jersey number (Settleman bought the No. 23 serial copy of the James dunk, for example). Different runs are given names like "Cosmic," "Holo" and "Metallic Gold," just like limited-edition physical trading cards.

In just a few months, Top Shot has attracted a group of devoted fans ranging from traditional card collectors to high-powered sports bettors and fantasy sharps to crypto enthusiasts to stock market traders. New moments sell out faster than Jordan sneaker releases. Even the $9 entry-level packs, which contain three moments and are intended as a low-cost way to get new users in the door, aren't regularly available, and allotments of 25,000 packs are gone instantly when they drop. The $999 "Holo Icon" packs were in such high demand that the site crashed when they were released earlier this month.

The Top Shot platform, which is still in public beta, has a marketplace that now does millions of dollars in transactions in a single day with over 50,000 users signed up, many of whom talk and compare packs in an active Discord channel. Dapper takes a 5 percent cut of peer-to-peer sales, which have totaled over $60 million.

Two different versions of another James dunk, from a November 2019 game, are both listed for sale for over $200,000. Copies of dunks from Ja Morant and Luka Doncic are available starting at $100,000 each. 

On the low end, "common" moments from lesser-known players can be had for $2, but things quickly get pricey if you move beyond the entry-level stuff. A Jrue Holiday layup with a "rare" designation goes for $200, a Devonte' Graham "Metallic Gold" three-pointer starts at $222, and a "Holo Icon" Kyle Lowry jump shot sells for $2,175. Much like with physical trading cards, rookies are the most coveted, and even common releases for superstars like James Harden, Stephen Curry and Giannis Antetokounmpo aren't cheap.

The pitch is being able to own a copy of a specific play that you can buy, sell and trade with other fans, rather than simply owning a card of that player. It remains to be seen whether that pitch will make Top Shot a lasting phenomenon, or if this is another bubble. But its biggest collectors are sold on the potential.

"With physical cards, it's just a photo," Settleman says. "Your LeBron rookie card that's worth thousands of dollars, it's just a random picture of him in a Cavs jersey. These moments give you the ability to actually watch and have more meaning behind it."

As the most tech-savvy of the major American sports leagues, the NBA had long been interested in moving into the digital collectible space, which made it a logical test case for Dapper Labs' first major project after the CryptoKitties bubble burst. According to NBA associate vice president of global partnerships Adrienne O'Keefe, the league began exploring avenues to utilize blockchain in 2018 and signed a multiyear licensing agreement with Dapper in 2019. (Both the NBA and Dapper declined to share specifics of their financial arrangement, but O'Keefe says the league gets royalties from all Top Shot sales.)

"Sports cards are already moving so digital," Dapper CEO Roham Gharegozlou tells B/R over Zoom. "Pack breaks are happening on YouTube, sales and trades are happening on StockX. People are storing their stuff in vaults."

Dapper began inviting users into a closed beta in June, and after opening the public beta in October, the platform began to grow slowly but steadily. It didn't explode until mid-January, when FantasyLabs co-founder Jonathan Bales, whom one Top Shot user describes as a "Paul Bunyan-like figure" in the sports gambling and daily fantasy worlds, published a blog post in which he revealed that he and a group of friends had paid $35,000 to own a Morant dunk.

"Bales is so sharp, and he just kind of doesn't do dumb things or make bad investments, so it's easy to blindly tail him on stuff," says Peter Overzet, a fantasy football player who now co-hosts the popular Club Top Shot podcast. "Once he wrote that post, I started poking around and it immediately captured my imagination and made sense to me."

Bales, who rose to prominence as a fantasy football writer after working in analytics for an NFL team, started FantasyLabs (which has since been sold to The Chernin Group and folded into The Action Network, a sports betting platform) in 2015. Although Bales had dabbled in trading cryptocurrency and digital collectibles in the past, his light-bulb moment for the potential of NFTs like Top Shot came over the summer, when he led a group of investors that reached the final round of bidding for a T206 Honus Wagner baseball card that ultimately sold to a different bidder for $1.4 million.

"If we had won, I was never going to see the card," Bales tells B/R in a phone interview. "We were going to put it in a vault. So I was thinking, 'What am I buying? Am I buying a piece of paper?' What you're buying is provable authenticity, provable scarcity and ownership. With NFTs, it's exactly the same thing. The process for buying and selling NBA cards is really s--tty. You have to go on eBay, you hope it's not fake, you have to send it in to get graded, it takes months. To me, the NFTs are pretty much in every way better than the physical asset as far as pricing and transparency."

When I began working on this story two weeks ago, I created an NBA Top Shot account and attempted to buy one of the $9 common packs just to play around with the platform, but they were sold out. I was able to get one last Thursday when they released a new set. The process was a lot like trying to buy concert tickets or sneakers, with a waiting room and a queue, and no guarantee you'll be successful—even though in this case, there's no physical product or in-person experience you're buying, just the crypto-backed "ownership" of a digital copy of a video.

Once you've bought one, an animation on your screen shows an unopened foil pack, which you can open and reveal your moments one by one. YouTube is filled with pack-opening videos, some of which have thousands of views. If you gamble (which I don't) or collect cards (which I haven't since elementary school), it's easy to see the allure here. It's an all-digital replication of the rush of opening a pack, seeing what you get and then either holding onto the moment or immediately being able to flip it on the marketplace.

NBA Top Shot

"If we were dealing with normal cards, I'd say 'I love Ja Morant' and you'd say 'I love Zion Williamson,' and we'd argue about who's going to have the better career," says Luc Doucet, a freelance advertising producer and crypto trader who hosts another Top Shot podcast called The First Mint. "But the next layer is we can say, 'What do you think is better, the Ja steal to end the game or the Zion block where he sends it into the rafters?' You can argue on a different level of fandom about which one should be worth more. And then see what the market thinks."

My pack of three moments included a Kevin Durant three-pointer and two copies of the same block by Toronto Raptors center Chris Boucher with different serial numbers in a slightly more limited edition of 12,000. I'm told that because this was the first Boucher play to become a Top Shot moment, it's going to be valuable someday. 

As of now, the Boucher moment is listed in the marketplace for anywhere from $9 into the thousands, while the Durant starts at $95 and climbs into six figures for the lower serial numbers. Maybe one day I'll sell them, if Top Shot takes off the way Gharegozlou and the platform's most ardent collectors are convinced it will.

After the COVID-19 pandemic subsides, the NBA and Dapper envision Top Shot adding a Pokemon GO-like element, enticing fans to attend live games with exclusive moments only available in one city. It's already attracting collectors with backgrounds in crypto and fantasy football, some of whom say they've been watching more NBA games this season after getting into Top Shot. 

Dapper is also developing a mobile game, which will let moments function much like the in-game purchases you can unlock in NBA 2K or FIFA's "Ultimate Team" mode. And they've already introduced various "challenges" to encourage marketplace trading, promising exclusive moments as a reward for collecting different sets.

Between the popularity of the 2K add-ons, the NBA's dominance on social media and the gradual mainstreaming of crypto and blockchain, it makes sense that the league sees big dollar signs in these digital trading cards. But the NBA will have to convince fans it's worth signing up even if they aren't DFS savants with the ability to speculatively drop five figures on a single moment without a physical component.

"The barrier of entry for cards is so low now," says Davis Mattek, another collector who has regularly appeared on the Club Top Shot podcast. "I could buy a new card every day if I wanted to. But moments are expensive. If I wanted to buy a super-collectible moment now that the marketplace is flooded, it's a real investment and not something you can do just for fun."

Last month, after word got out in the Top Shot community that Atlanta Hawks guard Bogdan Bogdanovic had paid $2,300 for the jersey-matching No. 13 serial of one of his own moments in the marketplace, his other moments immediately skyrocketed in value.

Bogdanovic had collected soccer cards growing up in Serbia, but when a friend told him about Top Shot, the concept resonated with him as a gamer.

"In video games, you put money into your character in the game," Bogdanovic tells B/R. "With this, you put your money in and you might get lucky and get some super-rare card that somebody wants to buy. These highlights have value online. You wait for the player to get better and it could be worth a lot."

Adam Hunger/Associated Press

Bogdanovic now owns 46 moments, but he says he's never going to sell his own. That's the other part of this phenomenon that will be fascinating to watch develop: What will be the value in holding onto moments you aren't intending to sell? How many people are paying for a moment because it's a cool play, and how many are just investing in something they think will be valuable in the future because other people have collectively decided they're valuable?

"It's certainly speculative," says Peter Jennings, Bales' FantasyLabs co-founder and a co-owner of his Morant moment. "There are a lot of bubbles out there right now, and it's hard to know what's real and what's not. If you're buying one of these moments, you're basically making a bet on Top Shot succeeding."

For now, at least, Dapper and Top Shot are winning. Over the weekend, the company raised more than $250 million in a round of funding that valued it at $2 billion. Talking to collectors and observing the social media and Discord chatter around Top Shot, it still has the feel of the early stages of a gold rush. The recent GameStop and AMC surge on Wall Street isn't quite a fair comparison, because it's based around a product—the NBA—that millions of people are emotionally invested in. But it's developed a similar ecosystem of discussion and debate around which players are going to increase in value and which moments are good buys.

According to Gharegozlou, every other major sports league has reached out with interest in developing something similar (a WNBA version is already in the works). The biggest Top Shot collectors are thinking even beyond the sports world.

"The first thing my mind wondered was, when is NBC going to let you collect moments from The Office?" Overzet says. "I think this is going to be a massive domino with these things proliferating everywhere in our lives."

But despite the rapid rise in popularity, there are clear signs that Top Shot isn't ready for primetime. Multiple collectors brought up the issue of being unable to withdraw their money from their Dapper accounts, which Gharegozlou says is because they're in the process of beefing up their fraud protection. And Monday's "Cool Cats" pack drop had to be delayed by several hours after users were unable to log into their accounts.

"They had a website that worked really well, all the users were really happy and people were able to withdraw with no issues," says Mattek. "And then Jonathan Bales made that announcement that brought a lot of like-minded, degenerate folks into the space, and the development and communications team have been completely overwhelmed. To me, they've done a pretty bad job of scaling, but more importantly a pretty bad job of communicating."

NBA Top Shot

These issues are expected for a product that's still in beta, and Gharegozlou hopes to have the full launch ready around the playoffs. The out-of-control demand this early for a product most people don't understand wasn't something Dapper expected. Now, it has no choice but to roll with whatever growing pains come with this bigger spotlight.

"I actually made a giant mistake in writing about it," Bales says. "That article really exploded and caused this cascade effect since then. It's a really crappy user experience right now. They just weren't ready for it. I feel a little bad that they weren't necessarily ready to scale."

Will Dapper be able to handle a similar influx once it starts advertising Top Shot on national NBA games? Will the product, not the user experience, be the story at the point when Dapper hopes "Top Shot" replaces "poster" or "Vine" as the everyday vernacular for a spectacular NBA play? These are questions that will be answered in the coming months and years as Top Shot attempts to prove itself as a sustainable business.

The bigger question is why regular fans without the deep pockets of these power users should spend their money on a Top Shot moment instead of a jersey or physical card, something they will have in their possession even if the crypto bubble collapses in a few years.

"I think a lot of people are looking for alternative ways to play with their money," says Doucet. "If you're 25 and you want to invest some money, you could learn the stock market, but it's gamed against you. Unless I come with $10 million and a hedge fund, it's going to be hard to compete. But I already love the NBA, so I might as well just use my own knowledge to make some money and connect with a whole community."

As for Settleman's Kobe tribute dunk, his ultimate goal is to sell it to James himself for $1 million.

"I know that Maverick Carter [James' business partner] is aware of the purchase," he says. "He doesn't necessarily understand it. But that's the end goal."         


Sean Highkin covers the NBA for Bleacher Report. He is a graduate of the University of Oregon and lives in Portland. His work has been honored by the Pro Basketball Writers' Association. Follow him on Twitter, Instagram and in the B/R App.