A federal judge, Victor Marrero, ruled Wednesday that NBA Top Shot non-fungible tokens (NFTs) issued by Dapper Labs can meet the requirements to be considered an unregistered security. The case arose in 2021 when an NBA Top Shot collector sued Dapper Labs, alleging that NBA Top Shot NFTs, known as “Moments” issued via the Flow blockchain, are securities.
The judge’s ruling allows the case Friel v. Dapper Labs
United States District Court Judge Victor Marrero agreed with the plaintiffs who filed a lawsuit against Dapper Labs on February 22, 2023, noting that NBA NFT Top Shots could be unregistered securities at the eyes of the law On May 13, 2021, Jeeun Friel sued Dapper Labs for selling Top Shot NFT without registering with the US Securities and Exchange Commission (SEC). Dapper Labs tried to get the court to dismiss the case, but Marrero denied the company’s motion.
Marrero’s ruling simply allows the case to proceed based on the judge’s opinion that NBA NFT Top Shots can be considered a security. Marrero said the ruling does not apply to the sale and distribution of FLOW, the native crypto asset of the Flow blockchain. However, the Howey Test was applied to the NBA Top Shot “Moments” NFTs, and Howey’s analysis is what supports the judge’s decision.
“Although the literal word ‘profit’ is not included in any of the tweets, the ‘space rocket’ emoji, the ‘stock chart’ emoji, and the ‘bags of money’ emoji objectively mean one thing: a financial return. investment,” Marrero said in the court filing. “The court is satisfied that Dapper Labs’ scheme to sell Moments plausibly reflects horizontal similarity by being ‘intertwined with interest in Dapper Labs,’ its new chain Blockchain and the ‘Power It All’ Token”.
Dapper Labs Responds To Judge Marrero’s Decision On NBA NFT Top Shots
On Wednesday, Dapper Labs commented about the lawsuit and the judge’s recent decision. “Today’s order in the matter of Friel v. Dapper Labs, which the court described as a ‘close call’, only denied our motion to dismiss at the pleading stage of the case,” the company said on Twitter.
“The judge did not conclude that the plaintiffs were right, and it is not a final decision on the merits of the case. Courts have repeatedly held that consumer goods, including works of art and collectibles such as basketball cards, are not “securities” under federal law. We are sure the same applies to Moments and other collectibles, digital or otherwise,” added Dapper Labs.
What do you think the implications of this decision could be for the NFT market as a whole? Let us know what you think about this topic in the comments section below.
image credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or a solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
