Dapper Labs Proves: NBA NFT Collection is Not a Security

In 2021, a class-action lawsuit was filed against Dapper Labs in a New York court, alleging that the NBA Top Shot Moments NFT collection constituted unregistered securities.

The basis for this conclusion was that the price of NFTs increases with the project’s popularity.

Court Decision

In a post on X, CEO Garregozlou stated that during the legal investigation against Dapper Labs, it was determined that NFTs are on the decentralized public network Flow, meaning they are not securities.

These were the main points defended by the company.

However, Dapper Labs will still have to pay $4 million as part of a settlement agreement to put an end to the plaintiffs’ claims that the NFTs were securities. Such is justice.

Dapper Labs’ Plans

The company aims to further decentralize its Flow blockchain. Specifically, they plan to transfer control of all FLOW tokens to the Flow Foundation.

Additionally, D.Labs will develop a mandatory annual training program for staff on federal securities regulations.

Interesting Moments From The Case Dapper Labs

The class action, Friel v. D. Labs Inc., was founded on all NBA Top Shot Moments NFTs being unregistered securities. Their value is firmly linked to the success of D.Labs, which controls both the Flow Blockchain and the only marketplace through which these NFTs may exchange hands. It found that plaintiffs had plausibly alleged that value accrues to their NFTs due to Dapper Labs’ efforts at maintaining and promoting the blockchain and marketplace that are central to their continued value.

Additionally, the precedent post that D.Labs owned intellectual property and that such transactions were subject to Dapper Labs’ charges and policies further solidified the case that the NFTs were securities. The denial was made, however, by the court, stating that it found based on the plausibility of the plaintiff’s claim—not necessarily its ultimate merits—and the decision would be narrowly applied in this proceeding only.(Casetext – CoCounsel)​​ (Justia Law)​​ (Findlaw)​.