Professional 3-on-3 basketball league BIG3, co-founded by rapper and actor Ice Cube, is facing a class action lawsuit in the Superior Court of California. The legal challenge, brought by disgruntled NFT investors, alleges that the league failed to uphold promises of team ownership as the organization prepares for a potential public offering.
Allegations of Deceptive Marketing
The lawsuit, filed last July, became public on Tuesday. It accuses the league of engaging in deceptive, fraudulent, and illegal marketing practices. According to the filing, BIG3 sold unregistered securities under the guise of non-fungible tokens. Joseph Sakai, the attorney representing the plaintiffs, stated that the case centers on broken commitments to the league's most loyal supporters. Sakai noted that his clients invested significant sums based on assurances that they would receive meaningful ownership stakes, encompassing roles in team management, season ticket access, and financial participation in the future sale of teams. While the league claimed these rights would last forever, the plaintiffs argue these benefits were effectively withdrawn after only three years.
The NFT Offerings and Broken Expectations
In 2022, BIG3 conducted a sale of Ethereum-based NFTs. The collection was divided into tiers: the Fire tier, sold at $25,000 per unit, and the Gold tier, sold at $5,000 per unit. Owners were promised perks including VIP ticket packages and the power to vote on specific team decisions. Ice Cube publicly stated at the time that the initiative was a revolutionary way for fans to become owners, characterizing it as a paradigm shift for sports. However, purchasers now claim that the league has failed to deliver on these ownership benefits.
The lawsuit asserts that rather than honoring its contractual obligations to those who provided capital, BIG3 has demoted these investors to the status of common ticket holders. The plaintiffs claim they were denied their promised rights to participate in league governance and revenue generated from team sales, despite these being key incentives provided at the point of purchase.
Team Sales and Future Outlook
In 2024, BIG3 sold four teams to external investors, resulting in approximately $40 million in revenue. The suit argues that a portion of these proceeds should rightfully be shared with the NFT holders, who served as initial private investors in the league. The legal document highlights that BIG3 had sold ownership rights to hundreds of private investors via NFTs two years before the league announced its first formal sale of team rights to DCB Sports.
A league representative did not respond to requests for comment but told media outlets that the plaintiffs are filing a public nuisance lawsuit despite contractual agreements requiring disputes to be resolved through confidential arbitration. The plaintiffs are currently seeking damages, restitution, and declaratory relief. BIG3 has reportedly attempted to move the matter to individual private arbitration rather than a class-wide proceeding. The league, now in its ninth season, recently announced plans to go public through a merger with a special purpose acquisition company (SPAC) at a valuation of around $290 million. Counsel for the plaintiffs indicated that they expect to file an amendment to the suit following the recent news of the SPAC merger.
