Dapper Labs lays off 51 employees amid pressures in NFT market

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Web3 game developer Dapper Labs has let go of 51 employees in its third round of layoffs in under a year. CEO Roham Gharegozlou said the laid-off employees included full-time staff and C1 contractors.

Acknowledging the immense talent of those affected, he admitted that the decision was not easy to make. Gharegozlou reasoned that the layoff would maintain a “lean and efficient” organization.

“With this restructure we have made the business more lean, which is going to let us do the right thing for our fans and grow our communities in the most healthy ways possible,” reads the CEO’s statement on Twitter.

Gharegozlou pointed out that despite the cuts, the company and its blockchain platform Flow are “well capitalized.” The executive also mentioned a separate pool of capital to fund the team for multiple years. It ensures they have enough financial support to reach their goals without selling tokens in the short term.

Dapper Labs gained recognition for pioneering NFTs with their launch of CryptoKitties in 2017. In March 2021, the company raised $305 million, propelling its post-money valuation to $2.6 billion.

The recent job cuts follow a round of layoffs last February, which resulted in a 20 percent reduction in the workforce as part of Dapper Labs’ restructuring strategy.

The first round of layoffs in November of last year involved a 22 percent reduction in staff. The company had previously rapidly expanded its workforce from 100 to 600 employees in under two years. Unfortunately, this growth negatively affected Dapper’s business and communities, according to Gharegozlou himself.

Dapper Labs’ recent struggles

This third round of layoffs arrived at a difficult period for the market in which floor prices declined, and the NFTGo’s Blue Chip Index, which measures the market cap of popular collections, dropped to 5,867 ETH from its yearly high of 12,394 ETH in July 2022.

A recent report by DappRadar also showed challenges in the NFT sector, as trading volume dropped by 38 percent to reach $2.9 billion in Q2. However, the report also highlighted that trading volume alone does not accurately portray the level of enthusiasm in the market.

Additionally, Dapper Labs’ NBA Top Shot, one of their most popular projects, has repeatedly experienced declining momentum. Despite its first success in early 2021, sales took a downturn and reached a nearly two-year low in monthly sales. Following a notable surge in January, the sales declined once again.

According to data from CryptoSlam, NBA Top Shot recorded less than $2.7 million in secondary market sales in October. The figure represents a 43 percent decrease compared to around $4.7 million in trade the previous month.

Dapper Labs is also dealing with a class-action lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The SEC claims the NBA Top Shots NFTs should be classified as securities and therefore need registration with the federal agency.

In February, the judge presiding over the case denied Dapper Lab’s motion to dismiss the lawsuit. In his ruling, Judge Victor Marrero applied the Howey Test and concluded that the NBA Top Shot NFT collectibles platform potentially fulfills the securities criteria.