Dapper Labs policy says NBA NFTs are not titles

Dapper Labs’ $4 million settlement agreement to conclude a class-action lawsuit against the company maintains that NBA Top Shot non-fungible tokens (NFTs) are not securities, according to CEO Roham Gharegozlou.

According to a New York district court deposit On June 3, Dapper Labs reached a settlement agreement with a class of investors who sued the company in 2021, alleging that it issued unregistered securities through its NBA Top Shot Moments NFTs.

In a June 4 post, Gharegozlou said the judicial investigation of the case determined that the NFTs were on “a decentralized public network,” meaning they “are not securities in the same way that trading cards are not titles.”

“These are the main allegations we wanted to prove, and continuing to litigate would have been a distraction from our main mission,” he noted.

According to the settlement agreement, Dapper Labs is willing to pay the $4 million settlement if the plaintiffs, led by Jeeun Friel, agree to stop claiming that NFTs were securities.

Dapper is making business changes to decentralize its Flow blockchain. This includes depositing and transferring control of all FLOW tokens in circulation to the Flow Foundation.

He also committed to establishing a mandatory annual staff training program that includes federal securities regulations.

Gharegozlou added that the company “is not aware of any regulators,” such as the U.S. Securities and Exchange Commission (SEC), alleging that NFT Moments are securities. In April, crypto.news reported that the SEC had previously opened an investigation into Dapper Labs, but it was subsequently dropped in September 2023.

Meanwhile, the latest settlement has yet to be accepted by District Judge Victor Marrero, who denied Dapper’s motion to dismiss the application in February 2023 after concluding that NFTs could be considered securities according to the Howey test, a legal framework for classifying securities.

Dapper Labs was the subject of a class action lawsuit in 2021, accusing the company’s flagship product, NBA Top Shot Moments, of being unregistered titles because the value of NFTs would increase with the overall popularity of the project.

The plaintiffs further claimed that Dapper Labs blocked investors from cashing out for “months” to keep funds locked to the platform and that Moments could not be purchased or traded on other NFT platforms at the time of filing the lawsuit.

Dapper’s lawyers rejected this claim, instead comparing NFTs to baseball cards or Pokémon trading cards.

The group also claimed that Dapper blocked them from selling the NFTs on other platforms, which the most recent settlement agreement indicates Dapper Labs prevented in March 2022 by granting other marketplaces the authorization to exchange tokens.

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