Investors sued Dapper Labs claiming that the sale of NBA Top Shot Moments NFTs violated security standards. Dapper Labs settled the lawsuit for $4 million. The chief executive officer Roham Gharegozlou, maintains that NBA Top Shot NFTs are not securities, and this agreement supports his claims.
The settlement, involving a class group of investors, concludes a 2021 lawsuit that mandates Dapper Labs to pay $4 million, contingent on plaintiffs ceasing to assert NFTs as securities. Moreover, Dapper Labs will enact changes for Flow blockchain decentralization and implement a staff training program on federal securities laws.
Gharegozlou emphasized that the legal discovery confirmed the NFTs’ presence on a decentralized public network, equating them to non-securities like trading cards. Proving this point was pivotal, as it aligns with the company’s core mission.
Dapper Labs will pay the $4 million settlement if the plaintiffs agree to cease claiming NFTs as securities. Additionally, Dapper Labs commits to ensuring the Flow blockchain’s decentralization, relinquishing control over remaining Flow tokens to the Flow Foundation. A mandatory staff training program on federal securities laws will also be implemented.
Legal Approval Pending
The settlement awaits approval from District Judge Victor Marrero. Notably, in February 2023, Judge Marrero rejected Dapper’s attempt to dismiss the suit, suggesting NFTs could be considered securities under the Howey test.
The class suit filed in 2021 argued that NBA NFTs were securities due to their potential price increase with popularity. Dapper Labs refuted this, likening NFTs to traditional trading cards.
The settlement also addresses claims that Dapper Labs restricted NFT sales to other marketplaces. The agreement reveals that Dapper Labs granted permission for trading on other platforms starting March 2022.
In summary, the $4 million settlement underscores the classification of NBA Top Shot NFTs as non-securities, marking a significant development in the NFT space.
Read the full article here
