Investors file lawsuit Exquisite laboratory Claims NBA Top Shot Moments NFT sales violate security standards. Dapper Labs settled the lawsuit for $4 million. CEO Roham Gharegozlou insists NBA Top Shot NFTs are not securities, and the agreement supports his claim.
The settlement, which involved a group of investors, ended a 2021 lawsuit and required Dapper Labs to pay $4 million if the plaintiffs stopped claiming NFTs as securities. Additionally, Dapper Labs will be making changes to: traffic blockchain Decentralize authority and implement federal securities law employee training programs.
Gharegozlou emphasized that this legal discovery confirms that NFTs exist on a decentralized public network, equating them to non-securities such as trading cards. Proving this is critical because it aligns with the company’s core mission.
Source: Roham Gharegozlou
If the plaintiffs agree to stop treating NFTs as securities, Dapper Labs will pay a $4 million settlement. In addition, Dapper Labs is committed to ensuring the decentralization of the Flow blockchain, giving control of the remaining Flow tokens to the Flow Foundation. A mandatory employee training program regarding federal securities laws will also be implemented.
Awaiting legal approval
The settlement is pending approval by District Judge Victor Marrero. Notably, in February 2023, Judge Marrero rejected Dapper’s attempt to dismiss the lawsuit, suggesting that NFTs could be considered securities under the Howey test.
A class action lawsuit filed in 2021 argued that NBA NFTs are securities because their prices can rise with their popularity. Dapper Labs countered this, comparing NFTs to traditional trading cards.
The settlement also resolves allegations that Dapper Labs restricted the sale of NFTs to other markets. The agreement shows that Dapper Labs has granted permission to trade on other platforms starting in March 2022.
All told, the $4 million settlement highlights the non-security classification of NBA Top Shot NFTs and marks a significant development in the NFT space.
