Dapper Labs, a leading non-fungible token (NFT) company, came under scrutiny from the Securities and Exchange Commission (SEC) until September 2023, according to a recent Fortune Magazine report.

The internal document uncovered by Fortune reveals that the investigation into "Dapper Labs, Inc." was abruptly terminated by the SEC’s crypto and cyber unit chief, David Hirsch, on September 29. The report lacks details on the reasons, duration, or factors leading to the investigation’s closure, raising unanswered questions.

While the SEC did not disclose the full contents of the report, the termination of the Dapper Labs probe followed settlements with Impact Theory and Stoner Cats, marking the SEC's initial steps into the NFT space. The agency accused these projects of offering and trading “unregistered securities,” contravening federal laws. Concurrently, Dapper Labs faces an ongoing lawsuit alleging NBA Top Shot Moments, their NFTs, as unregistered securities.

Despite the investigation closure, legal professionals caution against generalizing all NFTs as safe investments. The SEC’s actions suggest that certain NFT transactions could fall under securities laws scrutiny. Experts like Philip Moustakis from Seward & Kissel warn that Dapper Labs' clearance doesn’t absolve them of potential violations or lawsuits related to securities matters.

Dapper Labs gained prominence in the NFT domain with the introduction of CryptoKitties in 2017, a game enabling NFT creation and trading. The company further ventured into the NBA-backed Top Shot marketplace for NFT-based sports highlights. Despite their past successes, the NFT market witnessed a downturn in 2022, prompting layoffs at Dapper Labs.

Although the Dapper Labs case has been closed, recent developments indicate the SEC’s continued vigilance in regulating the cryptocurrency realm. A recent Wells Notice from the SEC to Uniswap Labs demonstrates ongoing scrutiny of decentralized exchanges, suggesting that the agency's enforcement actions within the crypto space persist.