Investors demanded Elegant laboratories alleging that the sale of NBA Top Shot Moments nfts violated security standards. Dapper Labs settled the lawsuit for $4 million. CEO Roham Gharegozlou maintains that NBA Top Shot nfts are not securities and this deal backs up his claims.
The settlement, involving a collective group of investors, concludes a 2021 lawsuit that requires Dapper Labs to pay $4 million, contingent on the plaintiffs ceasing to assert nfts as securities. Additionally, Dapper Labs will enact changes to Flow Blockchain decentralization and implement a staff training program on federal securities laws.
Gharegozlou emphasized that the legal discovery confirmed the presence of nfts on a decentralized public network, equating them with non-securities such as trading cards. Demonstrating this point was essential, as it aligns with the company's core mission.
Source: Roham Gharegozlou
Dapper Labs will pay the $4 million settlement if the plaintiffs agree to stop claiming nfts as securities. Additionally, Dapper Labs is committed to ensuring the decentralization of the Flow blockchain, ceding control over the remaining Flow tokens to the Flow Foundation. A mandatory staff training program on federal securities laws will also be implemented.
Legal approval pending
The agreement awaits the approval of District Judge Víctor 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.
The class action lawsuit filed in 2021 argued that NBA nfts were securities due to their potential price increase with popularity. Dapper Labs refuted this and compared 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 to operate on other platforms starting in March 2022.
In short, the $4 million deal underscores the classification of NBA Top Shot nfts as non-securities, marking a significant development in the nft space.
