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You might be very surprised the “Moment” you figure out your taxes from your NBA Top Shot activities! NBA Top Shot sells non-fungible tokens, or NFTs, known as Moments. Moments are actually a video clip of something happening in an NBA game, such as LeBron James dunking. You can buy Moments in “Packs.” Blockchain technology limits the supply of Moments and easily verifies ownership and authenticity. Initial purchasers of Packs can hold Moments or resell them on the secondary market. A LeBron James Moment recently sold for more than $100,000, and NBA Top Shot is currently the largest NFT marketplace.

NBA Top Shot is not the first NFT marketplace, nor is sports memorabilia the only use-case for NFTs. CryptoKitties was an early, if not the first, iteration of NFTs. And earlier this month, a digital work of art sold for $69 million at auction. This is just the early stages of the NFT industry.


A taxpayer that owns an NFT will generally be classified as an investor, collector, or dealer. Dealers are willing to buy or sell, attempting to profit from a mark-up or spread. Generally, dealers are taxed at ordinary income tax rates on their net taxable income. Collectors and investors generally would be eligible for capital gains taxation, if they hold the NFT as a capital asset. Both collectors and investors may be subject to limitations on claiming losses or deductions under “hobby loss” rules or investment expense limitations.

However, both collectors and investors should consider whether their NFT is a “collectible” for U.S. federal income tax purposes. Unlike other capital assets, collectibles generally are taxed at a 28% rate, which is higher than the 20% rate on long-term capital gains.

A collectible is defined to include works of art. The main query is whether the NFT is a work of art. Top Shot Moments may or may not be considered art, but the $69 million piece sold at auction may potentially be deemed a collectible for U.S. federal income tax purposes. This is something you should discuss with your CPA or other tax adviser.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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Brett Cotler | Associate

Brett Cotler is an associate in Seward & Kissel’s Taxation Group and Blockchain and Cryptocurrency Group. Brett structures and advises clients on investments in digital assets, offerings of digital assets, and crypto-businesses. Brett specializes in U.S. federal and state tax and regulatory matters. He also:

  • Tokenized various assets;

  • Solves complex tax issues for companies, their principals, and their investors;

  • Structured an upstart token exchange; and

  • Advises on New York State Virtual Currency License applications.

“Under current U.S. law, any time a person uses cryptocurrencies for payments, it’s a taxable event, and a lot of casual PayPal users could end up being completely surprised by tax liabilities that could result from buying and selling bitcoin or other cryptocurrencies via PayPal.”
Brett’s thoughts on PayPal’s new crypto services, as published in PaymentsSource article “Why PayPal’s crypto plan may not be fully mainstream.”